By Johnson Manyakara Ever heard of a public fuss about Board Remuneration? Yes, this is becoming a common occurrence. Stakeholders inside and outside the company now increasingly keep a close eye on Board Remuneration issues with virtually everything being scrutinised. If stakeholder interests are not met in the process, this often reduces confidence in the company and may result in serious reputational damage to the company. One may, therefore, ask, “How can Board Remuneration issues not keep Board members awake at night?” The “Hawks” And Their Interests “Hawks” are hovering around companies, both private and public, with a keen eye on ensuring their interests are met on Board Remuneration matters. Internally, the following are amongst the “hawks”, with their primary interests indicated: Employees (all levels)- real or perceived equity; Executive Directors- appropriate individual remuneration package perceived as “fair;” and Works Councils/Unions- real or perceived equity. In companies embracing the philosophy
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By Johnson Manyakara It is in the best interest of any progressive organisation to develop governance instruments to enhance the organisation’s ability to deliver against its mandate, whether the mandate is financial success or success in the provision of basic services such as water and sanitation, electricity, telecommunications, transportation, health or education. Governance Instruments, in my view, should keep Board members awake at night both in terms of having them in place and in terms of ensuring compliance with their provisions. Key Provisions of Governance Instruments Amongst the key provisions of governance instruments include the following: Full protection of all stakeholders; Accountability; Transparency; Responsiveness; Consensus Orientation; Equality and Inclusiveness; Effectiveness and Efficiency; and Participation. Examples of Governance Instruments in Board Leadership Research shows that the following are the most common governance instruments in Board Leadership: Board Code of Ethics/Conduct; Board Charter; Board Manual (e.g. Induction Manual, Governance Manual, CSO Self-Regulatory
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By Johnson Manyakara Many boards do a good job in terms of the appointment process of new Board members-identification, terms, reference checks, solvency checks, etc. However, most Boards don’t pay due regard to the all-important area of Board and Director Development, an area which helps optimise Board effectiveness quicker thereby drive an organisation’s success. Effective Organisations The most effective organisations invest in Board and Director Development in terms of continual learning and development. Amongst the strategic reasons for continual learning in the boardroom are the following: Board members are reminded of their role and responsibilities; The process helps build cohesive teams; Helps keep organisations safe and legal; Ensures Board members are using “reasonable care, skill and diligence” in the execution of their mandate; Helps motivate and retain good board members; and Helps increase innovation and improve overall Board performance. The Process Begins Here Best practice requires that new Boards and
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By Johnson Manyakara Corporate Strategy should also keep Board members awake at night. I expect a violent push-back on this, shouldn’t I? The likely source of the push-back is the majority of us still holding the traditional view that “CEOs should just get on with the job. A Board should merely choose and appoint a CEO, evaluate his/her performance and fire him/her, if he/she doesn’t deliver. Involvement by the Board in corporate strategy just confuses accountability.”-the role of the Board being restricted to approving next year’s budget and blessing the company’s long term plan. Please invite me to these “Blessing Ceremonies”! Missed Opportunity Aren’t Board members that hold that view missing an opportunity to guide the shaping of the business’ future through this rather “hands off” frame of mind? The majority of today’s Boards have people with loads of knowledge, experience, perspectives and contacts-assets that are not brought to bear
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By Johnson Manyakara Board Induction should keep Board Members awake at night! The sooner “best practice”-based Board Induction occurs, the quicker new directors are able to meaningfully and “productively” participate in boardroom discussions and decision making. The responsibility for the induction of new Board members falls squarely on the Board Chair’s lap, through the organisation’s Company secretary and CEO. Key Objectives The key objectives for new directors undergoing board induction include: Enlightening them on the purpose, vision, mission, core values and strategic objectives of the organisation; Enhancing the new directors’ knowledge, skills and experience to better equip them to discharge their corporate control and fiduciary duties; Improving the new directors’ level of confidence, competence and boardroom participation; Debunking wayward board leadership practices; Understanding the Board Leadership framework within which the Board operates; Addressing the expectations/requirements of the new directors to ensure they fulfil a meaningful role on the Board;
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By Johnson Manyakara This is the first in a series of blog posts exploring answers to this strategic question in Board Leadership – What should keep Board members awake at night? Progressive Board members have a number of issues that should keep them awake at night, starting with Board Leadership. But what is Board Leadership? Barbara Miller defines Board Leadership as- “…board actions that have served to move organisations forward so that they can successfully meet these challenges: Mobilise action to further the mission; Help the organisation adapt to changing circumstances; Respond to crises; Identify opportunities for change and growth, and/or Create future leaders.” In a way, planning for these actions should keep Board members awake at night. Key Role Boards and Directors have a key role in providing the leadership and accountability that determine the long term success of an organisation, accountable to shareholders. Effectiveness in this role depends,
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By Johnson Manyakara Shareholder activism generally occurs when the activist is dissatisfied. The targeted company is then pressured to make significant changes, more often than not, to increase stakeholder value. Is this good or bad for public-company boards generally or for the targeted company? For Public- Company Boards The growing influence of shareholder activists on capital markets has transformed how public-company boards interact with investors. This is particularly evident in the role of the board in the areas detailed below. Role of the Board in Investor Relations Progressive boards are now directly involved in investor relations with the following positive outcomes: There is now a growing realisation by most boards that shareholder relations are now a board duty, the board becoming a central player in shareholder engagement; Boards and executives now frequently review their investor bases in order to come up with a game plan for responding to shareholder activism;
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By Johnson Manyakara Simply put, a shareholder activist is an investor who attempts to use his/her rights as an owner of a publicly-quoted company to seek dialogue and/or change in an entity-attempts to gain control of the entity and even replace management. Typically, the focus is on corporate strategy, balance sheet issues, operations, boards of directors, senior management and M&A activity. In the 1980s and 90s, the term “activist shareholder” was synonymous with “corporate raider”-scary stuff indeed. How Shareholder Activism Presents? Shareholder activism is increasingly coming from mainstream institutional investors who engage companies through- Voting at AGMs or by proxy; Writing letters to Investor Relations Departments or to Corporate Secretaries; Filing Resolutions (e.g. petitioning companies for AGM agendas); Having In-Person meetings/dialogues; and Divesting-sending a message by selling their shares. Hedge Funds are the most ruthless, focusing on financial engineering, while active Mutual Funds focus on securing their long-term investments.
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By Johnson Manyakara Progressive Boards believe that Board renewal is a strategic imperative. Without a Board Renewal Policy(BRP) however, it is difficult to see how a Board can discharge this responsibility professionally and effectively. This post discusses the strategic purpose and make up of a BRP, informed by best practice. A BRP serves to ensure that the Board’s membership comprises directors with an appropriate mix and diversity of skills, professional experience, tenure and personal background that allow the Board collectively and directors individually, to: Discharge their responsibilities and duties under the law effectively and efficiently; Understand the business and the environment in which the entity operates so as to be able to agree with the EXCO Team the entity’s objectives, goals and strategic direction which will maximise shareholder value; and Assess the performance of the EXCO Team in meeting those objectives and goals. In addition to spelling out its purpose,
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By Johnson Manyakara Enterprise shaping in an organisation is amongst any board’s primary responsibilities. Aristotle once said, “We are what we repeatedly do”. Weaving the building of effective business networks into the fabric of an organisation – turning it into “the way we do business around here” for the Board, Senior Management and for a critical mass of staff at all levels is imperative for Board Leadership. Most Boards focus on investments, market competitiveness, talent quality positioning, enterprise risk management positioning, etc. in shaping their enterprises without due regard to making the building of business networks an area of strategic focus. Two key questions can be asked:- What are the strategic benefits of business networking? Just how are effective business networks built? Strategic Benefits of Business Networking Friendship Friendship plays a pivotal role in enterprise shaping. Good friends can become a bedrock for life, ideas and even for business. You
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