Establishing the Board
Research suggests that a group of five or seven is ideal, but there is no maximum limit.
What is the optimal size of a board?
Estimates can range from 200 to 250 hours per year and more for those in a leadership position.
What time commitment is expected of directors?
Ensure that the board has a comprehensive job spec for the board chair position, a formal process to evaluate the board chair, and a board-chair succession policy.
How should a board plan for board-chair succession?
Develop “board guidelines” or a “board mandate” and committee charters” or “committee terms of reference” and position descriptions.
How should the board and board committees be structured?
Data is compiled, interpreted and communicated confidentially to the individual.
How should assessment results be disclosed?
The responsibility is to vote for each director, rather than for a slate of proposed directors.
What role do shareholders play in the selection of directors?
While it is important to avoid tokenism, this is important to minimize groupthink and expand your options for qualified candidates.
Does diversity matter?
Emphasis should be put on directors’ contribution and value added, however mandatory-retirement age limits and director term limits are often used and can help promote regular board renewal.
Should there be limits on directors’ length of service?
This may include but is not limited to age, gender and/or sexual identity, cultural or ethnic identity, visible minorities, and people with disabilities.
What types of diversity should the board seek in its directors?
This can be done by looking at their leadership, procedures and resources, quality of information flow, board dynamics and relationships among the board
How should the board evaluate its effectiveness and that of its committees?
There can be no direct or indirect material relationship with the company which could reasonably interfere with the exercise of that director’s independent judgement.
What are the independence requirements for directors?
Factors such as mutual respect, positive energy and attitude can increase performance and overall board wellbeing.
How do directors’ qualifications and attributes affect a board’s culture?
This can be done through a nominating committee that engages the services of a search firm.
How can director candidates be found?
This is the legislation used to create the organization and its constating documents (e.g. incorporating document, constitution, by-laws)
What legal requirements exist for existing or appointing directors?
The committee selected to do assessments oversees the assessment process, questionnaires and conducts interviews and follow-ups.
How should board, committee and director assessments occur?
This should be sufficient to adequately reward directors for their expertise and experience and the time devoted to the company but should not be so high as to potentially compromise the independence of directors.
What compensation should be paid to directors?
Education on the business, corporate governance and current issues of importance/relevance to the company itself are of value to directors.
What kind of continuing education is important for directors to pursue?
A due diligence will be conducted as well as a series of discussions where the fit between the board’s needs and the director's qualifications will be explored.
How should boards evaluate director candidates?
Members and volunteers, contacts, referral agencies and online sources, advertising, leadership and development can be helpful for this.
How can the board identify and develop a pool of potential directors?
Committee can draft a plan to respond to the identified issues and areas of consensus, and then accepting constructive feedback and suggestions to approve
How should a board act on the assessment results?
Typically, these would include terms of appointment, expected time commitment, duties, remuneration and expenses, independence and outside interests, confidentiality, and rules regarding insider trading and company policy.
What information should be covered with directors candidates upon their election to the board?
A director should have integrity, accountability, courage, mature leadership, strategic perspective, and be a good communicator, along with many other things
What personal characteristics should directors possess?
While unique and individualized to each company, two considerations need to be made: (1) Does the board have the skills and experience needed to carry out responsibilities, and (2) Is the board maintaining a dynamic, vigilant culture. Competency matrices are often used to better anticipate this scenario.
How should a board plan for succession?
This could be a successful track record for leading, strong communication skills or strong interpersonal skills.
What leadership skills and personal qualities do board and committee chairs need?
How effectively each one contributes to fulfilling their position description, the nature of contribution and their personal qualities and behaviours.
How should the board evaluate the contribution of individual directors and chairs?