Blog -World Class Leadership

What is Governance - For Private and Family Owned Businesses

 

I often get asked these questions. What is Governance? How can I apply sound governance practices in my company.

First and foremost, Governance is not about slowing down processes or 'Red Tape' (which many private and family owned business owners think).  Governance starts from within. I prefer the definition that Governance is translating the wishes and desires of owners into results (Dr. John Carver). It is extremely important to understand that the following points are fully grasped and understood.

Owners Expectation: Having complete clarity in what owner's expect is the first and foremost. I have noticed companies going straight into strategy without taking time to truly understand owner's expectations. In some cases, owners themselves are engrossed, working fully on strategy and operations of their company, without fully connecting to what they really want. All decisions must be clearly linked to the owner's expectations. The starting point for Governance is to fully grasp...

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7 Signs of an Effective Board for a Private Company

Many boards are vague on what board meetings discussions should focus on. I recall a family owned manufacturing company, where the directors met to discuss monthly management reports. A senior member of an accounting firm was chairing these meetings. There were reactive arguments throughout one such meeting (I had the opportunity to observe) which lasted an hour and a half.  The chair was dominating the meeting and ultimately making decisions without much contribution from the other directors and executives. They considered these to be board meetings as they comprised of directors and the head of finance.

 My point is, there are many such companies who have not evolved to the new reality. The global landscape rapidly changes and boards must prepare more than ever before. Board level discussions and management meetings must have clear distinctions. In this article, I reveal 7 signs of an effective board.

 1)      Focused on Priorities: The...

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Small Enterprise Corporate Governance: The Structure of Sustainability

In turbulent times when clients are decreasing their budgets, banks aren’t lending, competition is becoming more hostile and threatening, and change is no longer variable but a fixed part of “business as usual” it often effects small companies much differently than large companies. A major reason for this is that larger companies (at least those that are solvent and long-standing) for better or worse depend on their infrastructure and internal systems to get them through tumultuous times. A major part of this system is the Corporate Governance Structure of the organization. This system provides structure in times of uncertainty, it provides a network of quality individuals who are familiar with the company and capable, as a group, of making logical decisions on matters that will determine the level of success or failure within that organization. Some may assume that small companies don’t require the same type of structure to succeed; in fact some may argue...

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Through the looking glass: Key indicators that can alert your board of directors to potential executive smokescreens  

 The job of an employee is to perform the actions of his job responsibly, to achieve those goals provided to that employee by management, and to work as a part of an overall unit to maintain and usher growth for the company as a whole.  The job of the executive team within a company is to develop and implement the strategies that will carry the company into the future while protecting the infrastructure of the company and managing the integral parts of the company in an attempt to move the company towards its goals. 

These are pretty defined objectives for these two classes of stakeholders within a company; and it is in that definition that they are able to serve their purpose.  While it is important to have defined roles within the company, not all parties involved share this particular trait.  The board of directors of a company has a simple mandate as it relates to their duties “Protect the Interests of the Shareholders”; and while very...

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Power in Numbers: The importance of collective thinking in Corporate Decision Making

Decision making is the most basic and vital aspect of running a company and the ability to do it well is a major determinant in the level of success that a company may experience. At its best corporate decision making is a collaborative effort between those in the company that have been specifically placed in positions of power due to either their specialties or their overall business acumen. In these situations, multiple individuals seek to make decisions by analyzing specific situations, providing their input, and allowing the group to determine the best course of action. While ultimately there is a key decision maker who signs off on the final decision, that person depends on the groups’ ability to collaborate to make informed decisions. 

The problem that arises in modern corporate settings is that this type of collaborative decision making rarely occurs because of the structure of the organization. Whether the CEO is the chief decision maker and rarely requests the...

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Necessary Oversight – Raising Board Standards in the New World

For decades the primary responsibility of the board of directors for many companies was to serve as a conduit between the executive team and the owners/shareholders.  In this capacity the board of directors was tasked with communicating the best interests of the shareholders to the executive team, which then allows the executive team to formulate a strategy for executing the company in a way that allows the shareholders to prosper.

While the board of directors was capable of voting in executives, and the executive team had to include the board into major decisions, many executive teams were given carte blanche to run the organization.  The issue is that like a democratic government, no one entity should have free reign over the management of the organization, because invariably the interests of the owners will ultimately be overshadowed by the interests of the executive team’s vision.

In these situations the executive team IS NOT...

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