Your Year End Review

Better Board Governance

My clients are often seeking better governance, and I’ve been asked to write more about these issues. There is much concern about governance for good reason. Most CEOs have mixed reviews of the effectiveness of their Boards, but it is up to the Board to decide to address their own issues. What could possibly go wrong?

A body that depends on its own self-evaluation to perform well is always at risk. Boards need annual governance review protocols, as well as a high level of transparency and accountability to ensure their integrity at the individual and Board level. “Just trust us” is not a governance plan.

If you don’t believe me, just listen to the person Warren Buffett trusted most. Buffett’s right hand and best friend Charlie Munger called out Boards over the years for endemic, ubiquitous issues resulting in failures of integrity. Munger noted famously that “a director who gets $150,000 per year from a company, and needs the money, is not independent.” This simple observation reflects a deeper truth — what can be corrupting is subjective. What can corrupt a person depends on that person’s resources and capabilities, interests and activities, and their ethics and integrity.

The subjectivity of the “independence — influence — corruption” continuum is a compelling reason for skepticism from a Board about its own rules and conduct. Good hygiene is necessary for good governance. Better governance practices starting now will create a better Board in the new year.

Review the Benefits of Service

Benefits of service can be causes for concern. Who is eligible to be a director? How are these individuals likely to be motivated? How are directors selected and appointed? Are directors compensated financially? Are there other professional benefits or compensation possible as a result of service (such as teaching, consulting, or other influential roles)? Are Directors able to offer teaching, service or influential roles to others? Are there significant social advantages to Board service? Are there other forms of compensation such as meeting attendance fee payments or travel and expense reimbursement? Are there opportunities for individual directors to exert pressure on one another? Any high-status role has benefits, so the existence of benefits is not necessarily an issue. But as you review the list of benefits, do you see potential issues? Is there any history of issues or concerns? Are there mechanisms to protect and promote individual integrity? If a cursory review leaves you with concern that benefits or powers of participation in governance could be compromising the integrity of individual directors, changes are needed.

Warren Buffett was a fierce proponent of creating the necessary conditions to ensure the integrity of independent Board members. From restricting compensation (capped at $7500 per year at Berkshire Hathaway), to requiring them to purchase their own stock holdings, Buffett was determined to protect the diversity of thought and perspective that constitutes directors’ independence and strength, lamenting “When seeking directors… it’s the cocker spaniel that gets taken home.”

Responsibilities of a Board

Boards that are not functioning well actually impede the healthy functioning of organizations. While the Board itself is best positioned to review its own effectiveness, this can only happen within the context of the board having adopted objective standards of effectiveness. Accepted standards provide the framework for any serious self-evaluation. Standards must include the following:

• Boards have responsibility to act as a fiduciary for the organization; they take on duties of care, loyalty and obedience. This is intended as a prohibition on action based on personal interests, as well as a positive responsibility to protect the organization and its mission and assets. Even the appearance of conflict of interest must be avoided.

• Boards must oversee an organization’s general strategy and direction, while managing risk, both financial and ethical.

• Boards (in the US) oversee the CEO who is responsible for the management of the organization. Boards steer, but they do not manage.

Make Room for Feedback

A self-evaluation is a first step to elicit feedback from individual Directors in a context that minimizes social pressure. A listening session where issues that arise are raised and discussed should follow. The CEO and Board Chair together will ideally plan this — the CEO is best situated to see Board dysfunction, but the Board Chair is best situated to lead annual Board self-evaluation. The ideal facilitator of a session like this is external, independent, and a forceful advocate for best practice and ethics. If there are concerns that arise in the survey, and there usually are, I have found it useful to conduct one on one pre-interviews to be sure the dynamics are well understood. The facilitator needs to be equipped to call out challenges clearly as they play out during the listening session, which they will. This is not personal, but it can feel that way, particularly if there is power being wielded by individuals. The focus needs to be returned always to the goals of Board leadership and the ways to protect that.

Your Year End Review

Your most important year end review is the one you conduct for yourself. Instead of asking what you did or didn’t do, try asking about who you are and who you are becoming. Here are some questions to get you started.

How Did You Show Up this Past Year?

How did you feel, what were you thinking about, and what was preoccupying you, unspoken or spoken? Who were you this year? How did you “show up” for yourself? Which parts of yourself were you most in contact with? It may help to try this visualization.

Imagine that you are a future, wiser, better version of yourself, the person you will be twenty years from now. They have come to help you. The future you has come to review your the most important moments from this year. The review includes not only what happened on the outside, but, more importantly, what was happening on the inside. They experience now what you felt, thought and saw at the most important moments of the past year. Knowing what you most need to understand, they share three insights. What do you learn?

How Might You Show Up Differently?

As you reflect on your year, what has held you back from showing up as you really want to? What has helped you to be more who you are at your most creative, brave and capable? How would it look for you to become more of who you want to be? What is holding you back?

What is Holding You Back?

When you think about what is holding you back, make a list of items you can identify — be specific. Reviewing the list, you may note items that are clearly outside of your control as well as items that are clearly within your control. Circle the items within your control. Of these notice some are things you are currently doing (habits or commitments) that you could stop, and some are things you are not doing that you could start. Now rate each item, as realistically as possible on a scale from 1-9, on these two dimensions — how difficult would it be, and how transformative would it be. Now select one item to commit to that is low in difficulty and high in transformational potential. How will you be accountable for maintaining this commitment?

I am grateful to my subscribers, clients and partners!

To all of you who have been a part of this community and whom I have worked with this past year, thank you.  Your results are what make my work so rewarding.

Go ahead and say “Yes” to Gratitude

Let’s keep the gratitude going beyond Thanksgiving. Part of the goal of coaching is challenging clients to adopt perspectives that affirm their limitless potential. Gratitude is a powerful practice.  The simplest things can open the door to gratitude. Go ahead and be grateful — for a cup of tea, a dish to wash, a breath to notice.

As always, I would love to hear how this lands with you.

Cindy

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