Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 1

Board Chairs’ Practices across Countries

Commonalities, Differences, and Future Trends Contents

Preface 4-5

Research Team 6

Part I: INSEAD Global Chairs’ Research Project 2016 7-17

Work of a Chair 8-13

Future Trends 14

Chairs’ Challenges and Practices 15-17

Part II: Chairs in the National Context 18-97

United Kingdom 20-31 Netherlands 32-39 Belgium 40-47 Switzerland 48-55 Denmark 56-63 Italy 64-69 Turkey 70-77 Russia 78-87 Singapore 88-97 4 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 5

Preface About the INSEAD Relatively little is known about board chairs as This report is a collective effort Corporate most of their work is done behind closed doors. and we wish to thank the following They deal with highly sensitive matters but rarely people for their contributions. Governance Initiative appear in public. They have no executive power but preside over the most powerful body in the The core research team The INSEAD Corporate Governance Initiative (ICGI) harnesses INSEAD’s organisation – the board of directors. Their per- expertise in multiple disciplines – accounting, finance, economics, strategy, formance is critically important for every compa- Vincent H. Dominé, risk-management, entrepreneurship, family governance, organisational be- ny but they still need help to improve it. Yet they Steen Buchreitz Jensen, haviour and corporate social responsibility - for a comprehensive and sustain- have no boss, no peers, no one to turn to for an Mik van den Noort, able response to the challenges facing directors today. ICGI is unique because advice. They learn mostly by trial and error. Ekaterina Ryasentseva, of INSEAD’s academic emphasis and international outlook. It combines fac- Anne Samyn, ulty competence and institutional visibility with the aim of: To respond to this paradox, INSEAD launched Kai Foong Tan, “Leading from the Chair”, a specialised program Hande Yasargil, 1- educating international board members held twice a year for individuals from all over the Alexey Ulanovsky, to master corporate diversity; world who are keen to understand what makes Anna Zanardi a good chair. We discovered how chairs from dif- 2- conducting research with a global focus ferent countries face similar challenges and that for their tremendous job of identifying and developing innovative pedagogical they all seek practical ways to deal with them. Our experienced chairs, convincing them to share materials on the most fundamental issues goal is to help them to identify and adopt effective their experiences, interviewing them, analyzing faced by boards; practices to perform what is a very demanding job. data and writing informative chapters. They provided a great learning experience 3- hosting forums of peer-to-peer exchanges To provide hard data we launched a Global Chair and were fun to work with. to address the many challenges facing boards Research Project, inviting more than 600 chairper- and promoting the highest professional sons to participate in a survey with a structured We would like to thank all 74 chairs who gave standards of conduct. The initiative brings questionnaire. From the 132 responses received their time to be interviewed, without whom an unmatched international viewpoint from 30 countries, we compiled the INSEAD Global this report would not have been possible. to its activities thanks to INSEAD’s position Chair Survey 2015. Our research provided valua- as The Business School for the World. ble insights into their demographics, motivation, We are grateful to www.insead.edu/governance background, remuneration and the challenges Ludo Van der Heyden, they encounter. Chaired Professor of Corporate Governance and Academic Director, for the INSEAD About Ward Howell Talent As a next step we wanted to identify and compare Corporate Governance Initiative, for supporting specific practices and instruments used in differ- the project, advising on the early stages, Equity Institute ent countries. A team of experts were assembled and making recommendations to conduct interviews with professional chairs in on improving the draft. Talent Equity Institute is a research arm of Ward Howell, talent equity con- different parts of the world – Belgium, Denmark, sultancy headquartered in Moscow and providing services to business Italy, the United Kingdom, Russia, Singapore, Muriel Larvaron, and government leaders in Russian and other emerging markets. It oper- Switzerland, Denmark, and the Netherlands. This Assistant Director, ates through three segments: executive services (executive assessment, report presents our preliminary findings. As the for identifying and contacting search, onboarding and development); corporate governance, and organ- research continues, we expect to publish results respondents, coordinating with us, isational development services that focus on building and enhancing tal- for 16 countries by the end of 2017. and giving us encouragement ent management systems. Ward Howell is committed to accumulating and disseminating best management practices among its clients and beyond; This publication can be read either as a whole Hazel Hamelin, in 2008 it started an in-house research center, the Talent Equity Institute, with or in chapters. Each country account can be read Senior Editor, the objective to create new, innovative models and tools for working with as a stand-alone without prior knowledge of what for copyediting leadership capital. is said elsewhere. The introduction describes our methodology, some conceptual models which This project would not have been possible facilitate understanding of the work of a chair, without the support of the INSEAD Corporate as well as a summary of our major findings. The Governance Initiative and Ward Howell Talent “Future Trends” section offers the research team’s Equity Institute, who provided the material view on how the chair’s role and function will and intellectual resources. evolve in the next decade. Practices identified in this research matched with the challenges that emerged from the INSEAD Global Chair Survey Stanislav Shekshnia 2015 are listed in the Appendix. and Veronika Zagieva 6 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 7

Research Team Vincent H. Dominé is Adjunct Professor of Leader- Stanislav Shekshnia is Senior Affiliate Professor Part I ship and the Director of Leadership Development of Entrepreneurship and Family Business in the INSEAD Global Executive MBA. He is also and a co-director of “Leading from the Chair,” visiting faculty at Tsinghua University. The founder a board development programme at INSEAD. of DOMINÉ & PARTNERS, a Swiss-based international He is a senior partner at Ward Howell International INSEAD Global Chairs’ Research leadership consultancy firm advising executive teams talent equity consultancy, independent chairman Project 2016 and boards, Vincent is a member of the Singapore of the Russian Fishery, and an independent director Institute of Directors. of NLMK and NIS.

Steen Buchreitz Jensen is the CEO and an owner Kai Foong Tan is Leadership Development Practice of the Scandinavian Executive Institute. He worked Director at the INSEAD Global Leadership Centre for over 25 years as a senior executive in FMCG and where she designs and delivers coaching solutions fashion companies. He has served as a board member at senior level executive programs. An organisational or chair for several organisations and has supported psychologist with over 20 years of global experience business transformations in his board capacity as well in leadership assessment and development, Kai Foong as an independent consultant. works with leaders at C-suite and board levels in Fortune 500/Global 1000 and regional Asian family Mik van den Noort is an executive coach businesses. and team facilitator for INSEAD (France/Singapore) and ESMT (Germany), as well as for the Kets de Vries Hande Yasargil is an executive coach and Managing Institute (France/UK). Her clients include international Partner of Mentor LD and Praesta Turkey. In 2012 companies in publishing, aviation, retail and biotech- she initiated and has since co-led a non-profit nology, as well as professional firms in the fields program called “The Cross Company Mentoring of strategic consulting, tax and law. Non-profit clients Program for More Women on Boards,” in cooperation include symphony orchestras and university hospitals. with Forbes magazine. Providing coaching for the INSEAD Global Leadership Center, Hande is a regular Ekaterina Ryasentseva is Head of Leadership contributor to several executive education programs. Development at Ward Howell International talent Hande served for nine years in board member roles in equity consultancy. She is responsible for a wide PERYON and she was also the founding President range of talent equity projects: from corporate of EMCC Turkey. culture transformations and corporate governance to team and individual effectiveness. As an associate Alexey Ulanovsky is an organisational executive coach at the INSEAD Global Leadership psychologist and social science researcher, PhD, Centre, she works with top management across associate Professor of National Research University - various industry sectors for both Russian Higher School of Economics (Russia), where and multinational clients. he teaches “Business psychology” and “Group communication” courses. He is also a consultant Anne Samyn has been an executive leadership coach at Ward Howell International talent equity consultancy. with the INSEAD Global Leadership Centre since 2004, coaching on open-enrolment, company-specific and Veronika Zagieva is Project Manager board programmes across the globe. She collaborates at Ward Howell Talent Equity Institute where with IMD (Switzerland), ESMT (Germany), and the Kets she specialises in research on the topics of leadership de Vries Institute (UK), in addition to working with and corporate governance (board of directors, the Vlerick Business School. She is head coach CEO succession, etc). on a new Eglobal Master with Ecole Polytechnique (X) Université Paris-Saclay. She is also an associate Anna Zanardi is a Board Advisor for several director of Talking Talent, assisting organisations boards of directors of listed and unlisted companies. in retaining women and helping senior executives She also acts as executive coach to the chairs reach their full potential. and directors in their decisional processes. Anna is a board member in a charity board and in a Zürich Stock Exchange listed multinational company. 8 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 9

Stanislav Shekshnia

Work of a Chair Formal rules are the laws and practices (includ- skills, have an impact on the chair’s practices. Ac- ing corporate governance guidelines) that consti- cording to many respondents, the presence/avail- This project is based on the findings of INSEAD than five years’ experience in chairing boards tute the legal framework within which the chair’s ability of board members, their social network Global Chair Survey 2015 and aims to explore the and chaired more than two boards). They spoke work is carried out. In all the countries that we and status, as well as their other commitments following research questions at the national level: on condition of anonymity but provided demo- studied, corporate governance is actively devel- influence the work that they do. The chair’s rela- graphic information. Interviews lasted from one oping, regulating more aspects of the work of the tionship with the owner(s), CEO, their own CEO What practices do board chairs use to deal to three hours, and in total the team conducted board (directly and indirectly) and the chair. Re- experience, number of years in the chair and their with the challenges identified in the survey 74 conversations. The respective country reports spondents from all countries reported the follow- personality also shape their behaviour in the role. and other challenges they face in performing are synthesised below and in the closing chapter. ing trends, in addition to stiffer regulations: their jobs? more public scrutiny Work of a Chair By practices we mean ways of getting things Chairing the Board: the Context more transparency for the company, done such as “ringing every director two weeks the board and the chair In all countries studied, the work of the chair con- before the board meeting to discuss its agenda” The board of directors is the highest deci- more accountability sists primarily of interacting with the board, share- or “at the end of each board meeting asking each sion-making body in an organisation. It consists for boards and chairs holders and CEO/management. Those three stake- member to reflect on what well and what did not go of experienced individuals (board members or more reporting holders take up the majority of the chair’s time, so well” – strategies that chairs use to perform directors) who may or may not be employees energy and emotion, and to a large degree define their duties. (executive vs non-executive directors) and may However, levels of enforcement and acceptance the complexity of the chair’s job, although the pro- or may not have a financial interest in it (affiliat- of corporate governance laws vary among coun- portion varies from one company to another. What is the purpose and scope of the chair’s ed vs independent directors). The directors meet tries. Many chairs reported that although the new work in different countries and contexts? periodically to debate and make decisions. Every rules had changed the formal side of their work, Leading the board. All respondents considered director has the same rights and responsibilities, their working methods remained intact. their main task to be providing effective lead- How is the chair’s job evolving, and how except in special cases such as a conflict of inte- ership to the board. (In a small number of cases will it change over the next decade in terms rest. The chair is one of the directors but is re- Societal norms and values (national culture) an equally important task was to provide leader- of content, scope and requirements for the sponsible for the smooth functioning of the board are another influence on the chair’s work. While ship to the company, even when respondents did incumbents? and communicating on its behalf with the firm’s we found culturally-specific practices in all coun- not combine the roles of chair and CEO). The spe- To collect data we developed a structured ques- key stakeholder – shareholders, management, tries, traditional norms are more dominant in cific form of leadership rotates around three func- tionnaire with 35 open-ended questions, incorpo- regulators, etc. those where society applies stronger informal tions: engaging, enabling and encouraging. rating the findings of the INSEAD Global Chair At least that’s what the law stipulates in all coun- sanctions for deviation. Survey 2015 and existing academic theories on tries that we studied. But, as we discovered, for- Engaging board members – using their talents chair’s work. In each country, our researchers con- mal rules are only one dimension of the context in The micro context of the chair’s work is largely in the service of the board – is no simple task, par- ducted face-to-face semi-structured interviews which chairs operate. To understand the playing defined by the characteristics of the company, ticularly as boards meet only a few times a year; with experienced board chairs (who had more field more fully, we need to take into account a the composition of the board, and the chair’s members do not work in the same office, have number of other factors, summarised in Figure 1. personal characteristics. Company character- multiple affiliations and have limited availability. istics include type of ownership, life-cycle stage As one respondent put it: “You need to make sure Figure 1. Context for Chair’s Work (start-up, initial growth, maturity, decline, and re- they are physically there, they are emotionally engaged, Laws and “Soft Laws” vival), size, profitability and sector. All influence they know what we are talking about, and they put their aspects of the chair’s work such as its scope, focus brains to collective work.” and intensity, and thus practices vary from one Enforcement and acceptance country to another. For example, distinctly differ- Enabling board members to work effectively ent contexts are created for the chair’s work by as a group is the second chair’s function. It re- Company public companies with dispersed ownership, fam- quires pre-meeting, in-meeting and post-meeting Ownership Stage ily businesses, state-owned or government-con- work which goes far beyond discussion facilita- Health trolled enterprises, companies with a controlling tion. According to one of the interviewees: “I have Sector shareholder, joint ventures and non-for-profit an enormous power without having any material re- Macro Micro Micro Macro Chair’s practices organisations, giving rise to practices that are sources. By controlling what goes onto the agenda, how context context context context specific to each environment. the discussion question is framed, who gets to speak first, Board Chair The composition of the board creates both oppor- I can make a huge difference to the outcome. I have to Size Ownership tunities and constraints for the chair. “Numbers use this power wisely for the benefit of the board.” Compatibility CEO experience Competencies Competencies matter” – i.e., large boards require a different style Encouraging board members involves keep- Social network Social network of leadership from smaller ones. Factors such as ing them motivated and productive by provid- directors’ complementarity and compatibility, ing feedback, creating the opportunity for re- as well as their professional and collaboration flection and learning, and keeping them linked Informal sanctions for deviation

Societal norms and values 10 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 11

to the board and the company is the third func- While the functions of engaging, enabling and Relationships with shareholders. Dealing with while others focus on performance. For some it is tion. “These people (directors) rarely get feedback – encouraging intertwine and reinforce each oth- large shareholders was the number one chal- about the board’s effectiveness, for others about they are successful high-power individuals, but it does er, our research uncovered specific practices that lenge for board chairs according to INSEAD the company’s effectiveness and value creation. not mean they don’t need a slap on the back or a word board chairs use to perform them individually Global Chair Survey 2015, and our research con- In working with shareholders, chairs use formal of encouragement. I regularly let them know how I value (see Table 1). firmed it – chairs work hard at establishing and and informal tools and channels. The specific their contribution and how they could make it even more maintaining productive relations with the owners practices which we identified are presented in valuable,” explained one respondent. of the company, although what each chair means a 2x2 matrix with the chair’s priority as one axis by that is defined by the context. In dealing with and proactivity – the second one (see Figure 2, stakeholders, some give priority to compliance, below).

Table 1. Leadership Practices of Board Chairs Figure 2. Chair-Shareholder Relationship Matrix

Leadership Function Chairs’ Practices “I welcome shareholders’ ideas “I ask shareholders to fill in on improving business and always a structured questionnaire about Engaging “I tell every candidate up front – if you are not ready to commit 40 days of your time to this board, let’s stop here.” (Switzerland) agree to have conversation their position on key dilemmas about them” (Russia) such as growth, dividends, “I ask every new director to sit down with every other board member before her first meeting.” (Singapore) Performance acquisitions, owners’ pride”(Denmark) “I prepared and signed an agreement “Dinner with non-executive directors is a good way to re-engage them on the eve of a board meeting.” (The UK) with shareholders to establish “I always consult shareholders’ formal rules and engagement” representatives before we put “I ring every director and ask if they are happy with the next meeting’s agenda or would like to change something.” (Denmark) (Russia) important decisions on the board agenda” (Singapore) “I make sure it attractive for board members to come to the Netherlands taking care of all arrangements during their stay.” Chair’s priority (The Netherlands) “I always have Q&A session at annual “I invite representatives of large shareholders’ meeting and stay and small shareholders to the board on to give minority shareholders meetings to hear their positions Enabling “I need to think very clearly about whom I ask to talk first and who an opportunity to ask their questions” and concerns” (Belgium) talks last about the specific topics. Who is irritated by who or what? (Singapore) Who is brooding about what? I need to be very alert about recogniz- Compliance “I consult with top 25 shareholders ing body language.” (The Netherlands) “I always write back to shareholders about executive compensation “I start with an informal in-camera session. I want to know what goes when they write to me” (The UK) strategy and personally supervise on in their minds and what their current concerns are. It is a way for all our compensation report” (The UK) of us to clear our hearts and minds before the official meeting starts.” (Belgium) “I try to take as little room as possible. My task is to help others to speak their minds.” (The UK) Reactive Chair’s tools and channels Proactive “I rarely express my position. If I do it – I speak last.” (Russia) “Asking questions in a Socratic way, even if you know the answer, is a good way to get other points of view to come alive.” (Denmark) Relationships with the CEO and management. this: chairs are expected to mentor the CEO. The CEO (and in some cases other senior exec- In most cases, we found the chair-CEO relation- utives) is an important counterpart of the chair. ship to be intense, complex and more nuanced Encouraging “We close every board meeting with a short reflection session. In most countries studied, the law or corporate than prescribed by the regulations. Contextual I ask each director three questions: ‘What went well? What did not go so well? What we could have done differently?’” (Russia) governance guidelines oblige board leaders to factors, notably national culture, their respective maintain productive working relationships with relationships with ownership, and previous career “Once every year, we go to an off-site dedicated to improving board dynamics. With the help of a facilitator we brainstorm how to improve their chief executive, communicate with them, experience and individual personality play a de- and try out new approaches.” (The UK) and provide advice and feedback on behalf of cisive role. We identified a number of “ideal types” the board. In others the demands go further than of chair-CEO relationships, shown in Table 2. “Once a year I invite every board member for lunch and we talk about what she/he wants to discuss.” (The UK) “I invite every board member to my home for a meal and we talk about his performance and how I could be more helpful.” (Singapore) 12 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 13

Table 2. Chair-CEO Relationships: Ideal Types and Chairs’ Practices What Makes Chairs Effective? Ideal Types Description Chairs’ Practices “Soft” and “hard” skills. Although to an outsider While the question of what makes chairs effec- it may look highly technical or even purely cere- Collaboration A close, intense “We set every board meeting agenda together.” tive was not a topic of this research per se, our monial, the work of the chair is almost exclusive- and well-structured (The Netherlands) respondents shared a number of interesting ide- ly about human relations – with specific types interaction between “We go on business trips together – it helps to build trust as. Those that resonate with the major themes of people: senior, successful, action-oriented, professionals with and have the same picture.” (Switzerland) of the project are summarised below. performance-driven, sophisticated individuals equal status “The CEO and myself conduct a debrief after each from different backgrounds and countries. Man- board meeting.” (Belgium) Humility and ego management. One of the aging these relations requires exceptional behavi- most experienced participants in the research oural skills. Among them, the respondents most put it this way: “If you intend to use your chair posi- often mentioned the ability to listen, ask ques- tion as a platform for self-aggrandisement, you are in for tions, frame issues, and provide feedback. Two Mentoring Senior (chair) and junior “We establish developmental objectives for the CEO trouble.” The words “restrain”, “non-domineering” and other competencies they referred to were synthe- (CEO): professional interaction and we have formal mentoring sessions with him once “leaving room for others” were cited when referring sising ability and systemic thinking, in the “hard with the main goal to help a quarter.” (Russia) the latter perform functions to fostering productive board discussions which skills” category. using the knowledge, “The CEO develops strategy – I listen to him and challenge lead to effective decisions. experience and resources his assumptions.” (The Netherlands) of the former “The management team comes to me for advice since I am Availability and presence. The chairs’ presence Commonalities and Differences old! I mentor them. We have a Socratic encounter and I teach should be felt as little (see below) and as much them to think by asking them questions.” (Singapore) as necessary. They should give others room to In multi-country research projects the question speak and yet be there to direct the conversation. of commonalities and differences is one of the In the words of one respondent: “It may be called most interesting, and in the case of chairs war- Commanding Superior (chair) a non-executive and part-time job, but I have no illusion: rants further investigation. We found strong simi- and subordinate (CEO): “I promote a healthy work/life balance with my fellow (“boss”) I have to be ready to mobilise and commit all my time to larities in how chairs from different countries de- the chair gives orders board members but also with the CEO and his team. to the latter Some need to be pushed away on vacation. Sometimes this board if the need arises. And I stay in a permanent fine the job – leading the board and working with I have to push them to look broader than just contact with the company to make sure I don’t miss this key counterparts – directors, shareholders and the organisation.” (The Netherlands) need.” the CEO. Most leadership practices described by the respondents applied to more than one culture, CEO prepares a “Chair Report” – monthly update for the chair (The Netherlands, Russia) Passion. A good chair not only does the job but a small number were unique to one country. professionally, but cares about the company, the Cultural specifics manifested themselves in de- board and the people. In the words of one re- tails such as which meal a chair shares with a di- spondent: “It’s like any other profession – you can only rector or how long the CEO’s report is. In general, Advisory Junior (chair) and senior “I come to see him every month; we speak one-to-one, reach the top when you are passionate about what you other contextual factors – primarily the compa- (CEO): professional very informally. I update him on the board’s work, ask his do. In this case it’s the board and the company it governs.” ny’s ownership structure and relationship with the interaction with the opinion on important issues. He may ask my views owners – had a stronger impact on chair’s work goal to help the CEO on anything from Obama politics to the last remuneration Patience and reflectivity. Passion creates ener- than cultural differences. to perform functions using committee meeting. Sometimes he asks for help in specific the knowledge, experience deals. I feel that he values my advice.” (Russia) gy, enthusiasm and a focus on achieving results. and resources of the chair. But in leading the work of a group of professionals “Quite important in my relationship with the CEO, who is it must be tempered by patience and the ability also a majority shareholder, is to help him keep his two roles The CEO shapes to pause and reflect. The chair should not rush separate. This leads to heated discussions sometimes.” the relationships; chair (The Netherlands) to get things done quickly but focus on getting is reactive things done properly. Many respondents empha- sized how this aspect of the job makes it different Co-habitation Two professionals “I never talk to the CEO’s direct reports – it’s the area from the CEO’s, and how the adjustment process with equal status work of his responsibility.” (Switzerland) was not easy for them. independently towards “I write to all board members to solicit ideas for the annual goals defined by each board agenda, the CEO is one of them. I don’t feel I need of them separately. to do anything special for him.” (Russia) Mostly formal interaction, cooperation limited to what is required by regulationsr 14 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 15

Future Trends Chairs’ Challenges and Practices

Corporate governance is a domain where tradition plays an important role Using challenges of board chairs from the INSEAD Global Chair Survey 2015 and find- and change is not always welcome. However, our respondents foresee a con- ings from the Global Chair Research project we compiled the table below matching tinuing evolution in the work of the chair. While this will differ from country the challenges and the practices described by the participants in their interviews. to country, a number of global or general trends will develop over the next The challenges are listed in the order of importance established by the survey; decade. the practices are presented in the alphabetical order.

In 2027, there will be more female chairs in the countries that took Chairs’ Challenges Chairs’ Practices part in the research project and worldwide, yet they will remain in a minority everywhere. Relationships with Asking shareholders to fill in a structured questionnaire controlling or large about their position on key dilemmas such as growth, There will be more aged 40-something people in the chair, shareholders dividends, acquisitions, owners’ pride; but professionals in their 70s and even 80s will continue Creating group in WhatsApp for shareholders to exchange news; to lead boards. The average age of the chair will fall, but not significantly. Emailing to the largest shareholders to enquire whether they would like a private meeting; External pressure on chairs will increase and their work Having informal dinner with large shareholders before will intensify. Tenure will shorten and fewer will chair more every board-meeting; than one corporate board. Informal meeting with shareholders discussing the questions a Chair is interested in; “Professional chairs” – people who do it for living – Inviting representatives of large and small shareholders to the board will increase in number. meetings to hear their positions and concerns;

Chairs’ backgrounds will be more diverse, but the CEO / general Inviting the five largest shareholders and independent directors for a working dinner once a year; management route will remain the main career path for the job. Preparing an agreement with shareholders to establish formal rules Board chairs will work more with stakeholders – notably of engagement; shareholders and management – but the board will remain Trying to be always available for shareholders their main focus.

Succession planning and development will become Managing difficult board Arranging a dinner after a board meeting; an integral element of the chair’s job. members (special cases) “Chair’s minute” at the opening of the board: update on developments since the last board meeting; They will have a lot more specialised executive education than they do today. Business schools, consulting companies, Convening off-site meetings with the help of facilitators; national directors’ associations and others will provide Creating WhatsApp group chats for the board’ members; classroom and online courses for board leaders. Dinner with non-executive directors on the eve of a board meeting Technology will actively move into the boardroom and become one of the main tools for the chair’s work. Board meetings Level of collaboration Arranging a dinner after a board meeting; and teamwork among will increasingly be held on line, one-to-one communication “Chair’s minute” at the opening of the board: update board members will become mostly virtual, materials will be prepared, on developments since the last board meeting; distributed and stored in digital form. New technology-driven methods of leading boards will emerge and become routine. Convening off-site meetings with the help of facilitators; Creating WhatsApp group chats for the board’ members; Dinner with non-executive directors on the eve of a board meeting 16 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 17

Chairs’ Challenges Chairs’ Practices Chairs’ Challenges Chairs’ Practices

Informational asymmetry Arranging board meetings in different company’ locations; Insignificant time Calling all directors a few days before the meeting to ensure participation with the CEO Attending management meetings; commitment by board and encourage preparation; members and management CEO monthly letter to all board members; Obtaining time commitment from every candidate upfront; “Chair Report” – CEO monthly update prepared for the chair; Setting all board and committee meetings dates for the next two years Checking board materials before they are sent to directors;

Defining format for board materials, digital board book; Relationships Appointing a special representative as a voice for minor shareholders Encouraging directors to spend time at the company; with minority in board discussions; shareholders Inviting external experts and consultants; Providing the same data to majority and minority shareholders; Spending time in the company’s office, having an office in the company; Staying on after the AGM to meet minority shareholders and answer Talking to each of the executive team members once annually any questions in a one-on-one conversation Facilitating effective Calling every director and asking if they are happy with the next meeting’s agenda or would like to change something; Relationship with external Arranging meetings for improving directors’ knowledge of the company board discussion Conducting an express evaluation at the end of the meeting; stakeholders such as clients, and its business, including customer visits; suppliers, government Interacting with media on a regular basis; Distinguishing between subjects that need a discussion and subjects that need a decision; Participating in industry conferences; Following “30-20-40-10” rule – 30 percent of time spent on management Sharing information in local languages to reach the community; presentations, 20 percent – on Q&A, 40 percent – on discussion, Supporting the CEO when necessary, for instance, in moments of crisis, 10 percent – on making decision. Or “30-70” rule – 30 percent of time to take pressure off the CEO on presentations, 70 percent – on discussion; Giving every director the same amount of air-time;

Relationship Conducting a CEO debrief after each board meeting; Limiting numbers of slides of management presentations, with the CEO setting specific special formats for presentations; Establishing developmental objectives for the CEO; and management Not indicating one’s personal position; Going on business trips together with CEO; No voting; Having formal mentoring sessions with CEO; Prioritising important topics in advance; Having lunch with the CEO and CFO every quarter, meetings with hi-pos; Soliciting opinions of “silent” directors before the meeting Never talking to the CEO’s direct reports vs Meeting with other executives; and presented them on their behalf; Setting board meetings’ agenda together with CEO Taking as little room as possible; Writing proposed resolution on a flip-chart; Verifying materials before they go to other directors. Appointing an board member for his out-of-the-box approach; Managing diversity Individual coaching of new directors; in board members’ Planning and preparing Using external consultants for succession planning; backgrounds “Round the table practice” – asking one director after another chair’s succession to state her position on a specific question; Using headhunters for benchmarking purposes; Talking to each of the executive team members once annually Using shareholders and board members networks in a one-on-one conversation to identify potential candidates. 18 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 19

Part II Chairs in the National Context: Country Reports

20 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 21

he United Kingdom of Great Britain non-executive directors. As the highest govern- GDP in 2015 – 01 and Northern Ireland consists of England, ing body, the board makes key executive appoint- T Scotland, Wales and Northern Ireland, each ments and takes decisions about the remuneration US$ 2.8 trillion with various degrees of autonomy. The UK has of top-managers, strategy, major capital invest- a constitutional monarchy, a parliamentary sys- ments, risk management and disclosure. United tem of governance, and a developed economy. In 2015, GDP was US$ 2.8 trillion (ninth largest in In practice, board engagement varies greatly, the world at purchasing power parity) and per as reflected in the number of meetings held per capita GDP of US$ 44,000. Of this total, the service year. Boards of larger companies have a stan- Kingdom sector represents more than 80%, industry 14%, dard set of committees for audit, nomination and and agriculture 6%. The UK is ranked 14th on the remuneration. Committees for strategy, environ- Human Development Index. ment, ethics, health and safety may also exist. The Stanislav Shekshnia average number of board committees for a listed Five million businesses in the UK employ some UK company is 4.4 (EU average 3.4). 25 million people. Privately held companies account for 99% of all private sector businesses, UK boards are not small, with 12.4 members 60% of private sector employment, and 48% on average (EU average 12.3). The proportion of private sector turnover (BIS 2013). There are of independent directors has steadily increased approximately 10,000 listed companies, in which over the last two decades. Women represent 18% financial institutions, foreign investors and pri- of board members in the UK (2014). Five million vate stockholders are the main shareholders, and form one of the most active shareholder com- The UK Governance Code recommends the sepa- businesses munities in the world. In 2011, turnover at share- ration of the CEO and chair positions, as adopted holder meetings of listed companies was 63%. by most publicly owned companies. UK compa- employ more than nies can have executive, non-executive, affiliated The UK has one of the oldest systems of corpo- and independent chairs, and the latter category 25 million people rate governance in the world, largely based on is on the rise. “soft law” (governance guidelines) and “comply or explain” principles, as defined in the UK Gover- The Code provides detailed guidelines about the nance Code, updated in 2016. There is no man- role, duties and responsibilities of the chair. As the datory structure for boards, but the single-tier leader of a collective body (board of directors), model predominates, with both executive and he/she has a responsibility for functions such as: 22 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 23

These include the timely provision of high-quality Eight experienced professionals: three women and five men, aged from 54 to 72. Creating the conditions for the board’s materials, setting a productive agenda for board and individual directors’ effectiveness. meetings, facilitating board discussions, ensuring Together they chair 15 boards of directors, that directors update their skills and knowledge including seven boards of publicly listed corporations, seven privately held of the company, and that the board has a balance companies, two charities, and of knowledge, skills and diversity of backgrounds. Chairs Interviewed a government agency. None hold a significant stake in the for the Project companies they chair. None are The chair should promote a culture of openness engaged in any private business Demonstrating the highest standards and debate by facilitating the contribution or full-time employment. of integrity and probity, setting clear of non-executive directors, and ensuring On average, they have occupied expectations concerning the company’s constructive relations between executive and their current position for four years culture, values and behaviour, non-executive directors. (maximum nine years, minimum two years). and establishing the style and tone The business boards they chair consist of board discussions. of 5 to 11 directors; charity boards are much larger. Business boards meet between 5 and 12 times per year, charity boards The Code emphasises the importance of the meet every quarter. Developing productive working chair-CEO relationship for the company’s long- Board composition varies in terms relationships with the CEO and other term success, and the need for their respective of the gender, age and professional roles to be well-defined and distinct. The chair backgrounds of members, but all include executive directors. executive, non-executive, independent provides support and advice to the CEO, respect- and affiliated directors. ing his/her executive responsibility. All boards have nomination, remuneration and audit committees (sometimes audit and risk management or audit and control). The chair provides overall direction to the com- Some boards have committees on strategy, Guiding the company pany secretary, evaluates his/her performance, ethics, and health/environment/safety (HSE). secretary. and ensures he/she has an appropriate skill-set and knowledge of the company. In the past, respondents had collectively chaired 21 boards of directors and are therefore con- sidered “professional” chairs. For our research, The chair ensures that directors are aware we asked about their practices throughout their Communicating with external of the views of shareholders, facilitates dialogue careers, although most of their answers and stakeholders, including shareholders. between the board and shareholders, and dis- examples refer to their current appointments. cusses governance and strategy with major share- holders. INSEAD Global Chair Survey 2015 identified the following main challenges for the chairs of British companies (in descending order of importance): The chair assesses its blend of skills, experience, Conducting periodical board independence and company knowledge, board Managing difficult board members evaluations. diversity, and how members work together as UK Chairs: Global (special cases) a unit. On this basis, the chair proposes new mem- Relationships with controlling or large bers and seeks the resignation of directors when Challenges and Practice shareholders appropriate. Evaluation of the chair is conducted Relationships with minority shareholders by a senior independent director, who also organ- Level of collaboration and team work among ises the succession. board members (board dynamics) All interviewees agreed that relationships with shareholders and collaboration among board members were top priorities. They shared both general strategies for dealing with those chal- lenges and specific tools to implement them. 24 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 25

Relationships with shareholders Chairs in the UK emphasise the importance before the meeting and then presents their views Board dynamics of maintaining a constructive dialogue with share- to the board, acknowledging the source. Others In dealing with shareholders, the chairs strive holders for the benefit of the company, but not adopt a format of asking every director to state his Helping the board to reach good collective deci- for a balance between pro-activity, equality and in the boardroom. They emphasise the impor- or her opinion as a way to engage otherwise sions is the top priority. Aware of multiple identities fairness. They want to be seen as available, listen- tance of protecting the independence of the silent members. and commitments of directors, the respondents ing, attentive but independent, non-partisan, and board and their authority over its workings. are modest in their team-building ambitions – putting the interests of the company before those As one put it: “We operate under the two meetings prin- In summary, “special cases” are dealt with in “I don’t think the board needs to become a team,” or of individual shareholders, no matter how big ciple: one is for directors (the board), another for share- a tactful but firm way. Chairs do not hesitate “Perhaps it is a very special team.” However, they or important the latter may be. As one stated: holders. If you happen to be both, learn to behave your- to challenge directors since this contributes deploy specific strategies to make this diverse “Shareholders have access to me. I make sure they know self.” Another respondent shared his experience to what respondents identified as their main group of people (which meets only a few times it, and I am always responsive.” of threatening to put an unexpected proposal by focus – board dynamics. a year) work productively. These fall into a large shareholder immediately to a vote, so they pre-meeting, meeting and post-meeting catego- Several respondents emphasised that they do would be outvoted by independent directors. ries, as summarised below. not distinguish between majority and minority We came across examples of written agreements shareholders. They are careful not to give prefer- between large shareholders and companies Table 1. UK Chairs’ Strategies and Practices ential treatment to any shareholder group when (legally binding) and between shareholders and they chair the board of publicly listed companies. chairs (informal). Stage Chairs’ Strategies Chairs’ Practices Some will not initiate consultation with a particu- Pre-meeting Set expectations Induction interview with a director lar shareholder unless others are party to the dis- Reach out to every director Induction program for a newcomer to the company cussion; they “give them enough information, but not Managing difficult board members Consult every director Phone call before the board meeting more than to other shareholders.” Consult about the agenda According to INSEAD Chair Global Survey 2015, Avoid surprises Respondents agreed that, for public companies, “managing difficult board member” was the num- Provide necessary data Pre-board dinner for non-executive directors executive compensation is the number one topic ber one challenge for chairs in the UK, although Pre-board dinner for the whole board in their interaction with shareholders. One for- respondents seemed to take this in their stride. Pre-board dinner for non-executive directors and CEO mally consults with the top 25 largest share As one said, “You have to work with what you’ve got Defining format of board materials holders on remuneration and personally super- – you are not a CEO selecting your team.” Generally, Checking board materials before they are sent to directors vises the preparation of the annual remuneration “challenging directors” fall into two categories – Digital board book report. They are aware of activist shareholders (i) those who do not listen but speak a lot, and Encouraging directors to spend time at the company, but have limited interaction with them. Overall, (ii) those who say little or do not speak at all. including customer visits respondents regard interaction with shareholders A common strategy for dealing with directors Convening board meetings in different company locations of public companies as a time-consuming, sen- with “verbal diarrhea” is containment, and for the Deep dives sitive activity which does not always add value silent type engagement. Get the right agenda Consulting with CEO to the business but has to be done to avoid share- Meeting holder conflicts. A number of steps were cited to contain vocal Focus on discussion, Consulting with board members board members: having a private word in their not presentation 30:70 rule For private companies, the independence and ear, offers of help (sometimes calling it “coach- Creating an atmosphere Starting a board meeting with a short in-camera session equal treatment of all shareholders are important, ing”), a direct confrontation in the board room of trust for non-executive directors although their smaller number and less strict gov- (“Bill, you talk too much”; “Margaret, I will have to ask Equal treatment Closing with an in-camera session for non-executive ernance allow for more intense interaction. The you to stay quiet for the next quarter of an hour”; “James, Focus on taking a specific, directors chair of a private company with three sharehold- thank you. Now we need to hear from other board mem- actionable decision Framing a discussion question ers sends a board book and speaks to a repre- bers”), suggesting professional help, or making Facilitation No voting sentative of each of them a few days before the a formal performance evaluation. If nothing Self-restraint Asking every director to state their position board meeting, walking her counterpart through works, they resort to recommending that the indi- Writing proposed resolution on a flip-chart the agenda. She does not look for “input or guide- vidual not stand for reelection. There was general Speaking last lines, but makes sure shareholders are aware of what is on agreement that if the chair is firm and consistent, Not indicating one’s personal position the next agenda.” Ideas from each shareholder are most cases could be remedied. Conducting an “express evaluation” at the shared with her at meetings specially convened end of the meeting twice a year. Another chair writes to the largest Respondents pay a lot of attention to ensuring shareholders to enquire whether they would like that every director contributes and that even Post-meeting Involve the whole board Conduct formal 360-degree board evaluation in finding ways to improve a private meeting; about half take up the invita- those not inclined to speak at meetings are part Off-site meetings for the whole board tion. One chair of a public company invites the of the collective work. One commented: “My major Learn from formal evaluations Open agenda one-to-one meetings and informal feedback five largest shareholders and independent direc- task – to make silent directors speak – they are my ma- Annual evaluation meeting with every director tors for a working dinner once a year to discuss jor underutilised asset.” Rather than calling on them Stay connected with Personal call every month with every director every board member business within permitted boundaries. in the boardroom, he solicits their opinions Annual lunch with every director Skype meeting with every director 26 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 27

supports it. One respondent described how: 30:70 ratio “As a novice chair, I underestimated the degree to which people participating in the same discussion and listening For respondents, the success to the same proposed decision may have different ideas of time about what it actually meant. As a result we would have of a board meeting is a function for presentations had some unpleasant conversations later on. I learned the 30% lesson and now always take time to make sure everybody of the right agenda, motivation and questions understands the proposed resolution the same way.” Another chair writes the proposed resolution and preparedness of the participants on a flip-chart and walks the board through it. and the process instituted by the for discussion Most conduct some sort of evaluation at the end and decision of the board meeting. This reinforces respect for 70% each director, builds trust, and helps them learn board leader making and improve. One respondent said: “At the end of the meeting I ask every director to comment on how we did as a team and how I did as a chair person?” Another puts three questions to the non-executive directors at the end of the meeting: “What worked All respondents agreed that the pre-meeting ment to produce a quality board book: “I don’t For discussion to be productive it has to be can- well? What did not work? What should we do differently stage is critically important, and invest time and check materials before they go to the board members – did and involve all board members. The chair’s next time?” – and implements their recommenda- energy in preparation, the ultimate goal being too controlling and interfering. The company secretary task is to create an atmosphere for productive tions at the next session. to ensure they have motivated, well-prepared has the power to turn them down.” A number of boards exchanges. When asked how they approach this directors in the board room. When a new direc- chaired by respondents have gone 100% digital task our respondents spoke about “trust, respect, Post-meeting. Formal board evaluation is tor joins the board, they conduct an induction (electronic communications rather than print). and personal attention.” The most common strategies a well-established practice. Board assessments interview at which expectations are set. Their to achieve this were equal treatment, discussion are conducted every 12 to 24 months, sometimes induction includes meetings with executives, site To improve directors’ knowledge of the company facilitation and self-restraint. As one explained: with the help of external consultants, sometimes visits, product introductions, etc. As one chair and its business some respondents facilitate com- “I have two rules – every director has to have roughly the via an anonymous survey among board mem- explained: “We organise induction programs for all pany visits, meetings with employees, customers, same amount of air-time, and we should reach consen- bers (and, in some cases, senior executives). One new directors – they visit key units and functions, and site-visits, etc. The chair of a hospital board intro- sus (I never allow voting). Sometimes one board member respondent explained: “We do 360 digital evaluation spend time with risk (department).” duced a routine whereby “every non-exec spends is more knowledgeable than another on the subject every year and every three years we invite an independ- one day with patients.”Another described how: matter and wants to have more time, but I say: ‘You are ent consultant to conduct a thorough assessment with the The chair reaches out to directors before a board “We conduct board meetings in different geographies an expert – you should be able to make your point help of semi-structured interviews with all directors and meeting to re-engage. Some consult with other and always visit operations and meet with customers.” quicker.’ Usually people smile and accept it.” Another key managers.” members about the agenda. One said: “I ring every affirmed that “You build trust by demonstrating respect, director before approving next meeting’s agenda to ask Leading a meeting. For respondents, the suc- and you show respect by valuing everybody’s opinion Some chairs arrange off-site meetings to dis- what they want to see on it.” While members rarely cess of a board meeting is a function of the right and acknowledging everyone’s contribution…I always cuss how collective decision making could be come up with drastic alterations, such conver- agenda, motivation and preparedness of the par- thank every director who put forward an idea after the improved: “Once every year, we go to an off-site sations help to concentrate their minds on the ticipants and the process instituted by the board decision has been made, even if that particular idea was dedicated to improving board dynamics. With the help upcoming meeting. leader. Items on the agenda should be, in the rejected.” Another strategy was to ask each of them of a facilitator we brainstorm how to improve and try words of one of them, “strategic”, “ripe for a decision”, to state their personal position on the subject matter out new approaches.” Others combine these with Pre-board dinners are another way to engage “material” and “no else in the company could make before concluding the discussion. strategic discussions. Overall, loosely structured directors, review the agenda, and ensure every- a quality decision” about them. One insists there off-site sessions are seen as an important tool body is on the same page. Most chairs limit these be no less than four and no more than six items Restraining their own participation in the discus- to improve board’s cohesiveness and perfor- to non-executive directors; others extend it to ex- on the agenda for one meeting. In most cases, the sion is another tactic used to promote trust and mance. ecutives. One noted: “A board dinner is a good way chairs we interviewed partner with the CEO to set engagement. As one chair put it: “I try to take as little to make sure we have no ugly surprises in the board the agenda. Others invite all directors to review room as possible. My task is to help others to speak their Working with the board as the whole is comple- room next morning.” the agenda and pitch their ideas. minds.” Another added: “I always try to avoid indicat- mented with one-to-one interactions. One chair ing personal views and preferences. If I have to speak, I rings “each director every month to keep them con- The quality of materials is critically important Respondents believe the board should spend speak last.” centrated on the company.” Another invites every for effective board work. Respondents cited the most of its time on discussions rather listening board member for lunch once a year. Yet anoth- need for clarity, for limiting volume, and allowing to management or committee presentations. The discussion facilitation task includes stating er has a Skype conversation every six weeks. enough time to study the materials in advance. One imposes a 30:70 ratio – 30% of time for pres- the facts, framing a discussion question, provid- One commented: “They (directors) should feel that Some define the format of these, some co-define entations and questions, 70% for discussion and ing every director with an opportunity to speak, you are available, you care about them and their views, with the CEO. Some check the materials before decision making. Others use similar but less strict summarising, formulating a resolution and mak- but you are not intrusive.” they are sent to directors, others trust manage- approaches. ing sure that every director understands it and 28 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 29

In the UK, unlike other countries, informational asymmetry with the CEO and management is not seen as a major challenge to the work of the chair. Most are philosophical about it: “You should acknowledge it and live with it. You will never know The chair’s role is to help by listening, Other Challenges as much as CEO does, but you have to trust him/her. If trust is not there, you should change him/her.” Some resort asking questions, challenging and Chairs’ Practices to “asking the CEO to write a monthly one-pager for me”, “meetings with the CEO direct reports”, “lunches assumptions, connecting the CEO with hi-pos”, and “company conferences” to improve their feel for what’s going on in the company. One chair insists that “other executives, at least the with experts, and sharing personal CFO, should be on the board.” Another described the “chair-CEO-CFO triangle as a critical factor for the busi- CEO experience. ness’s success.”

The relationship with the CEO is high on the chair’s agenda. Interaction is intense and more complex and nuanced than the “I run the board – you run the company” approach, and go listening, asking questions, challenging assump- sure directors when needed have access to company and beyond the supervisory or mentoring functions tions, connecting the CEO with experts, and shar- external experts.” Setting an example to other board prescribed by the Code. Although our respond- ing personal CEO experience. Some respondents members is paramount: “Although I try not to reveal ents asserted that “CEO development is one of my performed other services at the CEO’s request my position, I always make sure directors see that I have annual objectives” and “I question and challenge CEO such as meeting with customers, regulators, done my homework.” both privately and in the board room,” the notion suppliers and the media. In general, however, of cooperation, partnership, and support emerged respondents believe that chairs should not as more important ones. A very experienced chair interact with third parties except shareholders. Chair succession put it this way: “I am helping him to deal with loneli- The only time they should step in is a crisis. ness, almost acting like a shrink,” – they have an open The corporate governance guidelines say little agenda meeting or a phone conversation every Respondents acknowledged that multiple iden- about the role of the incumbent in the process two weeks. Another considers herself “a sound- tities and a lack of commitment of directors of identifying and preparing a successor. Atti- ing board for the CEO”; they meet every two weeks can become a real issue if not properly man- tudes among respondents differed remarkably. and talk both about current business issues aged: “This is a huge challenge. No matter how much From “I am thinking about it from the day I became and the personal challenges of the CEO, who you say upfront – people will fail you.” To deal with a chair” to “I should not mess with it; a senior inde- defines the content of their conversations. One it, they make their expectations clear at the out- pendent director will organise the process when the respondent, who holds multiple chairs and has set. One respondent said: “I say at the recruitment time comes.” One fascinating story of succession solid experience in executive development, lets stage – ‘You need to commit 40 days a year to this board, deserves to be reproduced here in full: the respective CEOs “define the format of our inter- are you ready?’” Another went further: “I set a rule action.” “At the global food company we always have at the induction interview: three missed meetings and “When I had to go through that for the first time a one-to-one meeting a couple of days before the board you’re out.” Enforcing the rules is critical, although I looked at the Code and found nothing there. I spoke meeting, he sends me a lot of SMS and I answer. At anoth- it may be enough to remind the board of them from to other chairs and executive search consultants. er company we have regular Skype meetings. At the third time to time. Some respondents are more candid There was no clear formula so I invented my own. organisation, we exchange e-mails almost daily.” in confronting directors who come unprepared First, I wrote a memo to all directors indicating my or unfocused: “I say ‘It was obvious you did not read the intention to step down and asking if they were inter- One respondent described how he negotiates materials. Is something special going on or did you lose ested in the position. Two said “yes”. In the memo a “non-aggression pact” with the CEO: “You never interest?’ or ‘I need your voice in the boardroom!’” Such I made it clear I should have no say in choosing my bump a board with an important decision without suffi- conversations take place behind closed doors successor, but I would organise the process. I put cient time to analyse it – I make sure they will know about rather than in the boardroom. together a committee of two independent directors all important concerns before the board meeting, rather (those who did not want to be considered) and the than at the meeting.” On the enabling side, respondents emphasised CEO to oversee the process. They developed a pro- the importance of thorough and long-term plan- file (and ran it by me) and hired an executive search There was consensus among respondents that ning: “Planning is critical. We set all board and com- firm. Together with the head-hunters they assessed developing strategy is the CEO’s business, which mittee meetings dates for two years, and I do everything three external and two internal candidates, and the board should “endorse” (unless there is a cri- to stick to them”; the quality of materials: “People picked one from within. We sat down with him few sis, in which case it should take over temporarily prepare when materials are crisp, concise and have times before I left and it worked very well.” as a collective CEO). The chair’s role is to help by good visuals”; and availability of resources: “I make 30 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 31

Summary Unexpected finding of this research was that one Looking ten years ahead, we expect of the most popular ways in which UK chairs to see the following trends with regard From INSEAD Chair Global Survey 2015 accomplish their business is… to share a good Looking ten years ahead, we expect the following profile of the chair emerged meal. They eat out with board members, exec- to see the following trends with regard (aggregated across 27 respondents): utives, shareholders and other stakeholders, at business breakfasts, tete-a-tete lunches, af- Aged just under 60 ternoon drinks or group dinners. This may have They will concentrate even more on They will have strong personalities, something to do with London’s recently acquired the board and stay out of the lime-light. developed social skills, systems thinking, Educated to Master’s level (only one PhD) reputation as the culinary capital of the world, but a global mindset, advanced listening skills we believe that it reflects the importance of per- They will put in more hours and have fewer and strong ambitions, but enough humility Chairs two boards sonal relationships for the job of the chair and the directorships; we will see more “exclusively to channel these into the collective work British tradition to foster them through a shared committed” board leaders. of the board. Sits on another two or three boards meal. as an independent director The relationship with the CEO will remain They will lead indirectly: engaging, enabling In the UK context, chairs are important figures but a top priority. It will be more intense, and encouraging directors through nudging, Very experienced as a board member stay out of the public eye. The chair is responsi- and evolve towards partnership, mutual creating an environment of mutual respect ble for and represents the board, while the CEO mentoring and collaborative work. and trust, and walking the talk. Has worked as a CEO or senior business is responsible for and is the public face of the executive (or more rarely as an academic company. Our respondents are accomplished UK boards will see more foreigners Boards will take chair succession more or civil servant) professionals with strong views, but they lead in the chair, but the majority will remain seriously. The UK code will formulate without taking much space and avoid the lime- UK citizens. comprehensive guidelines, and incumbents Receives around £70,000 a year per light. They lead board members and executives will have more ownership of the process. chair position by engaging them in a collective effort, creating The board leaders will become an environment for effective collaboration and somewhat younger. Technology will slowly but steadily The people we interviewed for this project are encouraging productive behaviour by providing conquer the boardroom. In the next decade, somewhat more senior, more experienced both feedback and opportunities for collective and We predict that 20% of chairs will be all UK boards will go digital and many as directors and chairs, come from a variety of individual learning and development. They don’t filled by women. board meetings will become virtual. industries and companies, and are well paid. They give orders or issue directives; instead they steer come from an executive background and later or nudge followers by setting agendas, framing Most chairs will continue to come up Much informal one-to-one communication become full-time board chairs and directors – discussion items, soliciting opinions, seeking and through the CEO school, but more will have will move online. By 2026, technology a path that seems to be almost universal in the UK. providing feedback. They set clear expectations backgrounds in consulting, academia, will become what sharing a good meal and establish rules, but the latter serve as guide- and technology; fewer ex-government is today – a stable platform for leadership. Although most are independent and non-execu- lines rather than set-in-stone laws. Chairs provide officials will lead company boards. tive, they spend a lot of time at their companies – exemplary leadership by consistently displaying between four and ten days per month. Because the attitudes and behaviour they expect others of this significant time commitment, so-called to follow. “Indirect” is probably the most accu- “celebrity chairs” – who chair three or more rate term to describe their leadership style. boards at a time – are disappearing. Yet when required – in times of crisis – they step UK Corporate Governance Code, April 2016 In the UK, chairs have two circles of interaction, forward, assume responsibility and demonstrate both fairly small. The inner circle consists of hands-on leadership. Understanding that such Financial Reporting Council (FRC) Developments a dozen or so board members, including the CEO situations may occur and being mentally ready in Corporate Governance and Stewardship 2015, and CFO and sometimes one or two other execu- to take an active role is integral to the chair’s Resources January 2016 tives, and the company secretary. The outer circle mindset. While not seeking the limelight, they are includes large shareholders, company managers, passionate about the companies they chair and for this chapter G20/OECD Principles of Corporate Governance, in some cases important customers or vendors, ready to go the extra mile (or more) to serve them. November 2015 representatives of regulators, the media, and pro- Corporate governance – where change is not al- fessional associations. The chair interacts with the ways welcome and tradition plays an important Financial Reporting Council (FRC) members of the inner circle relatively frequently – role – will continue to evolve in the UK. Guidance on Board Effectiveness, March 2011 face-to-face every one to two months and remains in regular communication in between. Meetings with the outer circle happen a few times a year. 32 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 33

02 he Kingdom of the Netherlands, often Larger companies, defined as any entity with GDP in 2015 – referred to as Holland, has a constitutional more than €16 million in issued capital, at least US$ 795 billion T monarchy founded in 1815. Today it com- 100 employees and a company council, adhere prises the continental Netherlands and six Carib- to the structuurregeling (structure regime) which bean islands: Curacao, Bonaire, Aruba, Saint Mar- provides for indirect representation of em- The 1.7 million tin, Saba and Saint Eustace. It has over 17 million ployees at supervisory board level. inhabitants and a population density of 415 people businesses employ per km2. A fifth of its surface area is water and The supervisory board appoints and dismisses Netherlands a large part of the country lies beneath sea level. management and approves major management more than 8 million It is a parliamentary democracy and a founding decisions. This applies to Dutch companies with member of the European Union, NATO and the a majority of the workforce in the Netherlands people Mik van den Noort World Trade Organisation. (international companies with a majority of em- ployees outside the Netherlands are exempt). In spite of its small size, it is the fifth-largest econ- While the above may explain why there are omy in the Eurozone, the seventh economy in the relatively few large companies in the Nether- such that all members are able to act critically world by GDP per capita, and is in fourth place on lands, the system makes for a highly skilled, high- and independently of one another, of the manage- the Human Development Index. The economy is ly motivated workforce that is largely aligned with ment board and any particular interests. The two made up of a highly developed agriculture sector, company goals and targets. The productivity rate pillars on which good corporate governance a sophisticated services sector and international is surpassed only by the Japanese and the Swiss, is founded and which are the basis of the Code are: trade. GDP is US$ 795 billion. with strikes a rare phenomenon. good entrepreneurship, which implies integrity and transparency of the management board’s ac- About 1.7 million businesses in the Netherlands The Dutch Corporate Governance Code was tions, and effective supervision of their actions. employ more than 8 million people. Large organ- established in 2003 by the Tabaksblat Commis- These are regarded as essential for stakeholder isations (of over 250 people) account for 3,000 sion, and revised in 2008 by the Frijns. Based on confidence in management and supervision. of these firms. Family-owned companies play “comply or explain” principles, companies have an important role in the Dutch economy – there to report on observance of the Code in their annu- Public and private limited liability companies can are approximately 260,000, which employ 49% al report. Board structures in the Netherlands are choose a two-tier corporate governance struc- of the labour force and contribute 53% of GDP. complex and highly regulated. Board members ture, with separate management and supervisory are both individually and collectively liable if the boards, or a single board comprising non-execu- A system of workers representation (onderne- board acts in an improper or illegal manner. For tive and executive directors. Most companies opt mingsraad or company council) is obligatory the chair, no specific “responsibilities” are list- for the two-tier model, although some one-tier in any company with more than 50 employees. ed by the Code. The board should be composed boards exist. 34 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 35

We interviewed five experienced Dutch chairs, For the chair of the hospital (part private, part replacing a member in a dignified way, giving one woman and four men, aged between 54 government-owned), the top priority was to him “limited time to speak” at board meetings yet and 74. Together they have chaired more than ensure that the majority shareholder balances handling the situation in a respectful way. 18 boards in the past, including listed multina- the CEO and owner roles. Less strict governance tional companies. Currently they chair seven rules in the family-owned companies allowed for In dealing with members who were “spe- Chairs Interviewed boards: six family-owned companies and one more frequent interaction between the chair and cial cases” they acted in a tactful but firm way, privately-owned organisation (a hospital) in the shareholders. “challenging” them until the end of their term for the Project public domain. and setting clear boundaries during the meeting One independent chair of a family company to preserve the quality of the discussion. One re- One chair is a high-ranking government official. saw one of his top tasks (with their full support) spondent, who was a former chair of a multina- One is the owner of a company with three subsidia- as mentoring second-generation of the owners. tional listed company, described how: “My fellow ries. One combines membership of the holding He was working with five people, keeping them board members were extremely busy people. As chair board with a chair role of a subsidiary and a CEO informed about the business and grooming them I felt I had to ensure that coming to the Netherlands was role of another subsidiary. Another combines his for the future: “I have given the family a long-term seamless for them: it made it more attractive to come position with a CEO job in a different (non-related) commitment to take the company to the next level.” to our board meetings.” company. The most senior of them recently with- Another said: “My most important task is to assure that drew/retired from most of his board positions and board members and the executive team (most of them All respondents saw the need for diversity in the now chairs one family board. The companies vary are family) get along harmoniously.” board, both in terms of gender as well as knowl- in growth between €60 million and over €1 billion. edge/experience. One commented, “It is vital for In all cases these are two-tier governance struc- me as chair to be able to have and to use all available tures. Relationship with fellow board experience and professionalism that we need in our board, not just for the quality of our decision making, On average, they have served in their current po- members: board dynamics but also out of respect for the qualities, capabilities, and sition for four years, the maximum being 10 years experience of my fellow board members.” and the minimum one year. The boards they chair “The role of a chair is to be a chair,” were the opening consist of three to five directors – the average in words of one interviewee, followed by “It is a disas- In the Netherlands, considerable efforts have the Netherlands is 5.5 but is decreasing – and ter to have a weak chairperson. It is hopeless when dis- been made to achieve gender diversity, although they meet from four to 12 times per year. cussion remains vague – which can happen when there this is not yet fully visible in the boardroom. Since is lack of meeting technique or lack of courage. January 2013 there is a statutory composition of Board composition varies in terms of the gender, The chair’s task is to prepare and ‘conclude’ and come at least 30% women directors. However, for age and professional backgrounds of members, to decisions. This means a clear meeting schedule, have non-executive boards this number was only but every board in our research has only non-ex- all relevant ready papers in time, distinguishing between 17.8% at the end of 2015. Companies that ecutive board members, both independent and subjects that need discussion and subjects that need do not meet the statutory number are expected affiliated. Only one board has formal nomination, a decision, and sticking to the agreed time/duration of to explain this in the annual report, but few remuneration and audit committees. the meetings.” comply.

Our respondents considered the quality of their Making good collective decisions was another It is striking that four of the five chairs interviewed fellow board members to be quite good, although priority. Our respondents used similar strate- stated that “bringing the organisation to the next level” it had taken time and effort to reach this level. gies or tools to be effective in the pre-meeting, was a top priority. This may be a reflection of One of them had the specific task of “shaking up” meeting and post-meeting phases (as listed Dutch entrepreneurial spirit and the level of the an (old-fashioned) board, and was working on in Table 1.) chairs’ involvement. For them it meant having Top Priority: Bringing close working relationships with the executive management about the strategy, the organisation/ the Organisation structure of the company, the right composition of the board, and the relationship with shareholders to the Next Level and fellow board members. In the Netherlands, considerable efforts

The relationship with shareholders and collabora- have been made to achieve gender tion among board members was a priority (con- ditio sine qua non). In dealing with shareholders, diversity. Since January 2013 there all respondents strove for a balance between involvement, fairness and independence. They is a statutory composition of at least wanted to be seen as pro-active in their contacts with the shareholders, listening, non-partisan and 30% women directors looking after the interests of the organisation. 36 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 37

Table 1. Dutch Chairs’ Strategies and Practices to show a consistent image towards the executive board Stage Chairs’ Strategies Chairs’ Practices members.” She added: “Sometimes we need a short All respondents used talk afterwards in order to smooth things over.” Pre-meeting Prepare topics Phone calls before the board meeting common strategies to achieve and themes with the CEO Consult about and/or clarify the agenda Chairs also reached out to board members a productive dialogue: Consult every board member Pre-board lunch for the whole board before the meeting in order to “re-engage them” Avoid surprises Defining format for board materials and help them concentrate on the upcoming equal treatment, discussion Provide necessary data Checking board materials before it is sent board meeting. Pre-board lunches were used facilitation and self-restraint to review the agenda and ensure everyone Involve executives Arranging for board members to spend time at the company is on the same page. Most favoured lunch with Board meetings in different company locations non-executive members only; others extend it Make sure that executives are invited to executives. To engage the more “silent” board members, to board meetings for specific subjects respondents solicited their opinions before the Organising informal dinner (annually) of board The quality of materials was seen as critical meeting and presented them on their behalf, ac- and CEO/management for effective board work. Our respondents strive knowledging the source. Asking each director to for limited volume, clarity of information, and state his or her opinion was another way to ensure sufficient time to study materials. Some of them diverse opinions in the dialogue. Meeting Right agenda Consulting with the CEO define the format, some co-define it with the CEO. Focus on dialogue, Dialogue/discussion with board members All checked the materials before they are sent to When conflict or disagreement threatened not individual opinions Starting a board meeting with other board members. to emerge, they considered it their responsibility Creating atmosphere a short session for executives to take avoiding action: “The board is there to take of working trust Closing a board meeting with To improve directors’ knowledge of the com- decisions, not to dwell long on possible disagreement. Equal treatment a session for executives pany and its business, some chairs encouraged That’s not what we are here for.” Focus on taking Framing a discussion question and facilitated company visits. These could actionable decisions No voting include meetings with employees and customers. Restraining their own opinions was another way Facilitation Asking every board member to state their position they used to promote trust and make room for Leading the meeting. “Some subjects need only all participants’ points of view. All respondents Involvement of executives Speaking last the stroke of a hammer, others need longer discussion.” said that they “speak the very last.” One stated: Self-restraint Summarising the discussion In the words of one respondent, items on the “My task, but also my pleasure, is to distill from numerous Conducting an “express” evaluation agenda should be “relevant to our task” and “ripe statements and opinions one clear line, in which every- at the end of the meeting for decision.” All respondents partnered with their one recognises him/herself.” Use humour when things get too serious or tense respective CEOs to set the agenda. In some cases they invited other directors to review the agenda Post-meeting. All respondents conducted some Post-meeting Involve the whole board Conduct formal 360-degree board evaluation and pitch ideas. sort of evaluation at the end of each board meet- ing (in the absence of the executive board), be- in finding ways to improve Off-site meetings for the whole board There was general agreement that for the board lieving that it reinforced respect for each other, Learn from formal evaluation Open agenda one-to-one meetings and informal feedback discussion to be productive it had to involve all built trust and helped members to learn and im- Annual evaluation meeting with every director the board members. The chair’s task was to cre- prove. Among the questions they asked directors Stay connected with every Personal call every month with every director board member ate an atmosphere for productive exchanges. were: “What did you notice? What will you take home to Annual lunch with every director As one put it: “The fine art of the role is to be the per- reflect about?” Skype meeting with every director formance director (regisseur). I need to think very clear- ly about whom I ask to talk first and who talks last about One had the habit of informing the CEO (in gene- the specific topics. Who is irritated by who or what? ral or specific terms) what had been said during Who is brooding about what? I need to be very alert this evaluation: “The evaluation never takes longer All respondents invested time and energy at the All emphasised the importance of information in recognising body language.” than 30 minutes. Time boundaries are important here, pre-meeting stage to ensure that directors were exchange with their fellow board members because I don’t want the CEO to think that we are dis- motivated and well-prepared. before the board meeting, for the benefit of the All respondents used common strategies to cussing ‘important’ issues in his absence.” dialogue in the boardroom. Preparatory phone calls achieve a productive dialogue: equal treatment, Some had informal telephone contact with their could last one hour per member, when complex or discussion facilitation and self-restraint. All allo- Work with the board as the whole was comple- directors before each board meeting; others start- difficult decisions need to be taken. As one said: cated the same amount of air-time to each board mented with one-to-one chair-director interac- ed the board meeting with 30 minutes of informal “It is important that the board comes ‘uni sono’ to the member. In the Netherlands, reaching consensus tions. One chair invited every board member for discussion. “I want to know what’s in their minds and table. We need a good dialogue; we do not fight in the (polderen) is the norm. One commented: “Some- lunch once a year. Another had Skype conversa- what their current concerns are. It is a way for all of us boardroom or stick to our individual opinions.” Anoth- times it is better to postpone a decision when things tions every six weeks. As one respondent point- to clear our hearts and minds before the official meeting er said: “Opinions may differ, but showing dysfunctional are too complex; a bit more reflection on the topic often ed out: “They should feel that you are available and you starts, without the executives present.” behaviour during the meeting is not done: we need helps.” care about their contribution.” 38 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 39

None of the respondents considered informa- mends the use of external specialists to conduct The former chair of a multinational public com- tional asymmetry with the CEO and manage- evaluations and to do it annually, but as one respon- pany was invited by the majority shareholder ment to be a significant challenge. The working dent noted: “I prefer to do the evaluation myself to deliver an official speech during the Christmas relationship with the CEO was open and effective. because I think it makes us stronger both professionally dinner for the top 150 executives of the company: One described how “quite important in my relation- and in our interactions as board. Besides, I enjoy getting “It felt a bit like stepping out of my role, but I also felt Other Challenges ship with the CEO, who is also a majority shareholder, a lot of additional information, with is valuable input for honoured and we ended up having a great evening.” is to help him keep his two roles separate. This leads my role.” and Chairs’ Practices to heated discussions sometimes.” Once a year, the chair is also evaluated: “I leave the Summary Other means included “asking the CEO to write room and let the vice-chair lead the evaluation. I like it a monthly one-pager for me,” “meetings with the CEO this way, but I know that some of my colleagues don’t do Most striking is the shared priority of our direct reports”, “company conferences” to improve it this way.” respondents in terms of “bringing the organisation their feel for what’s going on in the company. to the next level”; a certain responsibility – and Chair succession was vital in the family-owned also appetite – for entrepreneurship in the chair The relationship with the CEO was important companies chaired by our respondents. A lot of is visible in the Netherlands. As the number for respondents, although (or because) the chair time, money and effort were spent on grooming of smaller companies in the Netherlands is grow- is officially the boss of the CEO. Interaction with the next generation for the task, including send- ing, it is likely that chairs will increasingly share the CEO was frequent: an open agenda meeting ing possible successors on (inter-) national busi- the entrepreneurial spirit of executives, and thus or a phone conversation every two to three weeks. ness courses on governance. Only one of the five to challenge assumptions about business growth, One called himself “a sparring partner” for the chairs interviewed in this project had recently and connect the CEO with (international) experts. CEO, they meet every four weeks and talk about been “actively” involved in finding a successor current business issues. Another had weekly for his position. Another, who is an independent The use of humour is connected to the individual Skype meetings with the CEO. All said that men- chair, has never been involved with her own suc- rather than to the role – some use it, others don’t – i toring should come naturally and could not be cession: “I do not want to rule over my grave.” but all share the conviction that “doing what is forced, and thus could never be an official “role” necessary” to keep a positive atmosphere during for the chair. board meetings goes with the job. The compari- What Else do Chairs Do? son with a performance director (regisseur) is apt: All respondents said In this respect, one respondent described how: who to invite to speak first and who last? Reading that developing company “For me it is important to have regular conversations with At times of crisis or other unusual events, our the body language of the directors and figuring the CEO, who can then ventilate his topics or his con- espondents increased the intensity of their invol- out who is brooding about what to say and who strategy is the CEO’s business – cerns. I can then see whether the relationship between vement and interaction within the board. As one is irritated by what, is clearly an important part the board should “endorse it” – the CEO and his team in the organisation is healthy... of them said: “It helps enormously to fit in 15 min- of the role. I have also made it a habit to talk to each of the executive ute phone updates as often as possible. It contributes but they were willing to help team members once annually in a one-on-one conver- to trust and commitment among the board members.” One practice appears to be specifically Dutch: by listening and challenging sation.” ensuring consensus (polderen). In the Netherlands, Building relationships with external stakeholders where consensus and equality are the norm, this assumptions. All respondents said that developing company such as clients (patients), suppliers, government means that the chair allows same amount of air- strategy is the CEO’s business – the board should was seen as being not the responsibility of the time to each board member, and that discussion “endorse it” – but they were willing to help by lis- chair, although some exceptions to this might be will take as long as is needed for a joint decision tening and challenging assumptions. When neces- agreed upon with the CEO. For example, the chair (or compromise) to be reached. This practice sary they connect the CEO with experts and of the hospital is specifically tasked with interact- is engrained in the Dutch way of life. in some cases share personal experience. ing with the media on a regular basis: “The chair is the public spokesperson of the organisation and needs The time commitment by board members was to be capable of reacting publicly in a responsible way.” a non-issue for respondents: a specific number of days is a “part of the deal.” One said: “I promote a healthy work/life balance with my fellow board mem- bers but also with the CEO and his team. Some need to be pushed away on vacation and sometimes I have The Dutch Corporate Governance Code, to push them to look broader than just the organisation.” Resources January 2009 If board members have a tendency to assume that the chair “will take care of everything,” this attitude for this chapter Statistics Netherlands is discussed in the annual evaluation. (Centraal Bureau van Statistiek)

Conducting board evaluations is officially part of rules and regulations. The Dutch Code recom- 40 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 41

elgium, officially the Kingdom of Belgium, a market capitalisation of more than a €1 billion. GDP in 2015 – 03 counts 11 million inhabitants across a ter- 60% of listed companies have a shareholder who, 2 US$ 454 billion B ritory of 30,528 km . Belgium is a federal alone or in concert, holds more than 30% of the constitutional monarchy with a parliamentary sys- voting rights, so the concentration of ownership tem of governance. It is divided into three regions control is rather high. Belgium – Flemish region (with 6.5 million Dutch-speak- More than 77% ing community), Walloon Region (with 3.6 mil- In the wake of the global financial crisis, efforts of the employees work Anne Samyn lion French-speaking community, including Ger- were made to enhance the 1999 Belgian Compa- man-speaking community in eastern part) and ny Code, monitor risk and optimise transparen- in the service sector Brussels-Capital Region (with 1.2 million who cy. New rules were incorporated into the Belgian are officially bilingual). Brussels is the capital Corporate Governance Code in 2009. In 2015, of European Union (Belgium was one of the found- Belgium was the first country to publish a code for ing members of the EU) and the host for Benelux non-listed companies – Code Buysse. Both codes and NATO headquarters. pay particular attention to the role, composition nance recommends that at least half should be and tasks of the board of directors. They advocate non-executive members. In principle, three Belgian economy has capitalised on its central best practice rather than having the force of law, of these must qualify as independent direc- geographic location, highly developed transport and are recognised by Royal Decree as the refer- tors. For non-listed companies, the composition network, and diversified industrial and commer- ence code for listed companies, thereby creating of the board should foster complementarily with cial base. The GDP was worth US$ 454 billion a “comply or explain” basis for corporate govern- respect to competencies, experience, knowledge in 2015, representing 0.73% of the world econ- ance. and diversity. The Code Buysse recommends omy, while GDP per capita (PPP) was estimated the appointment of several external directors at US$ 43,600 (the 33d in the world). More than The Belgian Corporate Governance Code pre- as board members who do not represent manage- 77% of the employees in Belgium work in the ser- scribes a one-tier board, although companies ment nor the controlling shareholders. vice sector. Family businesses represent a turno- are allowed to adopt a two-tier board structure ver of €70 billion and employ more than 320,000 through installing a directors committee (Wet- The board should appoint its chair on the basis employees. telijk Directiecomité), which is similar to the man- of his/her knowledge, skills, experience and facil- agement board. Only a limited number of Belgian itation ability. If the board envisages appointing The Financial Services and Markets Authority companies has established such a committee. the former CEO as chair, it should carefully con- (FSMA) and the National Bank of Belgium togeth- sider the positive and negative aspects in favour er form the supervisory body for Belgium’s listed The boards of listed companies are general- of such a decision and disclose in the CG State- companies. 178 companies are currently regis- ly composed of a mix of executive and non- ment why such appointment is in the best inte- tered on Euronext, nearly a quarter of them have executive directors. The Code of Corporate Gover- rests of the company. 42 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 43

The Corporate Governance Code describes the chair’s role and responsibilities: INSEAD Global Chair Survey 2015 identified num- ber of challenges that chairs face. We asked inter- The chair should establish a close information before the meetings and, viewees which of these challenges they consider relationship with the CEO, providing where necessary, between the meetings. the most important. Similar to their colleagues support and advice, while fully respecting from other countries, Belgian chairs agreed that the executive responsibilities of the CEO. The chair conducts the general shareholders’ Belgian Chairs’ relationship with the shareholders is the most meeting and should take the necessary important challenge followed by relationship with The chair is responsible for the leadership measures to ensure that any relevant Challenges the CEO and management. We will start by dis- of the board. He should take the necessary questions from shareholders are answered. cussing these challenges and then will describe measures to develop a climate of trust within practices Belgian chairs use to lead the board. the board, contributing to open discussion, The chair should lead regular (at least every constructive dissent and support for the two to three years) evaluation of the board’s board’s decisions. size, composition, performance and those Relationships with shareholders of its committees, as well as its interaction The chair is responsible for ensuring that with the executive management. Respondents acknowledged that undivided loyal- directors receive accurate, timely and clear ty to all shareholders, irrespective of their voting rights, was the cornerstone of their work. In light of that they considered the task of making sure The data in this study were collected through that the positions of all shareholders are heard qualitative interviews with the chairs of boards and understood as one of their top priorities. of Belgian companies, most of them listed. These Common practice for Belgian chairs is to organ- consisted of a set of broadly defined open-end- i ise meetings with representatives of controlling ed questions designed to solicit their insights and shareholders before board meetings or to have Chairs Interviewed reflections, and lasted on average from one hour regular phone calls. to 90 minutes. for the Project Respondents acknowledged There was consensus among the respondents that undivided loyalty on treating minority shareholders with equal res- pect and attention. Some chairs saw this as a mat- to all shareholders, ter “of conscience and a sense of responsibility.” Interviewee 1 Interviewee 4 irrespective of their voting One said it was imperative to focus on this group was until recently chair of the board is a chair of the board and a managing and feed objective, accurate information. Anoth- of a global metals company listed on Euronext. director of subsidiaries of a public rights, was the cornerstone er organised shareholders’ presentations to the He had also chaired boards of a number Belgian industrial group. of their work board – including from minority shareholders – of private and public companies. Previously to give to all parties the opportunity to listen and he held managing director positions ask questions. He considered this to be a form at large multinationals. of preparation for understanding and knowing the group. Interviewee 2 Interviewee 5 is a member of the board of directors is an independent chair of the board All concurred that the board should focus on of large listed holding group in Europe of the Belgian division of a Dutch retail defining of the future of the company: “What is the (the controlling shareholder of the group property listed on Euronext Amsterdam. vision? Who can achieve it? When chosen, how should holds 50% of the outstanding shares). He also serves as chair of two listed Belgian strategy be implemented?” The board is mandated He has been chair of a major subsidiary investment companies. He is Global Head to decide to support the strategy and evaluate of the group since 2015. He co-chairs two of M&A for a major law firm. strategic options. With respect to strategy formu- other companies and serves as supervisory lation, the sequence of the speakers as well as board member, executive director the order of topics to be discussed was seen and director for a number of others. to influence the process and the outcome.

Interviewee 3 Interviewee 6 is chair of the board of the Belgian division is chair and board member of several of one of the largest banks in the world listed listed and private companies and has recently on Euronext. He had for many years chaired become a chair of his family business, a board of a global industrial specialty a leading European FMCG producer. electronics group. He has had a long international academic career in corporate strategy and M&A as a professor at leading business schools. 44 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 45

Relationships with the CEO the CFO) would be invited. One respondent had a “ritual” of having a board dinner the evening and management before the meeting, in a nice venue with fine din- ing and wines to create a relaxed, constructive Although all interviewees agreed atmosphere. He felt that these informal exchanges Belgian chairs consider productive relationships and (re)connecting moments were vital to a fruit- with the CEO (and in some cases other senior ful meeting the next day. Investing time in greet- that digitalisation is inevitable executives) a key to effectively playing their roles. ing everyone individually and creating a personal “Trust”, “dialogue”, “respect”, “non-interference”, connection was also cited. according to them it had so far “equality”, “transparency” are the words they most- ly often used in describing their model relation- Respondents sent the board agenda one or two ships. Intense two-ways communication seems weeks in advance. Some prepared the agenda very little impact on how they chair to be the major practice to establish and maintain with the CEO, others on their own. Some chairs such relationships. control the quality of material before send- the board and how the boards work ing them to directors, others trust management All respondents had regular interactions with to ensure quality. the CEO, and some with the entire management team. The frequency and the format of the contact One respondent sent a short agenda with key varied from a telephone conversation once every bullet points one week in advance of the board 2-3 weeks to a weekly meeting with the CEO and meeting. He also sends materials to directors All respondents considered directors’ prepara- Humour is not in the Belgian chairs tool box a monthly meeting with the management team. to read. This chairs told us that before every board tion a critical component of an effective board either. The latter appreciate it, but rare use it One chair believes that CFO is a critical member meeting he reads from 120 to 600 pages, which meeting. Some make it a board norm, some in the board room. of the team and every quarter has lunch with the can take up to 10 hours of his time. do not, but all believe that setting an example CEO and CF0 together. One respondent added is extremely important in enforcing it. Post-meeting. Some chairs review the minutes that he encourages CEO’s development by pro- Meeting. Belgian chairs spoke about their role straight after the board meeting to ensure their viding specific recommendations and pointing in the board room as “facilitators”, “moderators” As far as the agenda some chairs followed the accuracy. Many respondents conduct debriefing out to external opportunities. Another intervie- and even “mediators”, the strategies they men- tradition and started with minutes of the previous with the CEO, sometimes with the CFO, and, less wee emphasised that he is always conscious not tioned most often were “managing time,” “man- board meeting and the progress report, others often, with the entire management team. to create extra barriers for the CEO’s work. aging the agenda,” “managing the flow,” and “cre- did not have a preferred sequence. One chair ating productive context and productive culture.” started with “comments” from directors and then Our question on evaluating of their own board Half of the chairs interviewed prepared board As one of them said: “I consider myself a kind moved to discussing company performance. Most effectiveness prompted very little feedback. meetings’ agendas and materials together with of a stepmother when I am chairing a board.” respondents favoured dealing with difficult agen- With respect to measurable feedback, one chair the CEO, and some with the CFO’s participation. da items earlier in the meeting. worked with an external provider to deliver Many debriefed the CEO after the meeting not Belgian chairs are meticulous about time. One group feedback in order to enhance board effec- only to provide feedback but to receive it. respondent said that when a meeting is set at There was no common way for chairs to close tiveness, although no individual evaluation was 10h, he starts at 10h 01 and the door gets closed. a meeting, except for seeking to create clarity given. Some organised an annual review to reflect Others concurred that late arrivals are not accept- by repeating the decisions taken and formulat- on their board dynamics and learn from feed- Leading the board able, especially repeated once. The same applies ing next steps. Some interviewees asked each back, which was conducted internally. to attendance – missing even one board meeting individual participant if they wished to ask ques- Before the meeting. Respondents schedule is a serious delinquency. Some chairs explicit- tions or express concerns at the end of the meet- Most respondents organised an off-site or a stra- board meetings according to the company needs ly stated their expectations with regard to time ing. Most morning board meetings ended with tegic session for board members once a year. and its structure. The actual number fluctuated and attendance while others believed that it goes a lunch, and rarely reconvened afterwards. The sessions lasted from one to three days and from four to ten per year. In their view regardless without saying. In general the respondents did not covered various issues from company strategy of the number of actual meetings having time favour formal conduct codes or board rules. Although all interviewees agreed that digital- to trust among board members. Some chairs invit- and availability to the company are the essential isation is inevitable according to them it had ed external facilitators to help with such events. element of the chair’s job. Advance scheduling It is interesting that Belgian chairs were more so far very little impact on how they chair the is a common practice for Belgian chairs – all relaxed with regard to the board meeting’s end. board and how the boards work. The reason of them plan meeting for the next 12 months and While some chairs allocated a specific number according to one of the respondents is that chairs try to stick to the schedule. of hours for the board meeting – on average 2 and other directors have no skills or experience hours – half of the respondents did not predeter- in using information technology. All interviewees regularly interacted with other mine the duration. In that case, meetings lasted board members to maintain an ongoing conversa- on average 4.5 hours, often without a break. One tion, but actual practices varied. Half respondents of them practiced “no scheduled end” policy, so have a board dinner the evening before the meet- every voice could be heard. They took breaks ing. When appropriate, the CEO (and sometimes every three hours though. 46 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 47

Managing difficult board members did Summary not represent an important challenge for the respondents. In rare cases of a conflict some Even if levels of influence, power and attitudes In many ways the work chairs practiced leaving the board room to send vary widely between the chairs interviewed, a strong signal to conflicting parties. According clearly the role is crucial to the success of the of Belgian chairs Other Challenges to them it worked well. One respondent said he board. In almost every case, they were peo- is traditional, they reproduce didn’t devote much time if one board member ple with charisma, clarity of mind, and unafraid disagreed (depending on the potential impact to speak their minds. practices of other members on the decision); he simply asked for their dis- of the “network” and shy agreement to be noted in the minutes and moved Chairs take a more reflective approach than on to taking the decision. If a real problem CEOs. They seem to be more relaxed and keep away from innovation remained, a conference call would be organised things in perspective. Although passionate, their the week after the board meeting with that indi- foremost role is one of facilitation. decades of experience with traditional corpora- vidual. tions they tend to think in terms of hierarchy, power Common to all are the characteristics such as ex- structures, seniority and status symbols. A small minority took a different approach, de- tensive knowledge and expertise, a long track voting time to “resistors” on the board. They felt record of management responsibilities and There are significant differences between prac- that different opinions create healthy reflections; integrity – which are important to the stewardship tices of board chairs in Belgium and in other coun- people should be encouraged to express them- function. tries with developed stock markets such as USA selves and be heard. The chair rarely intervened and the UK (Anglo-Saxon countries), where con- except where there was systematic negative op- They all have a strong academic background, versations are more direct, confrontational and position or when it added value. Only in excep- speak at least three languages and have interna- challenging. In Belgium, boards are less “sharp” - tional circumstances would they suspend the vote tional experience. All sit on several boards and there is a culture of consensus and members are and put the minutes “on hold.” many have years of management as well as board more diplomatic. More “muscular” conversations experience. tend to happen outside the boardroom. For all respondents, a focus on external stake- holders depends very much on the organisation. Given the small size of the country a limited circle The generational change is one of the big chal- Maintaining a healthy ongoing relationship was of people tend to serve on most company boards, lenges the Belgian boards are facing. Knowing a strategic necessity, but relationships varied. Half these celebrity directors and chairs are often re- from this study that succession is not high on the considered external stakeholders as partners ferred to as “the old boys’ network.” In many ways board leaders’ agenda the transition is not going who were integrally involved in the success of the the work of Belgian chairs is traditional, they to be easy. company. One chair added that ego had no place. reproduce practices of other members of the All agreed that the chair should set an example to “network” and shy away from innovation. As an The same should be said about gender diversity encourage all board members to build good rela- example, digitalisation is not a foremost concern and the internationalisation of boards – the chairs tionships with outside stakeholders. Half of them for respondents, perhaps because it involves in Belgium are predominantly male and Belgian highlighted the networking responsibility of the a different learning experience and a shift in and the situation is not likely to change soon with- board; one referred to its lobbying and PR role. mindset. Given their age (60-70 years old) and out external pressure.

Belgian Companies Code, July 2011 In rare cases of a conflict some Belgian Code on Corporate Governance, chairs practiced leaving the board March 2009 Resources Code Buysse: Corporate governance room to send a strong signal for this chapter for non-listed enterprises, September 2005 to conflicting parties. OECD Principles of Corporate Governance, According to them it worked well July 2015 Edition Shareholders’ Rights Act, December 2010 48 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 49

04 ith just over 8 million inhabitants, up of SMEs with less than 250 employees. These GDP in 2015 – Switzerland began as a loose confede- are the backbone of the economy, employing 80% US$ 677 billion W ration of cantons that in 1848 became of the workforce and accounting for 60% of GDP. a federal state with its own constitution. The Switzerland Swiss confederation has four official languages Exports account for 63.5% of GDP. Key markets are (German, French, Italian and Romansh) and neighbours such as Germany, Italy and France, as a system of direct democracy. Swiss citizens elect well as the UK and the US. Swiss exporters strug- Vincent H. Dominé representatives at the level of the confederation, gle to cope with a strong Swiss franc relative to SMEs employ 80% canton and commune. the euro, notably since the National Bank ceased of the workforce intervening in January 2015, which has made ex- GDP in 2015 was US$ 677 billion, with per capi- ports significantly more expensive. and accounting ta GDP of US$ 84,000, the second highest in the world after Luxembourg. Switzerland has a highly Switzerland topped the Global Innovation Index for 60% of GDP industrialised economy but no significant natural published by Cornell University, INSEAD and the resources. The agricultural sector accounts for World Intellectual Property Organisation (WIPO) a mere 0.7% of GDP, industry for 25.5%, and ser- in 2016. The government has made sustained In addition, two major codes have vices constitute almost three quarters. investments in education and innovation infra- entered into force: structure. The country’s top-ranked universities Although a member of the European Free include ETH (Swiss Federal Institute of Tech- A directive on Corporate Governance, Trade Association, Switzerland is not part of the nology), EPFL (Ecole Polytechnique Fédérale de released by the Swiss Exchange European Union. In recent decades the country Lausanne) and the University of St. Gallen. in 2002 (binding); has become an attractive domicile for interna- tional businesses thanks to its politically stable The principal rules of corporate governance Swiss Code of Best Practice for environment, a favourable macroeconomic con- in Switzerland are enshrined in company law and Corporate Governance (SCBP) published text, a highly skilled workforce, easy access to provisions are set out in the Swiss Code of Obli- by the Swiss Business Federation financial markets, low corporate taxes, modern gations. As in the US (following the Enron scan- in the same year (non-binding). infrastructure, and a business-friendly regulatory dal), corporate catastrophes in Switzerland – such environment. as the liquidity problems of ABB and the collapse of SAirGroup (parent of former Swissair) in 2002 – Any assessment of Switzerland’s corporate gov- Switzerland has approximately 600,000 compa- prompted the Swiss government to review and ernance regime can therefore only be made by nies. Despite an impressive number of prominent adapt the legal framework to meet international taking account of all three fundamental sources as global corporations such as UBS, Nestlé, Novartis, standards. part of one framework. ABB and Swatch Group, 99.8% of the total is made 50 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 51

According to the Swiss Code Shape the company’s corporate governance of Obligations, the board of directors and put it into practice; In 2014, the family holding company that owns shares articles of association of the company, any change has the following non-transferable in the listed company Sika – a manufacturer of spe- of ownership of at least 5% requires board approval. and inalienable duties: Ensure in its planning the fundamental cialty chemicals for construction and industry – The board claimed that it was opposing the deal pri- harmonisation of strategy, risks and finances; decided to sell its stake to the French industrial group marily because it was not in the best interests of the Overall management of the company Saint-Gobain for an 80% premium over the share company. In this case, the family argued that it was not and the issuing of all necessary directives; Be guided by the goal of sustainable price at the time. While the stake comprised 52% selling the shares but only the foundation holding the corporate development. of voting rights, it represented just 16% of the share shares. Nonetheless, the Saint-Gobain takeover bid Determining the company’s organisation; capital. sparked controversy.

Organisation of the accounting, financial In Switzerland, as in other European countries, there In October 2016, the court of the canton of Zug, where control and financial planning systems In March 2013, a majority of Swiss voters accepted is a rule that any investor who gains more than one Sika is domiciled, said that directors of locally-based as required for management of the company; the Minder Initiative, aimed at preventing exces- third of the voting rights in a company must offer to buy Sika were entitled to block the company’s family sive executive remuneration at listed companies. out the remaining shareholders, at the same price or owners from selling their controlling stake to its French Appointment and dismissal of persons A year later, the Federal Council brought into better. However, Sika, like a number other Swiss listed rival. The family foundation decided to appeal the entrusted with managing and representing force the “Ordinance against excessive remuner- companies, has legally opted out of this rule. decision in the federal court. This is the latest twist in the company; ation in listed companies limited by shares.” This a takeover saga that will probably increase the pres- requires that listed companies elect board mem- In an unprecedented turn of events, the board of sure on Switzerland to review the status of companies Supervision of the persons entrusted bers and seek approval from shareholders for directors of Sika opposed the sale. According to the with multiple classes of shares. with managing the company, in particular the compensation of top management annually with regard to compliance with the law, through a binding vote. Boards of directors should articles of association, operational ensure that the remuneration of their most senior We interviewed nine chairs of companies head- regulations and directives; company representatives provides optimal incen- quartered in Switzerland and one chair of tives for successful corporate leadership and is in a company based in neighbouring Lichtenstein Compilation of the annual report, tune with the interests of shareholders. (no reference will be made to the differences in preparation of the general meeting regulatory framework). Of these companies, four and implementation of its resolutions; Another topic getting attention in Switzerland Chairs Interviewed are part of the SMI, three are part of the SPI, one is board diversity. A recent survey noted that is listed abroad, one is a state-owned company, Notification of the court in the event Swiss boards are becoming more diverse. While for the Project and one is a family-owned company. In four of the that the company is over-indebted. understanding of “diversity” is expanding be- listed companies, significant stakes are still held yond gender, gender diversity on boards is still by the founding families with various degrees an issue: only 21% of board seats of Swiss Mar- of voting power. ket Index (SMI) companies are currently held by women, and only one SMI company is chaired by The business activities of the ten companies The implementation of the board’s duties is also a woman. For the Swiss Performance Index (SPI) include financial services, pharmaceutical, consu- determined by the company’s articles of associ- the percentage of female board members is 13%. mer goods, manufacturing, retail, and transporta- ation, which set out whether and how the board tion. All but two of the companies are significantly of directors can delegate management of the Cultural background, age, education and experien- involved in international activities, and the majori- company to individual members or third parties. ce also contribute to the diversity of perspective ty of them have their more important activities that impacts board work. At SPI companies, 68% outside Switzerland. The SCBP describes best practice and makes of board members have German as their moth- recommendations that go above and beyond what er tongue, 13% French and 10% English. Board Only one of the chairs interviewed is a wo- is required by law. Since its inception it has had members speak a range of some 20 languages. man. Their ages range from 56 to 72. Nationalities a strong impact on corporate governance in Within SMI companies, the percentage of foreign- include Swiss (seven), Austrian (one), German Switzerland. Applying the principle of “comply ers on boards has increased from 10% 25 years (one) and British (one), and their educational or explain” it has been effective in encouraging ago to 62% today. The majority of board members backgrounds include a mix of economics, busi- boards to regulate themselves. The SCBP has been are between 45 and 65 years old, most have inter- ness administration and engineering. All chairs revised in recent years to reflect legal changes national experience and CEO experience in the held CEO positions prior to joining boards and at the level of the federal constitution. According relevant industry. Many boards also have mem- they currently hold an average of 3.8 board to the SCBP, the board of directors should: bers with a CFO or finance background, experi- or chair memberships. The time dedicated to the ence in M&A or a legal background. role ranges from 30-40% to full time. Determine strategic goals, general ways and means to achieve them, and the persons As the case below illustrates, the treatment INSEAD Global Chair Survey 2015 identified the responsible for conducting the company’s of shareholders has received international atten- top 11 challenges for the chairs of international business; tion recently, not least in the Swiss context. companies, and our interviews were structured accordingly. 52 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 53

Relationships with shareholders the CFO. In the Sika case, even large institutional “I want board members to be engaged and speak their Relationships with the CEO investors such as the Bill & Melinda Gates Foun- mind,” he said. “It just needs to happen within certain When the company they chair has a controlling dation felt that they were put at a disadvantage by rules of conduct.” and management or anchor shareholder, respondents invested a the diminished voting rights associated with their lot of time in meeting key representatives – of- shares relative to the voting rights of the family Several chairs mentioned mutual respect between ten founders or family members. As one chair foundation. Informational asymmetry the chair and the CEO as a sine qua non of effec- put it, “What you absolutely have to do is you have to tive leadership. One respondent said that board communicate. This is so important.” Meetings ensure with the CEO and management and management needed to be viewed as “one that the chair and the influential shareholders Level of collaboration and team”; executives and non-executives have their stay aligned in terms of company strategy, and There is obviously informational asymmetry own roles, but “The aim of what we are doing has to be connected at a personal level. The chairs arrange teamwork among board members between the chair and the CEO, given that the lat- the same.” All invested a significant amount of time meetings mindfully and proactively, and acknow- ter is closer to day-to-day operations. But where a supporting their CEOs, for whom they served as ledge that they are appreciated by the share- Responses to the issue of teamwork built on the chair is almost full-time, informational asymmetry mentors, supporters or sparring partners. All had holders since they give them a sense of control above observations. During the selection process, can also exist with other board members whose been in the role of CEO, mostly in other compa- over the strategic direction, and ultimately the fu- one of the cultural values potential board mem- participation is limited to attendance at board or nies, and thus knew how lonely it can feel at the ture of the company. As the Sika case illustrates, bers were evaluated on is collaboration. Several committee meetings. One respondent said, “When top. One chair of a large company insisted that to competing loyalties can nonetheless potentially chairs mentioned teamwork and openness as key you just come in six times a year, the knowledge you have be an effective chair you need to know what it is play out. values they expected to see in board members. is limited compared to the chairman.” In both instan- to be in the CEO seat but no longer want to play “Know-it-all” or “know-better” types do not get to ces, there is a need for trust and for regular infor- the role of CEO. Our respondents see their primary loyalty as join the boards. One chair said that an absolute “no mation updates. In addition to regular written up- being to the company rather than to the share- go” for him was someone with an overinflated ego. dates from the CEO or the board briefing – some Two chairs had held the CEO post in the company holders. If a chair has been “brought in” with the While they sought members who are knowledge- as long as 25 pages – a pre-board meeting dinner that they were currently chairing. They mentioned support of family members who have a controlling able and experienced, they also wanted directors offers a way to mitigate any potential disconnect. that they had to adjust to their new role, particu- interest, this can create conflict in cases where the who would constructively contribute to the work This explains why some chairs have moved away larly the respondent who had formerly combined board’s objectives differ from the interests of the of the board and “play as a team.” from PowerPoint presentations and like to articu- both roles (CEO and chair). In this dual role he had family. One chair said that he ultimately views late their point of view more personally, leaving to balance a tendency to make decisions with the the relationship between the board and large Beyond board meetings, some board members less room for interpretation (see also Relation- facilitation and consultative approach required of shareholders as collaborative: “Don’t look at them join field or company visits, which, depending ships with the CEO and management). the chair – not an easy transition, although he felt as enemies,” he said, “they are your owners and they are on the location, can be a 2-3 day trip. These visits it was clearly the right approach. Another went as your partners.” are unique opportunities for board members to far as referring to the “unit” formed with his CEO spend quality time together and get to know each Diversity in board members’ – that he wants people to see – and was confident When a large stake is held by institutional inves- other better, which foster a collaborative spirit. that this proximity would not blur his judgement. tors, some chairs nurture personal relationships backgrounds Many international trips are planned together and organise annual roadshows to meet with their Although our respondents were not currently and are seen as opportunities for the chair and representatives and engage them in discussion – experiencing difficulties managing board mem- Besides the skills and experience that bring the CEO to meet staff, potential hires and clients often about the governance of the company. While bers, the issue gave them an opportunity to un- complementarity into the board, gender diver- jointly. One chair who is based in a different coun- institutional investors do not receive any substan- derline the importance of vetting directors before sity and – particularly for companies operating try to the CEO, calls the CEO almost every Sunday tial information outside the formal notifications of putting them forward for election. They invest a lot internationally – cultural diversity are actively to touch base. all shareholders, they do have the opportunity to of time assessing personality, character, commu- sought. The chair of an SME mentioned that his engage directly with key company representa- nication skills and cultural fit of future directors, board members actively try to recruit women, but Trust between the chair and the CEO is put tives. In the case of a state-owned company, both as this helps to avoid problems later on. When had so far been unsuccessful because the women to the test in tough times and crisis situations. One the range of stakeholders increases – from politi- confronted with difficult directors in the past, one approached already had other offers. Clearly, al- respondent’s number one rule is “no surprises” – cal to union representatives – and the complexi- respondent had arranged a one-on-one meeting though the pool of experienced female directors and has made a pact with the CEO. This means ty of stakeholder management. One chair of the to address the issue head on; in another case one in Switzerland is increasing, it is still small com- that any troubling development within the com- state-owned company we spoke to take a pro- had expressed the view that they should leave. pared to that of men, hence the competition for pany needs to be reported to the chair at once; active communication approach by organising talent is intense. success stories can wait. One chair said simply, regular formal and informal meetings. In some instances, “courting” a future director “I care for him as a CEO but also as a person, and took up to three years, during which time the chair Several of the chairs of multinational companies I believe it is mutual.” Contrary to their relationships with majority assessed the fit with the company and the board. see diversity primarily through the lens of where shareholders, respondents seldom had personal The values of potential directors are scrutinised the business is operating globally. In such cases Asked about their relationships with others in the connections with minority shareholders beyond to ensure alignment with those of the company. board composition should ideally take account of management team, some made a point of meet- the annual shareholder meeting. While they took Respondents often mentioned integrity as a key the ethnic diversity of the company. At the same ing with every key executive on a one-to-one ba- the concerns of minority shareholders seriously attribute. One said, “We need board members that are time, for companies with a strong Swiss culture, sis from time to time. Others did not, preferring to and provided written updates to investors and team players,” while acknowledging that their voices ensuring that the chair and some members of the avoid what could be seen as interference in the the press, communication with shareholders was had to be heard even if handling inquisitive and board are Swiss nationals is seen as critical. CEO’s area of responsibility. handled by the investor relations team, or at times critical board members could be challenging: 54 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 55

Relationships with external gered by age or other reasons, regular evalua- tions conducted internally or, more often, by an stakeholders external consultant are a way to gauge both the potential interest of candidates and their suitabi- Most chairs try to stay away from engaging with lity for the role. Once a successor has been iden- Given the high number of foreigners external stakeholders beyond the shareholders tified, the on-boarding process is planned. One mentioned above. However, in situations of crisis respondent’s onboarding included visits to sub- joining the boards of SMI companies, or if the CEO is not available, they have more ex- sidiaries and support from a coach experienced posure. In some instances they do this on purpose in board work in Switzerland. many from countries that have a higher rate to deflect attention from the CEO. One chair is the “face of the company” in its dealings with NGOs, of female board representation, it is governmental agencies and the public on the spe- Facilitating effective cific topic of the environment and climate change. likely that the number of women joining However, he insisted that it was important that board discussion the chair not step on the CEO’s toes; there needs the boards of Swiss companies will increase to be a clear separation of duties. Another was All respondents ensure that board members more inwardly focused, preferring “to be seen receive material in a timely manner before the more in the office than in the newspaper.” meeting. They in turn expect board members to come prepared, having already formed a point of view, and ready to ask questions or raise con- Insignificant time commitment cerns. They saw their role as effective manage- Some feel that domain expertise for chairs is “a While shareholder democracy is receiving a lot of ment of the meeting, balancing the tension be- must” if they are to be effective, particularly in attention, we hope it will not be to the detriment by board members tween sticking to the agenda and keeping within highly regulated sectors such as finance. Failing of the many founders/family owners of compa- time limits, and giving everyone a chance to that, the CEO could have too strong an influence nies who put the long-term interests of their com- Lack of time commitment was not generally iden- speak. Framing the agenda items and staying on on the chair and, by extension, the board. How- panies ahead of short-term shareholder interests. tified as a concern by any of our Swiss respon- topic were essential, yet, as one put it, “One should ever, some of our interviewees were not domain Otherwise, such companies will choose to “go dents. In one instance where a committee chair not be a slave to the agenda.” They stressed the need experts and – perhaps as a result of this – function private,” as in the case of one of the successful was clearly struggling to invest the time neces- to stay humble and refrain at times from interven- in a very effective manner, ensuring that top-level family businesses whose chair we interviewed. sary to perform their additional chair duties, ing, while also making sure all voices are heard: domain expertise is properly represented and in- the respondent recommended changes in the “I listen. I also decide when it is time to decide, but every- fluential within the board. When asked how they would describe the committee’s composition. One mentioned that in one can express himself without fear.” Most share their essence of their role, our Swiss respondents a previous role he had asked someone who was own views last. Asking questions in a Socratic way, The challenges around gender diversity will saw themselves as “primus inter pares”, a “shep- not pulling his weight to leave the board (and even when one knows the answer, is a good way hopefully lessen as more women take on senior herd”, a “conductor”, a “trusted advisor”, the “link affirmed that he would do so again if faced with to solicit other points of view. corporate leadership roles. Given the high num- between the board and the CEO”, a “servant leader”, a similar situation). Another evoked the “one chance ber of foreigners joining the boards of SMI com- and “an owner responsible for the well-being of the and you’re out” rule, which he had enforced in the panies, many from countries that have a higher company.” past by asking a board member to step down. Summary rate of female board representation, it is likely that the number of women joining the boards of Corporate governance in Switzerland is clearly Swiss companies will increase. Chair succession being addressed in a professional manner. Our respondents were diligent about the technical A number of our Swiss respondents were ap- aspects of good corporate governance such as proaching the end of their term and had put suc- frequency of meetings and providing good infor- Christophe Volonté “Mehr Wissen cession planning in place. If the chair was, for mation materials ahead of time. When it comes im Verwaltungsrat”, Finanz und Wirtschaft, whatever reason, unable to assume the role, the to the more “adaptive” aspects relating to group September 2016 vice-chair or the lead independent director – if dynamics, those with strong personalities at times there was one – would take over as interim chair, default to a more directive, less facilitative style Corporate governance directive of SWX, although they are not the only potential candi- of leadership. One respondent, who works with Resources April 2002 dates to succeed. A number of chairs worked with a business school for onboarding of new board external consultants to help the nomination com- members, asks the board every year if they would for this chapter Swiss Code of Best Practice for Corporate mittee with succession planning. like coaching, but so far they have declined. We Governance (SCBP), August 2014 anticipate that measures to address group dy- In Switzerland, the chair, board members and namics, like board evaluations, will in future be- The Global Innovation Index Report 2016 committee chairs are elected by the shareholders come a standard part of good governance. at the annual meeting. Whether succession is trig- 56 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 57

enmark is one of the world’s oldest mo- The vast majority of Danish companies are limit- Communication and interaction 05 narchies, with a history stretching back ed liability companies, although many, including with investors and other stakeholders D to the Viking Age (8th-11th century). several listed companies, are ultimately owned Tasks and responsibilities of the board The country has a population of 5.6 million peop- or controlled by foundations (e.g., Novo Nordisk of directors Denmark le. It is classified as a high-income economy, and Carlsberg). Our focus is on chairs of boards Composition and organisation with GDP of US$ 295 billion. The Constitution of limited liability companies. These are regulat- of the board of directors of 1849 is the foundation of the current political ed by the Companies Act (Selskabsloven), which Remuneration of management Steen Buchreitz Jensen, system. Denmark has a number of political par- lays down the fundamental principles governing Financial reporting, risk management Alexey Ulanovsky ties, none of which commands a majority in par- Danish limited liabilities companies, in line with and audit liament. Since 1909 it has been ruled by coalition OECD guidelines on corporate governance, e.g., governments, making collaboration and consen- equal treatment of all shareholders, protection A separate set of recommendations for commer- sus-seeking a hallmark of the political landscape. of minority shareholders’ rights, protection cial foundations has been established. of creditors, election of governing bodies, trans- Denmark is often cited as one of the best countries parency and disclosure. These also specify The so-called “Nordic model” is the dominant to live in. It ranked top of the “World Happiness decision-making mechanisms and reporting governance structure for Danish corporations Report” in 2013 and 2016, based on variables requirements. The Danish Business Authority whereby shareholders exercise their influence such as per capita GDP, social support, healthy life (Erhvervsstyrelsen) oversees compliance with the via an annual general meeting to approve the expectancy, freedom to make life choices, generos- Act, and any changes in articles of association, accounts. Extraordinary general meetings can ity, freedom from corruption, positive and negative composition of the board or management must be called by the board or at the request of share- affects (emotions). Denmark placed 6th in Forbes’ be registered with the DBA. holder(s) representing at least 5% of the share annual list of “Best countries for business 2016.” capital, for transacting specified business. Pub- In addition to the Companies Act, listed compa- lic companies must have a board, or supervisory The most common forms of enterprise nies are subject to the Capital Markets Act (as of board, whereas private companies can opt to have in Denmark are: 1 January 2017) and to EU regulations concern- a board only, or management only. Management Public joint stock companies ing disclosure requirements and market abuse. is appointed by and reports to the board. Founda- (aktieselskabskaber or A/S) They are also subject to the Recommendations for tions are managed by a board and (if so decided) Private limited liabilities companies Corporate Governance issued by the Danish by management, but have no shareholders and (anpartsselskaber or ApS) Committee on Corporate Governance on a “com- no general meeting. Instead, the civil authorities Foundations (fonde) ply or explain” basis. The Recommendations, and/or DBA have the power to intervene in the Agricultural co-operatives which are not legally binding, cover: affairs of a foundation. (andelsselskaber or Amba) Partnerships (interessentskaber) 58 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 59

For this project we interviewed seven chairs, one tegy expectations, the exit potential, and other Table 1. Matrix of Shareholders’ Expectations woman and six men, aged 50 to 70. Six of them fundamental questions with owners or their rep- chair the boards of limited liability companies, resentatives. Scale and Comment one heads a private foundation. Each has a mini- When should we sell, 1 => 50 years mum of 10 years’ experience serving on pro- All give high priority to having a personal meet- Chairs Interviewed fessional boards and several years’ experience ing with key shareholders. Four held informal Maximum consolidation – maximum dividends as chair. One was a chair of several family-owned discussions about the business and the share- Conservation – evolution – revolution for the Project businesses and specialised in SMEs. Five are holder’s expectations. Three took a more struc- chairs of large publicly-listed companies. Six tured approach – which was effective for com- Profit – growth of them were formerly CEOs. panies with several shareholders – to clarify Growth strategy: organic – buy differences within the shareholder group in regard INSEAD Global Chair Survey 2015 to their tacit objectives, which can lead to conflict Focus: low-hanging fruit – long-term development identified the following as the main or a lack of focus in future board interactions. Ownership pride – rational professionalism challenges facing chairs: Matrix of expectations. To make sharehold- Adapt to changing world – influence change – make Relationships with controlling er expectations more explicit, one respondent change happen or large shareholders presented shareholders with a set of questions on a “from…to” scale (qualitative and quantita- Levels of complexity. When a person becomes Managing difficult board members tive) representing key strategic dilemmas. This a chair, the pattern of interaction with sharehold- (special cases) so-called “matrix of expectations” was used ers changes, and to a large extent is defined as the basis of structured interviews with share- by the ownership structure of the business Level of collaboration and teamwork among holders (see Table 1) and the dimensions changed (see Table 2). board members depending on the context.

Information asymmetry with the CEO Table 2. Chair-Shareholder Relationship and management Stage Public company Private shareholders Family business i We structured our interviews and analysis ac- cordingly. Entry Formalised, structured, Combination of formalised, Mostly informal, clarifying stage professional and informal, depending professional and personal on shareholders’ motivation and thinking All chairs emphasised Relationships with controlling sophistication of shareholder/family the importance of being or large shareholders After aligned with the the entry Formalized;alignment Active interaction Formalized Internal locus of control. All chairs empha- stage through shareholders’ between meetings and informal key shareholder’s sised the importance of being aligned with the representation interaction expectations, while key shareholder’s expectations, while at the same on the board time maintaining their authority as chair. With- at the same time maintaining out shareholder respect for their authority, they their authority as chair insisted, they would not be able to continue in the When starting out, chairs actively work to align role. In the initial stage of a new board, they invest shareholders’ expectations with their own (and a lot of time getting aligned with shareholders. repeat the process after a year or two) yet they Our respondents said they wanted to ensure that expect to have a full autonomy within an agreed shareholders accept that they have the final say framework for how they run the board. They didn’t (as long as their decisions are in line with share- want shareholders to interact with the rest of the holder priorities). board or with management, as one said: “I focus on what is the best for the company and I am in charge Clarifying shareholders’ expectations. All res- of doing it. If shareholders hire me, they should let me pondents spent significant time to understand do the job.” This condition was vital for our shareholders’ expectations before starting as respondents, who said they would be prepared a chair. At the outset, they clarify the vision, stra- to step down if shareholders interfered. 60 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 61

Managing difficult board members start by having a personal conversation with has the board’s trust that the principal issues will Pre-meeting a non-conforming member, and invest time to lis- be brought to the board’s attention, so there is no (special cases) ten, question and understand the director’s rea- need to be informed about his every action. As New director’s integration. Some respondents in- soning, assumptions and motivation. One chair one respondent said, the board should accept the vested time on individual coaching to help inte- Our respondents expected all fellow directors would phone the dissident member after the fact that the chair and CEO can fix some issues grate new and less experienced members, but it to give their best and contribute to the collec- meeting to ask for their views – in his opinion on their own, but the degree of their autonomy was not a universal practice. tive effort. They preferred to address cases of a “difficult board member” was not neces- should be aligned beforehand. In general, there “non-conforming” board members proactively sarily difficult by definition and often had some- was a certain triangulation between chair-CEO- Consulting key stakeholders. Before board meet- and to keep conflict and disagreements within thing meaningful to say. Asking a question like: board. ings, the chair reaches out to key stakeholders – the board, rather than expose other stakeholders “What are the main contributions you want to make to shareholders, board members, key executives – such as management or shareholders to them. the board?” helped him to understand the person. to know their positions and expectations. Many He might realise they had relevant views but that Leading the board respondents underlined the importance of avoid- Of several strategies identified (see Figure 1), the the board was biased against them. Or, if he did ing surprises and impulsive comments in the preferred one was to help the dissident member not agree with the member’s view, he would move Making the right decisions in the interests of the boardroom. integrate with the board through an out-of-the- on by saying “We agree to disagree.” company and its shareholders was recognised as boardroom intervention. Most respondents would a complex and challenging task which required All respondents spent significant time preparing intensive collaboration among directors. We iden- each board meeting. They believed the quality tified the following general principles and specif- of materials played an important role in ensuring Figure 1. Strategies for Dealing with “Special Case” Board Members ic practices used in Denmark to create productive boards’ effectiveness. Most chairs had intense group dynamics on the board. discussions with the CEO during the preparation phase. Others believed that management should Mutual respect and trust as a foundation have more autonomy to express their position. This for collective work. Danish chairs do not consider duality also pertained to management presen- the board of directors to be a cohesive team, but tations: one respondent controlled all presen- saw it as a group of professionals who know how tations before they go to the board members; oth- Evaluations before Strategies for difficult topics Post-meeting to work together to make collective decisions. ers felt management should have some autono- the meeting conversation or call The underlying assumption is that such people my in presenting their views. The first group did respect each other on the basis of professional- a lot of homework to avoid surprises; the second ism, rather than as the outcome of teambuilding believed that spontaneity could improve the qua- activities organised by their leader. lity of the final decision.

Integrating different interests. One of the respon- Board materials should be sent out neither too Changing a person Time out Calming down a provocative Get back on the track dents shared her story of chairing a board of a late, nor too early, since board members have mul- large family fund. She could not influence the tiple commitments and a limited attention span. board’s composition, which consisted of family The timing varied from one to two weeks before and non-family members with very different the meeting. Some defined the format and content backgrounds. She defined her main task as align- of the board material down to the last detail. Many ing directors’ interests, and began by seeking to included the summary of the last meeting’s ma- understand and then integrate individual direc- terials in the board book, as well as of materials Relationships with the CEO Chairs understood that information asym- tors’ expectations into the agenda. sent since the last meeting. metry was inevitable – and treated it in a prag- and management matic manner, attempting to address the conse- Other chairs were proactive in shaping the quences of the asymmetry rather than reduce it. board’s composition. As one said: “If involving During the meeting All chairs interviewed worked closely with their It was, they said, broadly accepted by the board directors is too difficult because the board is too large, CEO, an interaction that was often complex and as long as management and the chair kept the its size should be reduced. Effective boards are relative- Enabling others rather than dominating. Some followed no strict rules. Our respondents de- rest of the board updated. ly small.” The chair described a critical situation respondents emphasised the need to avoid domi- scribed their relationship with the CEO as profes- where a board of directors had to work close- nating or advancing a specific point of view as the sional as well as personal – not a “personal friend- One chair started meetings with “the chair’s mi- ly with management but was so large that it was most critical element of a chair’s effectiveness. ship” but one of “mutual trust.” One emphasised the nute”, in which he summarised the important is- hard to get them together and make decisions. Although chairs often had an opinion about the importance of the human dimension: “You need to sues he might have raised with the CEO. He in- The chair approached the shareholders and “right decision,” they should let the board work know more details about the world of the CEO’s every- formed members about what had happened they agreed to halve the board’s size – the speed it out collectively. A common practice was for the day life, but you don’t have to be an (industry) expert.” since the last meeting and took full responsibil- of decision making and quality of collaboration chair to start a board meeting by updating direc- Another chair stressed the mentoring element: ity for this. Another strives to keep the board in- with management increased thereafter. tors on recent events and interactions with man- “It is your job to guide the CEO to be good at receiving formed, and to be honest with board and manage- agement since the last meeting. and processing the response from the board, no matter ment about the level of information exchanged if it is positive or negative.” between him and the CEO. This suggests that he 62 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 63

Table 4. Chair Leadership Guidance for Meetings Managing airtime. Danish chairs ensure fair Summary tiple ways but do not shy away from taking an distribution and effective use of airtime during active part in the discussion They make sure that the meeting in a proactive way, for example: Provide enough time for preparation, While many practices identified by our research every directors feels his/her opinion has been sharing and making decisions; are of a universal or global nature, some aspects heard and counts. Above all, they are pragmatic going round the table asking every Prioritise important topics in advance; of the chair’s work have national roots and are and effectiveness-driven – the board has to make member to state their opinion; Ambiance is important, encourage specific to Denmark. We found traditional cul- decisions. giving the floor to the most knowledgeable everyone to contribute; tural values defined by the 19th century Danish director first, to set the tone; philosopher Nikolaj Grundtvig such as a spirit of They proactively ensure the quality of the board Avoid dominance or partiality; minimising irrelevant comments; freedom, disciplined curiosity and equality had by conducting board evaluations, acting on them placing items that require significant time Treat all directors equally; an impact on the ways chairs think about and exe- by personally coaching and mentoring directors, earlier and before lunch; Acknowledge the specific knowledge cute the job and even replacing board members (with share- forbidding management presentations of each member; holders’ approval). Surprisingly this proactivity during the board meeting, or limiting them; Never forget silent directors; In Denmark, an important condition for being does not extend to their own succession – all our establishing directions for board an effective chair is to feel that you “control your respondents left it to the shareholders. discussions; Plan in great detail board,” its dynamics and workings, as opposed to dealing with formal and less important under external control of other actors. This trans- In the next decade, we foresee issues off line; lates into relationships with shareholders, which the following trends in Denmark: delegating important issues to board could be paraphrased as: “I actively interact with you – committees; After the meeting listen, inform, ask – but I am the master in the board- There will be more female board leaders, encouraging directors to speak, while room.” Danish chairs see it as a dynamic relation- but their number will not exceed a quarter reminding them of the need for brevity Board evaluation. Most respondents used board ship, which is not set once and for all, but should of all incumbents. and specificity. assessment as a method to analyse and im- be regularly updated. They regard the board The number of younger chairs will increase. prove the board’s performance. One of them as a group of capable, mature professionals, whom There will be more non-Danish chairs emphasised the collective competencies of the they respect and trust as individuals and collec- in Danish companies than today. Our respondents gave special attention to quiet board rather than individual contributions. His tively unless proved wrong. And they expect the The diversity of the chair population will directors. One asks whether the person “agrees approach is to ask the whole board to define same respect from each member towards the noticeably rise. We will see more chairs with our decisions, or keeps silent because they dis- the set of required competencies, and then each board and the chair. without CEO experience, though it will agree? If the latter is the case we cannot move on, it will director evaluates the board along those di- remain the main career path for future backfire in the future.” mensions. Then the whole board discusses the Transparency, putting all facts on the table, and board leaders. outcomes of the assessment and plans specific shedding light on all matters are important The complexity of the chair’s work will Action-oriented minutes. Minutes are action- actions to improve effectiveness. to Danish board leaders. They encourage every- increase and will require more time and oriented for management as well as for the board. one to speak their minds with vigour and deter- knowledge. They cover different views and opinions as well as One-to-one discussions. Many respondents held mination, are not afraid of conflicting views and Danish chairs will need to learn their conclusions. Such a style prevents the board from one-to-one discussions with directors after the disagreements, but prefer to deal with them in business sectors better and use expert forgetting, ignoring or resurfacing key positions board meeting as way to preserve freshness of a proactive way. help to conduct their work. of the board members. impressions and benefit from their engagement. Information technology will become One phoned board members afterwards and Danish chairs run meetings in an interactive and an integral part of the chair’s work. Management participation. Half of the respon- asked them to evaluate his performance at the lively manner. Procedural fairness is important Many meetings will move on-line, dents invite only the CEOs to participate last meeting, if anything went wrong, and what for them, but formalities are of little value. They paper will disappear from in board meetings, others call in the CEO and direct could be improved next time. allow directors to formulate their opinions in mul- the boardroom. reports from time to time. In most cases, execu- tives attend only specific items. Most chairs con- Sharing information. Respondents said they try duct some in-camera sessions (without execu- to create and maintain a single information space tives present) at the beginning or at the end of the for all directors in between meetings. One said board meeting. that whenever he gets a question from one board Andersen Paul Krüger, Corporate member, he sends it to the entire board. Governance in Denmark, Stockholm Institute Conflict management. Despite expressing for Scandianvian Law, 2009 a preference for handling potential conflict out- side of the boardroom by talking to the parties Chair succession Resources European Commission recommendation involved, if a dispute arises they tackle it on the on the quality of corporate governance spot rather than break up the meeting. Respon- There was consensus among all respondents for this chapter reporting, April 2014 dents said they let each director present their that succession was not their business but side of the story and then involve the whole board the business of the shareholders. Danish chairs Recommendations in the conflict resolution. One said: “I am not afraid do not prepare their successor, leaving it entire- on Corporate Governance, of disagreement. You need a good deal of them for ly to the owners. As one put it: “If the owner is not November 2014 a healthy board. But I don’t allow aggression or dis- fully satisfied with the work of the chair, he will look for respect in the board room.” a new one.” 64 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 65

06 taly is a parliamentary republic, a founding ed in July 2015, based on the “comply or explain” GDP in 2015 – member of the European Union, and is defined principle, whose provisions have been widely US$ 1.8 trillion I as a developed market economy. In 2015, GDP adopted among Italian public companies. was US$ 1.8 trillion, US$ 30,000 per capita. Italy Italy is the only G7 country to register a negative per- The Code does not impose a mandatory struc- centage change (–0.2%) in per capita GDP since ture for boards. The majority of Italian companies 1997. The service sector accounts for over 70% operate under a one-tier model, where executive Anna Zanardi of GDP, industry around 24%, and agriculture just and non-executive directors sit on the board. Only 4.5 million above 2%. few financial institutions have a two-tier board enterprises employ model (supervisory and management boards). Italy has 4.5 million enterprises which employ Under the one-tier model, the board is responsib- about 13 million about 13 million people. Privately-held compa- le for approving the strategic, operational and nies account for the majority of active businesses, financial plans and monitoring their respective people 95% of them are SMEs. Around 320 companies implementation, defining the risk profile of the are listed on the Borsa Italiana (Italian stock ex- company, ensuring an adequate organisational, change). The concentration of ownership is very administrative and accounting structure, approv- high: 46% of listed companies are controlled by ing extraordinary financial operations, and ade- Italian boards have 11.6 members on average a shareholder with more than 50% participation. quate disclosure and control as required by law. (EU average is 12.3). The number of independent Family businesses dominate the business sector. directors on boards has steadily increased over The board has responsibility for making key exe- the last two decades, to 5.8 on average. Women Over the last 30 years attention to corporate gov- cutive appointments on the recommendations represent 27.6% of board members, up from ernance has significantly increased among gov- of three board committees for Remuneration, 11.6% in 2012. A new regulation requires one fifth ernment, shareholders and other stakeholders. Nomination, and Control & Risk, as stipulated of board members to be women, rising to one The creation in 1985 of the Commissione in the Code of Corporate Governance (Article 6). third when the board comes up for reelection. Nazionale per le Societa’ e la Borsa (CONSOB), an In practice, nomination and remuneration respon- Since the enactment of Law 120/2011, directors independent authority responsible for regulating sibilities often come under the purview of one have tended to be younger, more educated, and Italian financial markets, was an important step committee. less tied to the controlling shareholder. in this direction. It has a division dedicated to cor- porate governance which monitors compliance An additional part of the corporate governance The Code of Corporate Governance recommends by public companies with regulatory require- system is the Board of Statutory Auditors (Collegio the separation of the CEO and chair positions – ments and best practice. The latter are set out Sindacale), made up of three statutory auditors as is the case at most publicly-owned companies. in a Code of Corporate Governance, last updat- and two substitute auditors. All statutory auditors Among the duties and responsibilities are required to have professional certification. of the chair outlined in the Code are: 66 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 67

To create effective board dynamics by the entrusted with organisng the board’s work, timely provision of quality materials, setting liaising with executive and non-executive Respondents underlined the need to provide the same data productive agendas for board meetings, directors and between the board to majority and minority shareholders, to disclose the same facilitating board discussions, and holding and the management. They ensure induction sessions to ensure directors up- that directors do not interfere with information to all, and to behave in a uniform manner towards date their skills and familiarity with the com- or influence management beyond all board members pany. The induction of new directors is also the purview of the board. advocated by the Corporate Governance Code of the Italian Stock Exchange, to pro- To ensure efficient communication vide them with information on the company, between members of the board a trend we believe is a direct effect of regulatory Relationship with the CEO its financials, management systems, risks, of directors and the board of statutory provisions aimed at increasing directors’ account- etc. Ten of the 15 chairs interviewed had auditors, and to guarantee the latter ability. and management implemented a full board induction process. with access to key information. The remaining five were in the planning The interviews revealed valuable insights In nine cases, respondents defined themselves stage and intend to implement it in 2017. To conduct board evaluations. Valuations into how the leaders of Italian boards operate. Our as “coaches” to the CEO or the board; six are generally conducted once a year, either findings are aligned with the major challenges respondents felt that they were good “mediators” – To ensure effective liaison between the as a self-evaluation exercises by the board identified in INSEAD Global Chair Survey 2015. with the board but not necessarily with the CEO, board and management. Chairs are or with the help of external consultants. although none reported conflict with the CEO. Relationships with shareholders We interviewed 15 chairs, one third of them Leading the board women. Eight of interviewees chaired listed com- Establishing and maintaining good relationships panies, seven presided over family businesses with shareholders was considered to be one The concept of “alignment” between different or mid-sized unlisted companies. None of them of the most important aspects of the chair’s job. players emerged as a central theme: “Alignment combined the role with that of CEO (i.e., they were One-to-one conversations were the most common is the most important dynamic a chair can put in motion Chairs Interviewed non-executive chairs). Three had a mandate with way to doing this, usually before board meetings when arriving in a board. Alignment means that after regard to institutional communication. None were – and especially when deliberating on crucial having freely expressed own ideas and dissent, we make for the Project entrepreneurs or a shareholder in a listed com- decisions. These mainly occurred over the phone an effort to be convergent about the final version of what pany. Two were shareholders in a family-owned to facilitate scheduling and logistics issues. While we’ll present outside the board, without exception, so that company. None had any other job – hence they pre-board meetings were initiated equally by people feel how strong we are, being all together in the can be defined as “professional” chairs. On aver- chairs and shareholders (or their representatives same boat.” age, they had held their positions for four years in case of minority shareholders’ associations), (shortest two years, longest ten years). Nine pre- the follow-up was mainly done by the chair with- Facilitating discussion among board members sided over two boards, two over four boards, and in a week of the meeting: 14 respondents made was a main concern for 12 respondents, e.g., call- four over a single board. For two of them, diversity follow-up calls within a week to update people ing on more reticent ones to speak and contain- among board members required a special effort on board decisions and listen to shareholders’ re- ing those who talk too much. This is a delicate with regard to foreign languages. actions. “It’s very important to solicit follow-up without issue, requiring strong social skills and inter- leaving too much time to distort memories,” said one. personal sensitivity. All of the chairs interviewed Four of the 15 defined the role of the board as cere- had undergone some form of “preparation”, past monial. The other 11 defined its function as prin- Respondents felt that meeting in person with or present, aimed at improving their soft skills. cipally supervisory and highly strategic. All the shareholders was important to maintaining good One said: “I’ve spent some time in the recent past to boards had nominating, remuneration and risk relationships, and held meetings at least every know myself better, my deep-rooted beliefs, and also my committees. quarter on average. As one said: “Face-to-face meet- reactions. It is time well spent to be more self-aware and ings are very much part of the Italian culture. We need to available for the collective interest of the board.” The average number of meetings was ten per year sit at the same table and look at each other to reinforce (minimum six, maximum 13). There was a correla- the trust and sense of sharing goals. Often, I organise Thirteen respondents opened board meetings by tion between market capitalisation and the num- individual business lunch or dinner with shareholders. presenting the agenda and then gave the floor to ber of board meetings, probably related to the I understand that it’s more than sharing updates – we individual participants to make a presentation; fact that higher capitalisation is often associated need to share live moments to feel comfortable about they concluded the meeting with a quick recap with larger size and complexity, making frequent discussing critical business issues.” and an invitation to continue the discussion infor- meetings necessary. The rate of participation mally over drinks or a light lunch. Two respon- in board meetings was 92%. Respondents underlined the need to provide the dents asked the first planned speaker to read the same data to majority and minority sharehold- agenda. Meetings on average lasted two and a half hours ers, to disclose the same information to all, and (shortest one hour, longest up to six hours). to behave in a uniform manner towards all board Half of the respondents dedicated 70% of board Banking advisors met more often and for longer, members. meeting time to presentations and the remaining 68 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 69

30% to discussion; the other half tried to reach a to be unpleasant but sometimes it’s needed. You have Summary Looking ten years forward we see 50:50 balance. As one said: “The most difficult task is to cut in a gentle way but firmly.” a number of trends with regard to explain effective rules for the executive presentations In Italy, the chair’s practices are defined by law, to chairs in Italy: so that the time spent in the board is mainly on discus- When open conflict arose, the chair took a constantly evolving code of self-discipline and sion, not on the narcissistic needs of the manager.” Some on the role of an outside mediator who set up by cultural traditions. The chair has two clusters More diversity in terms of gender and age. chairs established formal rules for management a one-to-one meeting with the dissenter. Thir- of interaction: one with a dozen or so board mem- presentations such as a maximum of three slides teen of the fifteen chairs felt their role was central bers, including the CEO, CFO, one or two other Notable increase of foreign chairs, and 10 minutes. to maintaining good relationships between board executives and the company secretary; the oth- or chairs with substantial experience members, and that it was important to give equal er made up of large shareholders, company ma- outside Italy. For all respondents the preparation of board meet- attention to the different interests represented. nagers, representatives of regulators, the media ings required a substantial amount of time. In Italy As a result, a large part of their work was per- and professional associations. The chair interacts More attention to new technology, it is considered best practice to send documents formed outside the boardroom. The other two felt with the members of the board circle relatively including digital and big data. out six days prior to the meeting, although only that the general atmosphere on their boards was frequently – seeing them face-to-face every cou- two consistently followed the rule; others delegat- good and did not require their intervention. ple of months and communicating (by phone/ Increased induction and education ed the task to the board secretary, and three days email) more often. Interaction with the members for the chair and directors. ahead of the meeting was more common. of the second cluster happens a few times a year. Relationships with external A broader role in the new member Pre-meeting dinners were usually well attended In Italy, the chair has a conflict-resolution function nomination process. Today this is currently – by 75% of board members on average. For 13 stakeholders and assures smooth board dynamics. The most ef- within the scope of the Nomination respondents, dinners with board members were fective chairs identify and resolve/manage con- and Remuneration Committees, critical. However, they preferred smaller groups All respondents considered institutional and flict outside the boardroom. Among board mem- and the chair takes a marginal role. rather than a full board dinner. For example, they external communication to be important tasks bers, the chair is generally the most exposed to tried to rotate periodical dinners with independ- and constantly worked to maintain a positive the media and certainly to shareholders. The chair ent board members and committee chairs, and image of the company in the eyes of the wid- has direct contact with internal audit, and thus a More formal settings for board work to balance leave full board dinners to special occasions (e.g., er business community, not only shareholders. critical compliance role. As such, the chair has the predominantly informal occasions that still before an annual shareholder meeting or investor Meetings with institutional stakeholders such the dual responsibility to lead strategic thinking consume much of the time chairs devote to the day). The decision was influenced by the location as regulators, banks, suppliers, etc. were careful- by the board of directors and to assure company function. It is to be hoped that a more formal way of board members and how often chairs had the ly planned in advance but often held in an infor- compliance by upholding solid line reporting of of managing boards would reduce the risk of de- opportunity to meet in person without advance mal context such as over lunch or dinner. Some the internal audit function. cisions being taken in an informal and emotional planning. respondents met with their board counterparts way rather than applying data and analytics in the during the summer holidays – professional boardroom. The Code of Corporate Governance requires and personal life and networks are often mixed that the chair organise an annual evaluation of in Italy. the board and its committees. Three respondents carried out a board assessment every year, while the other 12 once every two years. Twelve used Chair succession external consultants, three did an internal evalua- tion. Evaluations covered items such as board size The Code recommends that boards of directors and composition, professional competencies and “evaluate the adoption of executive succession experience of directors, and proportion of female plans” but says nothing more specific about suc- directors. cession to the chair. Transparent and planned preparation of future leaders has never been a strong element of Italian business culture; suc- Managing difficult board members cession decisions have traditionally been made when a sense of urgency prevails. Italy Corporate Governance Code, Four respondents shared their approach to man- July 2015 aging a “special case” board member. They dealt Our research found that some progress had been Resources with the situation by meeting the individual be- made but succession is not a major preoccupa- Italian Stewardship Principles, July 2015 fore and after board meetings to seek alignment, tion of Italian chairs. Five respondents reported for this chapter allowing dissent in the boardroom while contain- that they are working or have already worked out New Regulation on Banks’ Organisation ing the risk of open conflict with other members. their succession plans, each time with the help and Corporate Governance, March 2008 One said: “You have to give enough space for express- of an external consulting company. Four had not ing own positions and also intervene with the right concerned themselves with such plans, all from timing in order to avoid disruption. It’s not very easy the banking and insurance sectors. 70 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 71

urkey is a transcontinental country linking opening up to foreign direct investment, and har- and monitors its members’ behaviour accordingly. 07 Europe, the Middle East, North Africa and monising its laws with EU regulations. Its ensuing Turkey has a one-tier board system under which T Central Asia. It is a parliamentary constitu- economic growth exceeded 5% per annum on both executive and non-executive members make tional unitary republic. The president, as a head average. The economy contracted sharply in 2009, up the board of directors, the highest governing Turkey of state, has mostly ceremonial powers; the prime but recovered swiftly the next year, only to shrink body in the company. The board has full authority minister is appointed by parliament and is head again in 2014 and 2015. In 2016 GDP was US$ to manage the company. In practice, it delegates of government. 730 billion and per capita GDP US$ 9,400. Turkey managing powers to the CEO or, in rare cases, Hande Yasargil, is a net importer and FDI in 2016 represented less more than one managing director. Non-trans- Alexey Ulanovsky Turkey’s population reached 78 million in 2016. than 1% of GDP. It is ranked in the medium range ferable powers include the appointment of key The country has urbanised dramatically and in terms of human capital development (72nd executives, approval of the management structure, opened up to foreign trade and finance. Many in the world) and equality in income distribution supervision of executives including appraisal and laws and regulations have been harmonized (56th). remuneration, compliance with laws and regula- with European Union (EU) standards, and access tions, and organisation of shareholder meetings. to public services has been greatly expanded. Corporate governance in Turkey has undergone The board is also responsible for effective com- profound changes in the last decade. The Turkish munication with shareholders. The country has a market economy with a diver- Commercial Code (TCC) and Capital Markets sified structure in which services represent 65%, Law (CML) set out the main principles of cor- The Turkish code prescribes a board size for JSCs manufacturing 27% and agriculture 8%. Family porate governance for public and private joint of no less than five members, with no less than businesses of many different types, from mom- stock companies (JSC). Both largely reflect the 50% of them non-executive directors and one and-pop shops to multi-industry conglomerates, spirit and the principles of corporate governance third independent directors. The average size dominate the Turkish economy, accounting for developed by the OECD. of a Turkish board in 2013 was ten. The chair almost 90% of GDP. Of these, 48% have been is responsible for setting the board agenda, pro- in business for over 35 years. In 2016 there were The Capital Markets Board (CMB) is an independ- viding materials, and ensuring directors’ attend- just under 400 companies listed on the Istanbul ent regulatory and supervisory body overseeing ance, and conducting board meetings in such stock exchange, a majority of them large family Turkey’s capital markets. It updates requirements manner that every director contributes to the col- businesses with a controlling shareholder. Dozens for governance in listed and non-listed compa- lective work. The responsibilities of the chair and of Turkish companies are listed in London, Frank- nies through communiqués covering different the CEO should be clearly delineated – the Code furt and New York. aspects such as information disclosure and con- recommends that these positions be filled by two flict of interest, and is responsible for ensur- individuals and stipulates that where combined, At the dawn of the 21st century, Turkey undertook ing their implementation. The Turkish Capital the board should disclose the reason. impressive economic reforms, privatising state- Markets Association (TCMA), a self-regulating owned companies, modernising public services, organisation, sets rules of professional conduct 72 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 73

We interviewed five men and one woman for this The following analysis covers these four topics The presentation reports are usually very struc- project, aged between 55 and 65. With one excep- with the goal being to understand the leadership tured, but in some cases one chairman says tion, they all are based in Istanbul. While two are practices applied by chairs in Turkey. “You may have overlooked…” and points out where second-generation owners of the companies con- information is lacking. Where the asymmetry cerned, four are professional chairs who are (or is between the chairman and the other members, Chairs Interviewed used to be) the CEO in the organisation. Together Relationships with controlling he closes the gap. One chairwoman had no asym- they occupy 43 chair seats, all of them at privately metry because as the CEO she shares all informa- for the Project held companies and three of them publicly trad- or large shareholders tion with everyone. Another said “We call it ‘integrity ed. of the information’ and are very sensitive about accuracy Turkish chairs consider this to be a real challenge and consistency.” The chair sees and approves the Even though none of them chair an NGO/chari- and an important element of their work, especial- pack that goes to the members. ty today, they have all served as chair in at least ly when the chair is not a large shareholder. They one charity in the past and continue to sit on the are very involved with owners and use both for- board. Without exception, they all have CEO ex- mal and informal tools to interact with them. Relationships with the CEO perience, and two hold a controlling large share. All have a full-time engagement with the organi- Five respondents rely on regular reporting and management sations they chair. Their chair experience varies to keep shareholders informed. Most of them between 6 years to 16 years. prefer to send very detailed materials before The research identified a number of specific prac- the meeting so the shareholder feels in control tices Turkish chairs use to interact with the CEO, Their boards meet either monthly or bimonthly, and also trusts the management because of their including some unorthodox ones. in most instances for half a day. In terms of gov- detailed openness. One chairman prefers to report ernance, in some companies there are only share- only the basics and inform the shareholder ver- Clearly dividing areas of responsibilities. One holders, and in others there are executive, non-ex- bally, with the management, during the meeting. respondent called himself an “executive chairman” – ecutive and independent members. In most of under his model the CEO is 100% responsible for them diversity is important, although the diversity One respondent conducts an annual strategy execution and the chair for governance and strat- criteria vary. Diversity in functional expertise is meeting with shareholders to review and docu- egy. All executives report to the CEO, but audit number one. Industrial experience, governance ment strategy and board agenda for the next and risk report to the executive chairman. experience and international experience follow year. He then relies on agreed points to navigate that. Gender is a criterion for board diversity only the board during the next twelve months. An- Managing CEO performance. One chair works for two of them. other goes to see a shareholder before each board closely with the CEO as a supervisor. The board meeting to prepare all decisions which have has established formalised KPIs and the chair Most of their boards actively use committees, to be made by the board. Some chairs take share- reviews progress in formal meetings with the especially those mandated by the Capital Mar- holders and their representatives out for dinner CEO. In addition they have less formal mentoring ket Board, such as risk and audit committees. to discuss the upcoming board meeting informally. sessions. Other respondents are also involved in Optional committees, such as for ethics and hu- directly supervising CEOs and providing perfor- man resources, are used only in few of them. Turkish chairs interviewed for the project consid- mance feedback, in some cases after each board Three respondents chair boards where foreign er minority shareholders to be important and le- meeting, particularly when the chairs is the con- investment, shares, representation exist. Two gitimate stakeholders who should be treated with trolling owners or former CEO of the company. chair local companies where 100% of the shares dignity and consideration. As one respondent belong to a foreign entity. One is chairing a fully said: “He can have a small share in a business, but be Mentoring. Providing advice and patronage local investment. a wise and experienced man. I want him to feel that I val- is often used in the relationships with the CEO. ue him as much as I do large shareholders.” One respondent explained: “Since I groomed and promoted the CEO, he consults me as he does with an INSEAD Global Chair Survey 2015 older brother, and I mentor him.” This “mentoring identified main challenges for the chairs Informational asymmetry from position of seniority” has its drawbacks as of international companies, as follows: some CEOs try to devolve responsibility up to the with the CEO and management chair. One chair said that he always pushes back Relationships with controlling on such attempts. Turkey’s Chairs: or large shareholders; One way to manage the informational asymmetry Informational asymmetry with the CEO is to explain everything at the meeting, and this Recognising. Chairs make CEOs aware that their Global Challenges and management; is mostly dealt with by the chair. Another way is contributions are noticed and appreciated. They Level of collaboration and teamwork among to send detailed presentations of company news don’t wait for a formal performance appraisal and Practices board members; to the board members. The management is will- session but do it informally when the opportunity Managing difficult board members ing to “drill down” to any level of detail for those emerges, including during board meetings. (special cases). who want it. Board committees on ethics, gover- nance and audit also help to overcome informa- Rehearsing with CEO. One rehearses upcom- tional asymmetry. ing board meetings with the CEO. He considers 74 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 75

Table 1. Turkey’s Chairs’ Strategies and Practices One chair provides mentoring not only to the CEO but Stage Chairs’ Strategies Chairs’ Behaviour Practices to his direct reports. This allows him to understand what kind Pre-meeting Sharing high quality reports (very detailed or standard) of leadership talent the company has. Informational and communicative readiness Reaching a pre-agreement

Getting together in a social context. Most of them organise it not only a good way to prepare for an effec- Facilitating effective discussion Networking activities a dinner or lunch before the meeting tive meeting, but to motivate and train the CEO. He observed that “Turks are less prepared than inter- We discovered three approaches to running Encouraging some members to be in touch with executives. national CEOs and need more support.” board meetings among Turkish chairs, referred Only some chairs encourage members to as structured, semi-structured and delegated Initiatives’ sponsorship. One chair uses the (professional) facilitation. Sometimes the committee members or less participative practice of assigning a board member as cura- members are invited to be closer with the management tor of a specific initiative which management has Structured facilitation. Proponents of this Creating social environment for ownership. Product launch, to implement. The curators work closely with the approach believe in planning, timing and control- art exhibition, guest speaker event, etc. CEO and other executives, provide mentoring, ling. They set the agenda and allocate time for advice and feedback. each item in advance, establish the rules of en- Meeting Clear agenda gagement and enforce them. One chair always Process moderation Mentoring sessions for CEO-1 level. One chair opens the meeting with procedural questions, and facilitation Time allocation for each item provides mentoring not only to the CEO but tightly controls the time, the order and the flow to his direct reports. This allows him to understand of the discussion, disciplines anyone who devi- Harmonisation Encouraging every voice to be hear what kind of leadership talent the company has. ates, solicits the opinions of silent directors, and closes the meeting. He does not allow meetings Equal treatment to be interrupted by phone calls or strangers. Interaction with presenting executives Level of collaboration and team- Another chair insists on sticking to the pre-de- fined agenda and timetable. Post-meeting Wrap up & follow up Sending minutes work among board members Being in touch and having mini discussions Semi-structured facilitation. One chair sub- if an item could not be decided or postponed Collaboration outside the boardroom. One scribes to a more flexible approach. She allows chair considers board committees to be an new items to be added to the agenda, but keeps Questionnaire important venue for directors, and encou- them for the end. She organises breaks when she rages and supervises committee work. He be- feels directors need some fresh air. Another said lieves competition for excellence between the he leads with emotional intelligence: “You should Managing difficult board makes challenging comments We identified specific committees to produce high-quality work increas- be in the meeting, but also look at it from the outside members Respondents during the meeting; strategies and tools es collaboration among committee members. He to see what’s going on and intervene accordingly.” derails the agenda; that chairs used invites them to company-sponsored events like defined “difficult member” is quiet; to manage these art exhibitions and award gatherings to enhance Delegated facilitation. One of our interview- as someone who: goes into too much detail; different cases. their feeling of belonging and togetherness. ees is a controlling shareholder and a chair does not contribute in general. Chairs also organise lunch after the meetings. of several boards. He delegates the job of chair- “It is never enough just to come, As one of them said: ing board meetings at some of his companies Table 2. Managing Difficult Board Members have the meeting, and go. They need to enjoy each other to lead independent directors (LID), who are as well.” usually experienced professional directors and Deviant Behaviour Chairs’ Response sometimes professional facilitators. Under this Challenging a board member Replying directly to the “challenger” One board leader who emphasised the power model, the LID runs the meeting while the chair in the middle of the meeting Cutting the “challenger” short of joint intellectual effort organises brain-storm- participates in it as a director. ing sessions for board members with the partici- Controlling the track of discussion Derails the agenda pation of external speakers. He brings directors Another tries to create an inclusive, collabora- and asking to summarise to product launches and customer meetings, tive environment for active participation of Paying attention to the member Too quiet and even sets specific performance-improve- board members, and in cases of non-construc- and encouraging him/her at pre-board meetings ment projects. Another appoints board members tive behaviour he intervenes with authority. (including independent ones) as sponsors of Goes into too much detail Providing individually more detailed materials executive initiatives. Some chairs use a question- naire for the board to assess each other, and when results do not meet expectations they discuss Does not contribute in general Engaging the person in discussion them at the board meeting. 76 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 77

Raising the engagement of the person. One behave himself after an initial warning, he might Professional chairs have no additional power are being jailed and traditionalists are gaining chairman said that difficult members get even stop the meeting: “When everything was clear, compared to other types of board chairs. They more and more influence. This change is already more difficult if excluded; it is easier to ma- but one member wanted to continue about the topic work for the board and in many cases for the spe- having a noticeable impact on Turkish business. nage those members by involving and engaging ignoring my warnings, I stood up, told them that I was cific shareholders who appointed them. The latter At the same time, the forces of globalisation con- them more, having them meet with the CEO and cancelling the meeting and walked away.” are very involved and influential in board matters, tinue to impact business and corporate govern- ask questions before the meeting. Since they are while the chair will sometimes play a more tech- ance in Turkey. The tension between these two a family company, they mostly resolve issues nical role. forces – local and global – will influence how without tension. Chair succession chairs of Turkish companies conduct their busi- Despite significant differences between the sta- ness. While it is hard to predict specific trends, Asking to clarify the point. Directors who Thinking about and planning for their successors tus and work of chair-principals and profession- some of the following are likely to materialise: derail the agenda and create inefficiency are more occurs mostly among chairs who are large share- al chairs, there are specific elements common Informal elements of a chair’s work of a problem for the chair. Depending on their holders or CEOs of the company. One respon- to a “Turkish chairing style”: will increase in volume and importance. age and relationship with the chair, one tactic dent shared that his successor is almost ready to Attention and respect to the social status More meetings will be held off-site, without is to ask them to summarise or conclude the point – take over after working together for several years. of a counterpart. The latter is defined not minutes and even without all directors’ present. there is little tolerance of nonsense. A chair-owner of a large holding takes his succes- only by formal affiliations, but by the whole Value protection for shareholders sion seriously – he selects external governance web of social ties the person is a part of. (rather than value creation) will become Pre-meeting talk. Another chair handles difficult and business experts as independent directors Relying on social contacts and informal a top priority for Turkish chairs and their members by having a talk before the meeting for some of his companies and looks at them relations to get things done. boards. They will use all their all resources, to try to reach consensus, or discusses critical as potential candidates to succeed him in the fu- Family-style view of the organisation, including personal networks, to secure issues at the pre-meeting dinner or some earlier ture. One chair-CEO has two potential candidates where chair is the big brother and directors business and ownership continuity. social occasion. to succeed him in both positions and another five are younger siblings. Government and government-linked years to make his choice. Independent chairs Maintaining a focus on performance individuals and institutions will require Prolonged encouragement of less experi- in Turkey are not actively involved in their suc- (making decisions) and relationships more and more attention and time. enced members. Someone who is very quiet and cession, leaving it to the shareholders. (keeping the board a happy family). Most chairs will be reliable, predictable, not contributing may be simply lacking in indus- High value of social events such as dinners, well-connected, and loyal to the key try experience, one respondent noted. In one outings and conferences. shareholder, operator or owner. instance of this, the chair sent him all the reports Summary Emotional style of interaction, including Turkey is unlikely to see more independent much earlier than the meeting and encouraged at official board meetings. professional board leaders, in contrast him to have pre-meetings with the executives Although the formal corporate governance frame- A powerful and at times forceful to other European countries. to learn more. After over three of encouragement work in Turkey is very similar to those in Europe, leadership style. Women will remain an absolute minority the member became more participative. our research revealed some remarkable specif- in the chair league. ics in how chairs of Turkish boards conduct their Turkey is going through a dynamic political trans- Although information technology will make Giving more detailed reports. Equally diffi- work. A number of factors have a strong influence formation under an authoritarian president who strides in the boardroom, it will not become cult are members who are very “detail orient- on their conduct: is amassing unparalleled informal (and soon fully-digitalised in the next five years. ed”. They tend to be cautious and ask for overly to be formal) power. Tens of thousands of peo- Some chairs will stick to the traditional detailed reports. Once they understand the struc- A prevalence of private and family business- ple from all professions, including businessmen, way of doing things. ture, meetings go more smoothly. One profes- es with physical shareholders as key actors. sional chairman said the shareholders always A hierarchical, high power distance national seek clearance from the chairman before they culture, with such values as seniority, family appoint a member, so the possibility of having a and relationships. “Infographic: Turkish family businesses, difficult member is low from the beginning. Dynamic co-existence of formal “global” ” Campden FB Issues 59, November 2013 governance rules and standards Deep listening with a non-judgemental atti- and traditional models and instruments New Turkish Commercial Code, February 2011 tude. Another professional chair said, “The most of formal governance. important thing is to understand. If she/he gives a tough Dominating male governance culture. “Principles of Corporate Governance”, reaction, that means we brought him to that stage. When Resources Capital Markets Board of Turkey (CMB), we listen and show that we understand the point, it January 2014 resolves automatically, and we see points where she/ Our research found two ideal types of Turkish for this chapter he is right too. It is important to listen to someone who board leaders – chair-principals and profession- Reports by TUSIAD (Turkish Industry is labeled a trouble-maker with a nnon-judgemental al chairs. The former concentrate power in the and Business Association) attitude. When you listen to them genuinely, you deserve organisation because of their ownership stake, a right to say something.” This calls for “emotional intelli- CEO position, social status, or all of the above “Women on board 2013,” gence” from the chair. combined. They are masters in their organisation, Independent Women Directors Project no matter what the organisational chart or bylaws Sabanci University, 2013 Interrupting the meeting. One chair con- say. They call the shots and directors often work ceded that when a deviant director did not for them rather than for the board. 78 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 79

ussia is the largest country in the world, ex- GDP in 2015 – 4 million companies employ 08 tending across Eastern Europe and North- US$ 3.7 trillion more than 60 million people R ern Asia. With 146.6 million inhabitants it is the ninth most populous country; 77% of the The Russian population live in the European part (West of the Urals). Russia is a federation with 85 federal sub- jects and a presidential-parliamentary repub- and implemented on a so-called “comply or Communication with shareholders. lic – the president is the elected head of state; explain” basis. On the initiative of the Central The chair of the board of directors should Federation the prime minister is appointed by parliament Bank it was revised in 2013 and a new Code enact- make himself available to interact with as head of government. ed in 2014. This specifies the functions of a board company shareholders. of directors, the organisation of its work and Ekaterina Russia’s GDP in 2015 was US$ 3.7 trillion, seventh that of its committees, the criteria for indepent Management of the board. The chair Ryasentseva in the world (using purchasing power parity), but directors, and recommendations on developing should ensure that board meetings are held in terms of per capita GDP (US$ 26,000) it ranks a remuneration system for executives. in a constructive atmosphere and that all 73d in the world. Russia is one of the world’s lead- items on the meeting agenda are discussed ing producers of oil and natural gas, and a ma- Russian companies operate under a one-tier gover- freely. The chair should ensure effictive or- jor exporter of steel and aluminium. Reliance on nance system, with a single board composed ganisation of the board’s work and its inter- commodity exports makes it vulnerable to swings of non-executive and executive directors. The action with the other bodies of the company. in global prices. On the Human Development functions of CEO and chair must be separated. Index, it it ranks 50th in the world. Russian boards are not small (10.3 members on Providing information to directors. average). They have limited gender diversity The chair should take “any and all measures About 4 million Russian companies employ more – less than 7% of directors are women. Accord- required to provide board members in than 60 million people. The government plays ing to the Corporate Governance Code, boards a timely fashion with information required a significant role in the economy. State-owned should have “a sufficient number” of independent to make decisions on issues on the agenda.” companies account for 75% of the transport sec- directors; 70% of companies follow this rule, with tor and constitute almost 70% of GDP, up from two independent directors per board on average. Conducting board performance evalua- 35% in 2005. The Code recommends appointing a chair with tions. The chair and nominating committee an impeccable business and personal reputation shall organise periodical evaluation The primary sources of corporate governance and extensive executive experience, but limits of the board’s performance, and if necessary regulation are the law on Joint Stock Companies guidelines to the chair’s role and responsibilities develop proposals on how to improve board and the Law on the Securities Market. In 2001, to the following: and committee work committees, taking into a Code of Corporate Governance was adopted account the results of such evaluations. 80 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 81

We interviewed nine chairs (one woman and minutes, written requests stating the sharehold- eight men), aged between 44 and 63. All but one er’s position and so-called “directives” – formal Chairs with extensive (UK) are Russian citizens. They have an extensive instructions from the government to its directors social networks actively used corporate governance experience: together they on how to vote on a certain item on the board’s have chaired or chair 28 boards of directors (and agenda. When the government is a majority them to build relationships Chairs Interviewed served and continue to serve in 57 other boards shareholder, the chair is often a conduit of rath- with and influence as directors). Currently they chair 13 boards: five er than a partner of government. One respondent for the Project of them currently chair one board each (three are commented: “It is a highly political function. 70% of the government-shareholder owners of the companies; two others – formerly initiatives come from the government and only 30% are top-ranking government officials – respectively generated by the board.” Another said: “I try to act in chair a state-owned company and a private com- accordance with government interests, but in rare cases a formal shareholders’ get-together every six pany). Two of them chair two boards each (one the government can’t see that its decisions contradict its months to ensure alignment between their expec- is an independent chair of two private compa- interests – in this case I speak-up, clearly expressing my tations and the board: “To be effective you need to be nies, the second is an affiliated chair in two joint disagreement and vote according to my conscience.” in virtually permanent contact with the key shareholders. ventures which belong to the parent company, They built this business and they care about it as if it was where he is Deputy CEO). One chairs four large In addition to formal communication, informal their baby, but they are also very dynamic individuals and public companies, another is no longer active but ties played an imprortant role in relationships develop new ideas quickly.” He created a Whatsapp previously led four boards. Five out of these nine between the chair and the shareholder. Chairs group for shareholders and they exchanged mes- respondents had been CEOs beforehand. with extensive social networks actively used them sages on a daily basis. to build relationships with and influence the gov- ernment-shareholder. One explained: “Govern- The chair of the board (who is also a large share- INSEAD Global Chair Survey 2015 identified ment is an institution, but there is always a real man be- holder) of a private company in which a global a number of key challenges for chairs in Russia – hind the institution. There are people who are responsi- corporation owns a 50% stake, makes an annual such as relationships with controlling or large ble for the government stake in our company and I have trip to meet the CEO of the major shareholder shareholders, managing difficult board members good working relationships with them. Most of the time in person to discuss dividend distribution and (special cases), relationships with other key stake- we find common ground. In rare cases when we don’t the investment programme. They speak over the Russian Chairs: holders. Our research questions were organised agree, I speak to people in my network who are above phone every six to eight weeks. accordingly, asking respondents to what extent them or can influence them.” Global Challenges they consider them relevant and how they dealt All respondents agreed that working with large with them. We also inquired about other challenges, In the joint venture (JV) context, a chair who is shareholders was a top priority which required and Practices strategies and practices used to manage them. a senior executive at one of the partners, consider- time, patience and flexibility. As one put it: “You ed himself a representative of shareholders, and just need to be available. They may have what they think acts to advance those interests. He did not inter- is a brilliant idea and want to share it with you at the most Relationships with shareholders act with other JV partners directly, but had cre- inconvinent (for you) moment, but if you are not there ated a system under which junior staff members they will share with somebody else, and the whole gover- For all respondents a shareholder was the num- from each partner prepared board decisions in nance system will be at risk.” Another agreed: “I think ber one stakeholder. But that specific shareholder advance and had them approved by the parties I spend 60 to 70% of my time working with shareholders. has to be big and powerful, not every shareowner before the board meeting. He had delegated the If you get it right, the rest is easy.” will qualify. Many respondents admitted that they shareholder management function to a specially work for the interests of shareholders (not the created JV management and coordination depart- Respondents spent less time interacting with mi- company or all stakeholders). One even worked ment. nority shareholders. Most did not consider this for a specific shareholder: “I always remember who part of their work a significant challenge. They nominated me as chair!” At private and public companies, chair-share- did what the law requires, but no more. One chair holder interaction is intense but usually less for- of a public company said that this was the respon- Since relationships with shareholders were high mal. At one private company, the chair met the sibility of the Investor Relations manager, who on every chair’s agenda, they spent significant CEO-majority shareholder once a month to infor- informed the board on a quarterly basis, together amount of time interacting with these people mally discuss various issues related to the board with the CEO. or their representatives. Specific practices and the company. At each meeting, among other for dealing with shareholders were primarily things they reviewed progress in preparing the Three respondents emphasised the importance defined by type – government, private owner, CEO’s successor. Conversations were candid of regular communication with minority share- legal entity – although the individual chair’s per- but the chair insisted on retaining independence holders. As one put it: “Minority shareholders are like sonality and attitudes play a role in shaping it. of action. a thermometer – they have no direct influence on the company but a sincere interest in its success. It is always In working with the government as a sharehold- Another chair invites two large shareholders interesting to talk with them and to listen to them. I try er, chairs consistently used formal channels of a private company for an informal dinner to make sure their rights are protected and their voices and instruments such as registered mail, official before every board meeting and organises more are heard.” 82 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 83

Board dynamics In addition to presence, substance matters. Two respondents reported that they include to skip the presentation and go straight to the conclu- One experienced chair said: “In Russia you need “Come prepared” in the list of formal board sions.” They did not hesitate to interrupt board According to INSEAD Global Chair Survey 2015, to understand the business very well. Some directors are rules. One experienced professional chair said: members who had spoken for too long or off-sub- the second major challenge for Russian chairs often founders or their representatives, who eat, sleep “In Russia you have very strict rules, but everybody ject, or to call upon a specific director to speak was managing difficult board members (special and breathe this business. In order to gain legitimacy bends them. You have to be flexible and use multiple tac- when deemed necessary. Some regularly went cases). We discussed this within the larger topic in their eyes, a chair has to develop industry and com- tics to make sure your board members come prepared.” “round the table” asking each director to state of managing board dynamics. pany knowledge.” The chair of two JV boards used Others called their directors a few days before their position on a specific question. Postponing his staff to generate this knowledge: “It gives me the board meeting, not to discuss specific top- a decision or moving an item to the next board Respondents took a pragmatic in their view of the the opportunity to get any information and data I need.” ics or secure support, but to remind them infor- meeting was routinely used as a tactic. board, its purpose and interpersonal dynamics: Another used site visits, management meetings mally of their duties and encourage preparation it exists to make major decisions in the interests and interviews with executives. A number held and participation. Management participation in board meeting of shareholders. One respondent said: “The board meetings with the CEO to discuss the upcoming prompted controversy among interviewees. Those should work for the company not for stakeholders.” board meeting a couple of days beforehand. Our interviews revealed specific ways in which with CEO experience tended to have senior exec- The chairs we interviewed did not waste time chairs in Russia lead a board meeting. They are utives present throughout board meetings, except discussing the board’s mission or operating prin- Respondents considered board committees quite formal and forceful: they sit at the head for confidential matters. Others were more selec- ciples with directors – they got straight down a vital tool for good board decisions. One said: of the table, set a detailed agenda and have the tive, inviting the CEO and the most senior manag- to business. None had tried to turn the board into “We do three quarters of the work during committees’ board stick to it, keep detailed minutes, strict ers for a limited number of agenda items. a “team”, as the following make plain: “The board meetings. Committees are small, their members possess allocation of time for presentations, questions is not a team! According to the law, each member has relevant expertise and discussions are always candid. and comments, actively manage the discussion Voting. Reaching consensus was not a must. One a personal responsibility.” Unlike their peers in other Board meetings are more formal, so I try to have good process, and insist on detailed board resolutions. respondent said: “It’s nice to have everybody aligned, countries, Russian chairs did not organise strate- discussions at the committees’ level and ask the board However, they often demonstrate flexibility if they but we have to be efficient. When I feel the majority gic off-sites or team-building events. to approve proposed resolutions.” Another added: believe it is beneficial to the outcome of the dis- supports a specific decision, I put it to a vote as some “Our committees are staffed not only with board mem- cussion or social cohesion of the board. One com- directors may have a different view. We vote and move However, Russian chairs believe that work out- bers but external experts. We also invite consultants few mented: “The (board) process is flexible. First people on.” Another added: “Voting is a legitimate instrument. side the boardroom is crucial to the board’s times a year to be part of the process. Committees do all tread a path and then it gets covered with asphalt.” This When I use it, board members do not have bad feelings, effectiveness. They start with themselves, their the analytical work; the board does not need to spend blend produces a particular style which we refer even those who voted against the decision taken.” Two own preparation and positioning. It’s less about much time for the decision making.” to as “domineering facilitation” (see below). respondents were categorically against voting, preparing for a specific meeting, but making the as they believe it destroys board unity. Both had board a platform for a long-term effectiveness. Some were actively involved in managing com- A number of specific practices used by the chair attended executive development programmes All respondents invested significant time in gett- mittee membership. One of them said that he did use in the board room were identified: at top international business schools. ing to know the company, its key players, and not try to influence who gets elected to the board, to become known and visible in the organisation. but cares about the selection of committee chairs: Establishing and reinforcing the rules of en- Board evaluations were not universally made “I look for competent and honest ones.” Although they gagement. Some chairs set formal rules for board by our interviewees. Three were champions One chair spent up to three days a week in the relied on committees to prepare the decision, work. One set a a “30-20-40-10 rule”, 30% of of evaluation, five used it because they felt it had company, during which he worked with the CEO decision-making power was rarely delegated board time spent on presentations, 20% on Q&A, to be done, one was openly critical. The “belie- and other senior executives, attended manage- to the committees. 40% on discussion, 10% on making and articulat- vers” conducted a short oral assessment at the ment meetings, reviewed reports and worked ing the decision. Others provided a timeframe for end of the each board meeting and a 360-de- with the company secretary. He had a person- We found different degrees of involvement in every agenda item: “When we have to approve the gree on-line evaluation once a year followed by al office next to the CEO’s, and used the CEO’s managing board materials. One respondent had annual auditors’ report, I would give 10 minutes to the individual meetings with directors and discus- assistant’s help: “When I was just a ‘visiting chair,’ established strict rules for all boards he chairs – chair of the audit committee to speak, allow 15 minutes sion with the entire board. One said: “The annual things did not work as well as they do now. My relation- materials were sent to all directors ten days before for questions and 5 minutes for discussion – the commit- evaluation is a major tool for improvement. In one of my ships with management were a lot more formal, mate- a meeting (others had seven and five-day rules). tee has done most of the work. When we need to approve boards we let go of two directors and brought in three rials less convenient and board meetings long and poor- Some verified the materials before they go out: an annual business plan there is no presentation, we go new ones following last year’s assessment. In the other ly structured.” “I always look at the materials first and sometimes I ask straight to the Q&A and spend the lion’s share of time on board we overhauled the work of our committees. I don’t management to rework them,” and others delegated discussion.” Many respondents had a formal length know how I would have done it without annual evalua- Others likewise emphasised the importance the task to management. Many reported that they no of time for management presentations and num- tion.” One chair-founder was dubious about board of their physical presence at headquarters to be longer sent materials by e-mail or post, but posted bers of slides: one limited slides to five, another evaluation: “How they could evaluate themselves? They effective. One recalled: “A few years ago I became them on the board website. allowed 12-15 slides for management presenta- will only say good things about themselves! I am watch- a chair of the board at a large company. It was in the pro- tions, and set specific formats for budgets and in- ing them and I tell them what does not work.” cess of moving offices and planned to have one huge for To ensure directors came prepared to the meet- vestment projects. me. I refused at first, only to reconsider six months later. ings, respondents used different approaches. When you have a permanent office you send a strong sig- Some scheduled an informal dinner the previous Actively managing board discussion. Within Managing conflict within the board nal to all key stakeholders: ‘I am here. I am real. I care, evening, when the meeting was held outside the a formal framework, respondents actively ma- and you better collaborate with me’.” Another added: company location, in some instances dining other naged board dynamics, sometimes breaking their Arguments and emotions often flare up in the “Physical presence gives you legitimacy in the eyes directors one-to-one. Others saw no point to shar- own rules: “Yes, we have this ‘30-20-40-10’ rule, but when boardroom, but our interviewees did not seem of shareholders, directors and management.” ing a meal. I feel that directors are well prepared I may ask the CEO too worried about it. Coming from a culture 84 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 85

of open conflict and heated debate, they know meeting and put on their shareholders’ cap in the board- The relationships with the CEO, and in some how to navigate them. Respondents distinguished room. To deal with it you need to combine patience with cases with other senior executives, is a top prio- between “sincere” and “false” disagreements firmness.” rity for all chairs interviewed, but takes differ- and debates. They praised the former – “directors ent forms largely defined by the parties’ back- are sincerely looking for the best solution, albeit from dif- Ways of working with power types included hold- grounds. We identified two distinguished back- ferent points of view,” and encouraged healthy ing a private meeting before the board, reminding Other Challenges grounds – the principal (the person is either a debates, even emotional ones. But they distin- them of the rules before and during the meeting, significant shareholder in the company or a fully guished these from those where “people argue interrupting the meeting to have a word, and even and Chairs’ Practices empowered representative thereof (in this case for the sake of arguing, or, worse, want to advance some conducting an emergency shareholders meeting. the Russian government or a state-owned compa- political agenda.” When “false” disagreement One chair shared his experience in dealing with ny) and the professional (a person who has no emerges, they halt the discussion and deal with a director-government official who considered significant stake in the company and works for a it outside the boardroom, working individually himself an expert in everything and disagreed salary). There were four resulting types of rela- with the interested parties, and returning to the with everybody: “Initially I would always let him speak tionships between chairs and CEOs (see Figure 1). question at the next meeting. at the board, then I involved him in committee work so he could speak there, and it helped to reduce his airtime Figure 1. Chair-CEO Relationship Matrix While comfortable with a highly emotional style, in the boardroom.” Another conceded: “Sometimes one respondent stepped in from time to time you just let the power guy speak for as long as he wants, to manage conflict in a forceful manner: “I don’t like hoping that you will be able to bring the discussion back surprises, but when the discussion becomes too emo- when he is done. Other directors understand.” Principal tional and not productive, I say ‘Cards on the table,’ give Dominant Professional every director a minute to state his position, and then There was less tolerance of “talkative” and “silent” mentoring collaboration we vote.” Another affirmed: ‘There are no conflicts, types. Interrupting the talkers, and reminding no destructors, just different opinions. If you do your directors in the boardroom of their duties as well CEO homework, prepare all issues in committees, and all as “cold calling” around the table were common members know each other’s position, you don’t need to practices. Some chairs pursued the matter out- debate – just make the final decision by voting.” This side the boardroom: one respondent had a one- Professional Partnership Advisory chair, in some instances, formulated his position to-one conversation with a deviant director and before the board meeting and sent it to the other offered coaching help. Another applied a muzh- directors in advance. skoy razgovor (men’s talk) approach – a tough con- versation with threat of dismissal if the behaviour When it comes to post-board meeting practices, did not change. Four chairs interviewed indicated Principal Chair Professional arranging a dinner after a board meeting is the they had had to ask a director to resign. most common. Some chairs organise New Year parties for board members and senior execu- There were two distinct approaches to manag- The principal chair-professional CEO dyad pro- tives: “At such events, real board issues are rarely dis- ing “absent” (non-attending) directors. The first duces an intense relationship which we refer cussed, but people get to know each other better.” One tried all means available to get them to partici- to as dominant mentoring. The chair leads and left time for informal discussion after the board pate, such as allowing to participate via phone the CEO accepts to follow. The former sets the meeting finished. Some met with directors infor- or Skype, soliciting their opinion in writing, and agenda, chooses the forms of interaction, pro- mally and privately, to discuss specific business transferring their vote to other board members. vides direct advice and feedback, and even gives issues and strengthen social ties. One chair spent The chairs who subscribed to this strategy want- informal orders to the latter. We came across a day a month at company headquarters, keeping ed to keep absent directors engaged, and thus three cases of dominant mentoring when compa- the door open to both board members and exec- informed them about the meetings they had ny founders had handed over the reins to a pro- utives. Several had created Whatsapp and Tele- missed and reminded them of their obligations. fessional executive and had become the chair. gram group chats for their boards. One was quite open: “Of course, I know that I should The second group subscribed to a more radi- not interfere in his (CEO’s) work, but I know this busi- Managing difficult board members was not cal strategy: “You are either in or out.” One said: ness inside-out and sometimes I just have a better feeling seen as major challenge. “Talkative types,” “silent “If a board member misses 2-3 meetings, she/he does of what should be done, so I tell him. Most of the time types,” “absent types” and “power types” were men- not take the job seriously and should be removed.” he is grateful.” Another agreed: “I have a lot of expe- tioned. The latter is the most difficult, and includ- They asked shareholders to re-elect the director, rience and know many important people the CEO does ed directors who are large shareholders, their or, in the case of a state-owned company, sent not know. It’s natural that I give him advice and introduce relatives or friends, and important government a written complaint to the government body. to some people, not the other way around.” With dom- officials. One professional chair said: “These peo- A softer option was: “I jeer at him, emphasising that he inant mentoring, the chair acts not as a leader or ple are used to telling others what to do and doing it does not know much about the problem under discussion.” a spokesman for the board, but as a person with on their own terms. They have a hard time listening Another said: “I call him on the phone and beg him a specific background and a powerbase unrelat- to others. Large shareholders have another problem: to come. Sometimes I say ‘I will send you a plane – please ed to his or her formal position. most of them forget that the board is not a shareholders come to the meeting, it’s very important’.” 86 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 87

When both the chair and CEO are principals, In terms of specific communication between the the image of the company I chair.” Yet they still find room Authority and facilitation. Russian chairs are a different type of relationship emerges that we two, respondents largely opt for informal (no minu- for humour: “I am not afraid of joking, sometimes even to pragmatic – they want their boards to be effec- call partnership. Both have a high degree of auto- tes) one-to-one meetings on the company prem- the point of absurdity. It helps to keep spirits up.” tive decision-making bodies – yet they are am- nomy and room for independent action, but they ises, phone and Skype conversations, and texting. bivalent in the way they try to achieve this goal. have shared goals, align their agendas from Some wine and dine their counterparts, others In a country experiencing “first-generation cap- On the one hand they operate from a position time to time, and cooperate when it’s required. don’t: “Dinner is useful to break ice and establish rela- italism”, the presence of the principal in every of authority and often act in an authoritarian way. A chair of a company where the government tionships, but when you know a person it’s better to meet organisation is extremely important. It is too early Yet they can instantly switch to facilitating mode, is the controlling shareholder described the re- in the office.” to draw fundamental conclusions because profes- ask other directors to speak their minds and lationship: “We both represent government, the CEO is sional chairs have existed in Russia for 15 years reach a common position – only to put the dicta- not appointed by the board, but by the Russian President. Most of our respondents did not claim to mentor at most. tor’s mask back on if things do not go their way. We both can open important doors, but we also can help the CEOs. One was categorical: “A chair should not We believe that extensive use of voting is one each other to help the company. We agree on that, so he be a mentor to the CEO, otherwise they become friends manifestation of this ambivalence. does his job and I do mine. But when required we join forces, and the chair will start protecting management inte- Summary as was the case with the business strategy, for regulato- rests.” However, they all willingly introduced CEOs Traditional ways of working such as drinking ry constraints we had to overcome, and in other cases. to the people in their social networks and provid- Since modern capitalism is only 25 years old or sauna parties are not in the arsenal. Russian Sometimes he gets grilled by the board, but he accepts ed other resources. in Russia, corporate boards as we know them in chairs are modern in the way they work, opting it. He knows that I am his great supporter.” the West only emerged about two decades ago. for office meetings and Skype calls over drinking Most regarded relationships with external The Russian model of corporate governance is sessions, as one said: “We all are busy people. I would When the chair is a professional and the CEO stakeholders such as clients, suppliers as less still a work in progress and the chairs we inter- rather spend my time on a one-to-one meeting with a di- is a principal the relationship turns into what we of a challenge, with one exception – govern- viewed are at the forefront of this. While it’s too rector than arrange a big drinking party.” They are also call an advisory model. Formally the chair is in ment. Chairs with a government background early to make far-reaching conclusions, our key quite health-conscious and strive for a healthy life charge of the board, sets the agenda and conducts or high social status (large shareholders) take on findings are as follows. style. the board meetings, but everyone in the system a significant part of PR work in addition to fulfill- understands where ultimate power resides. The ing their direct duties. They meet with govern- Russian chairs work for shareholders, not board and its leader perform their functions but ment officials, speak at summits and conferences, all stakeholders or long-term interests of the Trends for the Next Five Years only up to a point, beyond which the power of the supervise charity projects and promote the com- company. Public companies with dispersed CEO-principal prevails. The chair advises and pany image in other ways, e.g., things that fall ownership are virtually non-existent. Russia Russia’s history teaches us that it is hard to make educates the CEO, brings important information in the management domain. In contrast, profes- is dominated by first-generation private busi- accurate forecasts, but we believe the following to his attention, and assists him in preparing and sional chairs usually stay out of the public eye and nesses or state-owned corporations. The owners trends will materialize: making decisions. The CEO may also educate the undertake projects only when asked by the CEO. or their representatives (in the case of govern- chair about the business, share his concerns and ment owned-companies) are powerful and have There will be more professional chairs who challenges, and ask for advice or a favour. The Planning and preparing succession to the a strong impact on the work of board leaders in exclusively dedicate themselves to this type two cooperate but not on an equal footing. One chair was not a priority for the Russian chairs in- terms of their attention, time allocation and even of work, but the percentage will be still chair respondent described his relationship with terviewed. Only one respondent was working on style. lower than in developed countries. a founder-CEO: “I come to see him every month, we getting a CEO of a JV ready to succeed him as a The “professional collaboration” model speak one-to-one, very informally. I update him on the chair, but the decision in this case had been made Relationships are more important than insti- of chair-CEO relationship will spread board’s work, ask his opinion on important issues. He may by the chair’s boss. Other interviewees men- tutions. Institutions such as boards of directors to many organisations, especially private ask my views on anything from Obama politics to the last tioned “shareholders”, a “respective board committee” are quite powerful in Russia, and their responsi- and public businesses. remuneration committee meeting. Sometimes he asks for and even a “corporate secretary” among the parties bilities and authority are well-defined and corre- Many government officials and ex-govern- help in specific deals. I feel that he values my advice.” responsible for finding their successor. It’s worth spond to the global standards promoted by OECD ment officials will assume chair roles; for mentioning here that there is no culture of leader- and other international organisations. Behind the some it will be an informal retirement plan. When the chair-CEO relationship involves two ship succession in Russia, which makes the above façade, however, the situation is very different. Women will remain an absolute minority professionals, we call it professional collabora- observations less surprising. Ownership structures and the power networks in the chair league. tion. The chair of a JV who is a senior executive of key actors such as shareholders, their repre- Chairs and their boards will become of one of the partners described his work with the Respondents actively used technologies in their sentatives, board members and key executives technology-savvy. Information technology CEO who is a former executive of the same com- personal work and for the boards they chair, create specific constraints for chairs, and largely will have a transformative impact on how pany: “I provide him all information I have and he does e.g., video-conferencing for individual work with define their roles and the practices they use. Russian boards work. the same for me. I run all major decisions by him before directors, committees and even some board they go to the board. You may call it informal mentoring, meetings. Most boards have their own portals, but he also mentors me in some areas such as regional and some use digital voting. Federal Agency for State Property Management politics or local markets.” One ex-government offi- (Rosimuschestvo)’ recommendations cial turned professional chair said: “(It’s) partner- Russian chairs work hard and feel a huge respon- Resources to Boards of Directors, 2013 ship and cooperation, not mentoring! My office is next to sibility on their shoulders. One said: “I am repre- Listing Rules of Public Joint-Stock Company the CEO’s. It helps our close professional relations as I can senting the company all the time and everywhere. It is for this chapter “Moscow Exchange MICEX-RTS”, 2016 easily ask him: ‘Sasha, please come to my office as there a huge responsibility, which creates some constraints. Russia Corporate Governance Code, April 2014 are questions regarding the investment program’.” For example, I cannot drink in public places not to damage 88 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 89

he Republic of Singapore, a sovereign state to the rest of the world. Services account for 70% Southeast Asia, prompted the MAS to take a fresh 09 in Southeast Asia, is one of the five founding of GDP, primarily in wholesale and retail, financial look at corporate governance. It formed a num- T members of the Association of Southeast and insurance industries, and business services ber of committees to review existing practices Asian Nations (ASEAN). It has a parliamentary (real estate, rental and leasing services). Goods and develop recommendations to improve busi- Singapore system based on the Westminster model, whereby include manufacturing (electronics, chemicals ness sustainability. In 1998, the Singapore Institute voters elect members of parliament (MPs) in a gene- and biomedical manufacturing), as well as con- of Directors (SID) was established to promote ral election. The prime minister (PM), who is the struction, accounting for the remaining 30%. high standards of corporate governance and steer leader of the political party that wins the most corporations towards good practice. Its corporate Kai Foong Tan, seats in parliament, forms a cabinet by selecting Government-linked companies play an important governance committee issued a framework for Vincent H. Dominé ministers from among the MPs, with a five-year role in the economy. Temasek Holdings, one ma- a Code of Corporate Governance in 2001. mandate. Parliament has three major roles: mak- jor sovereign wealth fund, holds majority stakes ing laws, managing state finances, and holding in some of the Singapore’s largest corporations. Following the global financial crisis in 2007, which the governing party and ministries to account. led to tighter regulations in global capital and Singapore is well known for its business trans- liquidity rules, a second revision to the Code Singapore is home to 5.6 million residents, 38% parency and advanced corporate governance was made in 2012, with a number of provisions of whom are permanent residents and the others policies. In 2013 and 2014, the Asian Corporate designed to address issues such as transparency are foreign nationals. Despite a lack of natu- Governance Association put Singapore at the top of remuneration, the board’s role in managing risk ral resources, Singapore has developed rapidly of its list for corporate governance performance. and setting ethical standards, and many referenc- to become a global hub for commerce, finance A global ranking by KMPG in 2014 put Singapore es to long-term interests, risk management and and transport thanks to its external trade and in third place, behind the US and UK. incentives. To understand the regulatory frame- highly educated population. work for boards, key elements from the Singa- The groundwork for its corporate governance pore Code of Corporate Governance (Monetary Singapore’s economy is consistently ranked was laid in the years after Singapore declared in- Authority of Singapore, May 2012) are outlined as one of the most open, pro-business and cor- dependence. The Companies Act of 1967 and the below. ruption-free in the world. In 2015, it had a GDP Monetary Authority of Singapore (MAS), which of US$ 307.9 billion. Its per-capita GDP in terms was established as a statutory board in 1970, The role of the board is to “lead and control of purchasing power parity is the third highest in played a critical role in regulating all aspects the company” and it is “collectively responsible the world. Singapore’s investment climate makes of monetary policy, banking and finance, which for the long-term success of the company.” Ac- its one of the most attractive nations for foreign were previously handled by different agencies. cording to the Code, “The board works with the direct investment. As a strategic port, Singapore management to achieve this objective and the benefits from entrepot trade through the pur- The Asian financial crisis of 1997, which saw management remains accountable to the board.” chase of raw goods that are refined for re-export assets devalued and stock markets’ decline across The chair’s role is to “lead the board to ensure 90 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 91

its effectiveness in all aspects of the board’s at the director level continues to be low, with con- In our interviews, chairs generally articulated role” including: “Setting the agenda and ensur- fidentiality and a fear of talent poaching cited the core functions of the board as described ing adequate time is available for discussion of all as the main reasons for non-compliance. Diversi- by the Code of Corporate Governance 2012. agenda items, in particular strategic issues; promot- ty also continues to be a challenge for corporate The way that each interprets the role is influenced ing a culture of openness and debate at the board; boards; fewer than 10% of public companies have by their personality, background, experience, ensuring that the directors receive complete, female board members. Moreover, since guide- Chair’s Role: and the company context in which they operate. adequate and timely information; ensuring effec- lines for sustainability reporting were released tive communication with shareholders; encour- in 2011, companies have been slow to respond, the Participants’ Views Government-linked companies, which typically aging constructive relations within the board and despite recommendations that they implement operate in an oligopolistic and monopolistic con- between the board and management; facilitating changes on a “comply or explain” basis by 2017. text, have a specific role in preserving and build- the effective contribution of non-executive direc- ing the wealth of Singaporeans for generations tors in particular; and promoting high standards Despite these challenges, the SID and other govern- to come. In these companies, the values and cul- of corporate governance.” ing bodies continue to review corporate gover- ture of “Singapore Inc.” prevail: company leaders nance in Singapore’s companies to ensure they focus on building for the longer term and creating While corporate governance in Singapore is con- constantly strive to improve and keep abreast a transparent and sustainable business environ- sidered among the best in the world, it still has of best practice. ment by investing in human capital and life-long room to grow. Remuneration disclosure for those learning.

One chair of a government-linked company We interviewed 10 experienced chairs with saw his role as that of a steward who guides the diverse backgrounds, including three women organisation on its journey to transmit values and seven men, ranging in age from 46 to 73. Of across generations. He talked about creating our interviewees, five have a business education, a “learning board,” wherein members form an eco- three are CPAs (Certified Public Accountants), system for continuous learning to stay abreast Chairs Interviewed and two are lawyers by training. They chair an of the latest trends. As examples, he cited con- average of two boards each. Three of them chair ferences and overseas immersion trips to learn for the Project government-linked corporations, two chair pri- about the latest in digital strategy, how boards can vately held companies, three chair publicly listed i bring about significant transformation, and how multinationals, and two chair non-profit organisa- start-ups work. This fits with how he interprets the tions. Of the companies chaired, four have a mar- board’s primary role: driving strategy and trans- ket capitalisation over S$ 1 billion, two are mid formation caps (S$ 300 million to S$ 1 billion), two are small In government-linked . caps (less than S$ 300 million) and two are NGOs. Another chair of a government-linked com- As regards chairs’ individual involvement, six de- companies, the values pany saw his key responsibility as ensuring vote at least 50% of their time to the entities they and culture of “Singapore Inc.” a smooth succession and renewal process for the chair, three are involved only once every quarter. board: “Getting good people on the board and ensuring Five of the interviewees currently serve as chairs prevail: company leaders focus the quality of people and diversity of the board are key.” on multiple boards. on building for the longer term An executive chair who is also owner of a fami- and creating a transparent ly business viewed himself as a “sounding board” INSEAD Global Chair Survey 2015 identified the top and sustainable business for management to debate with and receive 11 challenges for the chairs of companies, as follows: collective wisdom on strategy and decisions. environment by investing He played a more facilitative role, ensuring that Relationships with controlling Relationships with the CEO and management in human capital and life-long all views on the board are heard and debated. or large shareholders Relationships with external stakeholders learning Managing difficult board members such as clients, suppliers, government Another saw his role as that of a “gourmet chair- (special cases) man” who challenges the CEO and board Insignificant time commitment to achieve greater performance and find ways Level of collaboration and teamwork by board members of expanding the pie: “I introduce them to gourmet among board members Planning and preparing succession food and I teach them to be hungrier,” he said. Another Informational asymmetry with the CEO to the chair founder/owner chair saw himself as responsible and management for the vision, culture, policies and strategy of the Facilitating effective board discussion company. Relationships with minority shareholders Interviews were structured to take account of these challenges and the various Diversity in board members’ backgrounds approaches used to deal with them. 92 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 93

Others described their roles variously as that of holders and answer any questions. Others said that a “cheerleader,” a “moral compass” and a “mentor” minority shareholders needed to be addressed for the board, shareholders and staff. One chair in a way that ensures they are not “short changed.” of a non-profit organisation said that he need- In some instances, they had appointed a spe- “Gourmet chairman” who challenges ed the “flexibility of an octopus”: he is regular- cial representative as a voice for smaller share- ly pulled into various roles and must be ready holders in board discussions. the CEO and board to achieve to spend extra time because non-profits gener- ally have fewer resources than corporate boards. greater performance and find ways Another non-profit chair described his role as Managing difficult board members “sticking my nose in the pie, but keeping my fingers out.” of expanding the pie: “I introduce (special cases) them to gourmet food and I teach Relationships with shareholders Respondents generally felt that a proactive selection strategy of board members was the most them to be hungrier” Chairs saw managing their relationships with effective approach for getting the “right person majority stakeholders as a critical responsibili- on the bus” and avoiding problems with difficult ty. Practices differed depending on the nature board members. A careful selection process – of the relationships and how active the share- to identify the desired skill set, aligned values holders are. With larger cap organisations and and motivational fit – was key for many of them. government-linked companies, the relationship One raised a provocative question: “What drives Collaboration and diversity seeking new members who could enhance the tended to be more formal, and their engagement the criteria for board member selection: is it more for con- age, functional experience and cultural diversi- more structured and less fluid. One noted that with formity or performance?” among board members ty of their boards. However, one commented that government-linked companies, “They appoint you, achieving cultural diversity and international rep- so the trust is there.” The ongoing relationship To manage disagreements, various approaches Respondents used a variety of ways to build resentation on a board was expensive given the is one of reporting and consultation on major were used including “offline” strategies before relationships and collaboration. Many of them higher director fees and travel costs, and that only decisions, including winning approval for the a board meeting and “online” ones during the plan corporate retreats to which the board and larger companies could afford to do this. appointment of board members. meeting. Chairs commonly engage with mem- senior staff are invited, at which strategy sessions bers before the board to ensure that there are create opportunities for the board to meet the Chairs who are owner-entrepreneurs wear two no surprises during the meeting. If serious dis- management team, both formally and informally. Informational asymmetry hats: they are concerned with driving the per- agreements arise in the boardroom, some put Spouses are sometimes invited to attend dinners formance of the business while at the same time the issue to a vote. One chair said of managing and, on occasion, working trips, where there is an with the CEO and management ensuring compliance. At companies in which a difficult board member, “If he is a fusspot with ir- element of informal bonding. Some respondents shareholders are more actively involved in the ritating behaviour, you live with it until he is up for renewal. described personally inviting board members Informational asymmetry is unavoidable in or- business, chairs found that interaction with If he is destroying the company, then I ask him to step to their home for a meal during the festive season, ganisations, and respondents reported a variety shareholders – both planned and ad-hoc – were down.” Another noted, “Most board members are so that they were “no longer a digit.” of practices to deal with it. Differences in their more frequent. One respondent had proactively friends. There isn’t a lot of contention. Usually I am direct strategies were due largely to contextual factors engaged a private equity owner in investment with them if it is not going to work out, and I find a face-sav- Chairs increase interaction between board mem- such as degree of ownership, culture and struc- decisions, succession planning and performance ing way for them to exit.” bers and management through project work, sub- ture of the organisation. expectations, both by phone and in face-to-face committees, and business travel. One mentioned individual meetings. She said that a “no-surprise” Evaluation of board members is common, but an onboarding process for new members that One affirmed that since the CEO was confident policy worked well in managing the relationship there were different ways in which the informa- included a guidebook describing what is expect- and secure in position and the senior manage- and ensuring alignment, and spent an average tion from evaluations was used and disseminated. ed of board members in their new role. ment team were transparent with the board, of five hours a month engaging with the owner. At one end of the spectrum is a process in which there was a transparent culture where the CEO the chair himself is evaluated and can even lead Almost all respondents cited the challenges and management team hear messages from the A majority of respondents felt that minority stake- to his removal. On the other end, the process involved in creating a more diverse board. Gen- board directly. Board papers are comprehensive holders did not pose a major challenge. All of them is outsourced to an external consultant and der diversity is a big focus in Singapore, which and sent in advance of the meeting to allow time highlighted the need to balance the interests of includes self-assessments and peer assessments ranks near the bottom in terms of women’s rep- for review. Management presents the company the various shareholders, and all mentioned that by board members. The information from these resentation on boards compared to key develo- strategy to the board annually, which enables mu- they addressed minority shareholders through assessments is shared with the nomination com- ped markets. All acknowledged the challenge tual understanding and dialogue on key issues. the formal annual general meeting (AGM), in- mittee and the chair, and the individual is then of gender diversity, but one felt that true board cluding them in their updates, and providing invited to discuss the assessment with the chair. diversity went beyond this: “I think of diversity In smaller companies, all directors are included in space to ask questions and their share concerns. Overall, our respondents gave the impression that as what would help the company, for example, the type subcommittee meetings as observers. The actu- One saw her role as that of an independent di- their boards perform evaluations as required but of skill sets required (private equity, lawyer, accountant). al board meeting is short, since all the work has rector looking out for minority shareholders. She there is wide variation in the extent to which they I do not necessarily think of diversity in terms of gender.” been done in subcommittees. stays on after the AGM to meet minority share- hold members to account and generate learning. Chairs recognised the importance of continually 94 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 95

On the other end of the spectrum, some saw the business, their primary role was to preserve their role as that of an intermediary between the the long-term growth of the organisation and set board and management: the chair decides what a clear vision for its future. Some saw the role of the board as one of providing challenge, information is shared and how it will be shared. One said, “As an active chairman, my role is to inter- Where the chair is also the owner and CEO, as such as offering checks and balances to the CEO and manage- mediate offline. If the board is not happy with the perfor- is the case in many family businesses, the rela- ment, bringing an outside perspective, asking tough questions, mance, and there is a difference between the board’s view tionship with management is very different, since and that of the management, I have one-on-one conversa- decision-making power is concentrated in one and driving the performance of the business beyond compliance tions with the CEO offline.” person who can make quick decisions. As one put it, “We do or die.” In such companies, the board’s A chair from a family-owned business said that function is more to provide formal legitimacy vis- he asks what will be in the best interests of the à-vis outside stakeholders, and less that of a truly company when he decides what and with whom independent body. Chair succession Facilitating effective board the information will be shared. Others saw it as the chair’s role to decide which agenda items Our respondents viewed board succession discussion should be discussed and how information is dis- Relationships with external as a key priority. Most highlighted the critical role seminated: “The chairman is the first person the mem- of the major shareholder in both recommending Among the variety of approaches to facilitat- bers of management come to, and I decide whether board stakeholders and endorsing a candidate. While the nomination ing board discussion, we see three areas of dif- members need to be involved or informed. It is counter- committee might be responsible for screening ference, namely how the agenda is shaped, how productive to share every single thing with them, as the As to who represents the organisation and in what and recommending people, the major sharehold- chairs act during the meeting, and how much board members will give you less value.” context, more than half of respondents said that er was the ultimate decision maker. Some be- of the board work gets done inside the board- they had little to do with external stakeholders, lieved it was their role to actively solicit and find room (online) versus outside (offline). leaving that function to management. However, talent, while others left it to the major sharehold- Relationships with the CEO they do meet key customers and vendors at inter- ers. One said he would never nominate anybody Shaping the Agenda. Our respondents shaped national trade or road shows. One mentioned that because it would send the wrong impression the board agenda in a variety of ways that include and management he would step in to support or complement the to the shareholder and the potential candidate. letting management decide the agenda items, CEO when necessary, for instance, in moments The difference is largely driven by company cul- co-creating the agenda topics with management One respondent’s remark sums up the relation- of crisis, to take pressure off the CEO. ture – whether it is more hierarchical or involves and board members, and the chair deciding the ship: “The role of the chair is to develop constructive a collaborative decision-making style. agenda items. The approach chosen is largely relationship between chair and CEO, where there is For some government-linked companies, in driven by the company’s decision-making struc- enough challenge and support. In Asia we lean towards which Singaporeans are stakeholders, attempts One cited the “three Rs” (rotation, renewal and ture, the chair’s interpretation of the role, and the more support. You also need challenge, because without it, are made to share information in local languag- retirement), which serve as a mechanism to culture of the board. you do not get improvement in quality.” es which reach the community, often using sim- develop board members and also to ensure plified and engaging means such as cartoons to renewal, with new members coming on board Acting at meetings. The respondents led board On the supportive end, many viewed their role reach out to the less literate. To address sustaina- and older ones retiring. meetings in different ways. Some facilitate dis- with the CEO as that of a mentor and coach. They bility issues, a key question put to external stake- cussions by playing the role of devil’s advocate sought to nurture this kind of relationship by holders is whether they invest in companies with a Tenure of board members varies. Some boards (challenger); others bring in their domain exper- establishing trust, providing support and acting “no burn” policy, a major environmental issue giv- set a limit of six years (two terms); others are more tise, e.g., finance and legal, as a way of adding as the CEO’s thinking-and-learning partner in the en the presence of haze and pollution generated flexible and allow two or three terms (6–9 years). value to the discussion. Some take a facilitative management of the business and people issues: annually by forest fires in neighbouring countries. The 2015 SID-SGX Singapore Board of Directors role by focusing on board dynamics and ensur- “The management team comes to me for advice since Survey, which provides insight into corporate ing that everyone is heard. Various factors ex- I am old! I mentor them. We have a Socratic encounter and board structures and practices based on input plain this, such as their professional background, I teach them to think by asking them questions.” Insignificant time commitment from listed companies in Singapore, found that role models, company needs and cultural norms, 84% of companies did not impose restrictions as well their understanding of the role. Some saw the role of the board as one of provid- by board members on length, probably in an effort to maintain the ing challenge, such as offering checks and ba- independence of board members. For the few For example, one chair-owner of a family busi- lances to the CEO and management, bringing Few respondents had problems managing the that did have restrictions, the specific limit was ness facilitates discussions in such a way that all an outside perspective, asking tough questions, time commitment of their board members. They nine years, in accordance with recommendations voices are heard and there is an environment of and driving the performance of the business generally felt their members were able to devote in the Code of Corporate Governance 2012. debate and challenge: “My board is active because beyond compliance. adequate time to their board responsibilities, and that is what I want. I want the board to debate on strate- that they would warn board members if they were Given Singapore’s tight labour market, finding gy, and to test my thinking, leading to collective wisdom.” Most were clear that their role was separate from not honouring their commitments. board members that fully meet both their inde- that of the CEO and the executive team, and pendence and experience requirements is likely stressed the importance of having clear boun- to be challenging. This underlines the importance daries. While the executive team’s responsibil- of the efforts made by the SID in directorship ity was to shape the strategy and direction of training and education. 96 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends 97

One founder commented that “Boards don’t run er and true outsider yet had managed to gain companies and too much regulation kills businesses.” the trust of the Singapore establishment and had There is some concern that Singapore could be turned his difference to his advantage, bringing Along with globalisation and increased marginalised as a business hub if it introduced an outside perspective. Such individuals are like- too much bureaucracy. ly to become more common as efforts are made demands for transparency, boards to bring more diversity into boards. Along with globalisation and increased demands in Singapore are under pressure for transparency, boards in Singapore are un- Given the increased level of scrutiny of corporate der pressure to embrace diversity and develop governance internationally, unprecedented dis- to embrace diversity and develop a more robust culture of debate. These changes ruption in the geopolitical arena and Singapore’s could challenge the established “old boy unique position as an island with huge interde- a more robust culture of debate. network” that has in the past been quite effective. pendence with contemporary global political and economical forces, the stage is set for a shift These changes could challenge All chairs of the boards we interviewed are in how its boards will function in the future. Singaporean nationals and, with one exception, the established “old boy network” were born and raised in Singapore. Given the small Aspiring to stay “top of the class,” Singapore size of this city-state, there is a natural tendency will move towards bringing more diversity into that has in the past been quite effective for board members to be selected from a pool boards, balancing the tension between retain- of people that know and trust each other. All bar ing a sense of control while empowering chairs one of the Singaporean native chairs we inter- and board members with outside perspective viewed were of Chinese ethnic background, and and experience. This will be particularly chal- so were the majority of directors in their boards. lenging for companies that are controlled by An ex-CFO chair contributes a financial perspec- In cases where an open and direct culture of de- This concentration of board chairs and board Singapore investment vehicles. If this tendency tive as a way to debate and challenge the per- bate prevails, the chair’s personality and back- members that have gone through the same edu- is confirmed, the renewal and extension of the formance of the business: “I am financially trained. ground drive the discussion. One said, “I tell it like cational system allows for mutual understanding pool of possible candidates for chair positions A lot of CFOs are under pressure when I am the chair. I am it is and I get away with it. If you are truly independent, and shared values. However, despite the undeni- will become more diverse in terms of gender, here to offer a second opinion and they should not feel you can afford to walk away. I worry about performance, so able benefits of belonging to the same communi- cultural background and age, in favour of young- threatened.” A lawyer chair mentioned a core focus I will play a challenging role.” Another was “big on ty (and to some extent intellectual elite) in terms er candidates. We can assume that more diverse on governance and leveraging domain expertise. boardroom dynamics. Everybody has to comment and we of communication and loyalties, the diversity boards will further drive the professionalism do not always agree. We thrash it out in the boardroom and of thought generated through cultural diversity of board work and make board meetings the main Online vs Offline. A key difference how much move on a majority basis. It is solidarity after that, nothing may not be fully leveraged. One of the most ex- platform for decision making, in contrast with the active debate happens in the boardroom (online) personal.” perienced chairs we interviewed was a foreign- current preference for offline pre-alignment. or outside the boardroom (offline). This is large- ly determined by the culture of the organisation and, again, how the chair views his or her role. Summary

In some cases, discussions occur offline and the Singapore has been proactive in seeking to chair tries to actively facilitate conversations establish itself as a role model of corporate between the board and management. If there governance in Southeast Asia. The combination are disagreements among board members, they of pragmatism and long-term vision – in a coun- are handled offline. This seems to be largely driv- try that is itself managed largely according to KPMG and ACCA study “Balancing Rules en by an organisational culture where relation- meritocratic principles – has had positive results, and Flexibility,” December 2014 ships and face-saving is paramount and direct notably the efforts made by the SID to train and confrontation is uncommon. educate current and future board members and SGX Guide to Sustainability Reporting to provide opportunities for best practice sharing. Resources for Listed Companies, June 2011 One described how, “Management lets the board know with board papers, and this is discussed before the Nonetheless, critical voices, mainly from the own- for this chapter Singapore Code of Corporate Governance, board meeting. A lot happens before the board meeting.” er-entrepreneur scene, have expressed concerns May 2012 He went on to say, “When the board is not happy with per- that some chairs do not really have enough “skin formance and there is a difference in view between the in the game” and hide behind overly formal cor- Singapore Institute of Directors – SGX board and management, it is taken offline. A key role I play porate governance processes to safeguard their Board of Directors Survey, October 2015 as active chairman is to intermediate offline. We do this own reputation. Their approach aims at mitigat- by informal lunches to have the CEO meet board mem- ing the risks inherent in building and expanding bers to discuss issues in a more relaxed environment.” businesses in challenging and uncertain times. 98 Board Chairs’ Practices across Countries: Commonalities, Differences, and Future Trends

Notes