Category: Starting a Business

Can you advise Stuart?

Stuart is a well-respected professional company director who has developed a prominent profile in his industry. He is president of the industry association and has recently been appointed to chair the board of a government owned organisation that is a highly important part of the industry ecosystem.

He has been pleasantly surprised by the diligence and contribution of his directors and the professional expertise of the CEO and management team. He also loves being able to contribute to the strategic development of the industry even though the Chairmanship pays less than his other industrial roles as a NED.

The Minister clearly appreciates his expertise and has taken to asking Stuart to speak at functions which the Minister either cannot attend or is not confident to address. He also drops by the office for coffee and advice as well inviting Stuart to attend a lot of official functions and conferences. He has also planned an overseas study trip which Stuart is concerned will take him away from his other boards (and this one) for a length of time that will be harmful to the companies.

The workload is spinning out of control and Stuart, who usually sees himself as highly organised and capable, is starting to feel that he isn’t coping and that something is going to be missed. He has tried turning down the requests from the Minister’s office citing workload and pre-existing commitments but these polite refusals are rejected and he is told that he ‘must’ attend as part of his role.

Stuart is happy that his expertise is recognised but can’t spread himself this thin. He doesn’t want to resign any of his board seats as the workload should be easily manageable were it not for the constant time demands from his Minister.

How should Stuart handle this issue?

Many readers of this blog will be familiar with my newsletter The Director’s Dilemma. This newsletter features a real life case study with expert responses containing advice for the protagonist. Many readers of this blog are practicing experts and have valuable advice to offer so, again, we are posting an unpublished case study and inviting YOU to respond.

If you would like to publish your advice on this topic in a global company directors’ newsletter please respond to the dilemma above with approximately 250 words of advice for Peter. Back issues of the newsletter are available at http://www.mclellan.com.au/newsletter.html where you can check out the format and quality.

The newsletters will be compiled into a book. If your advice relates to a legal jurisdiction, the readers will be sophisticated enough to extract the underlying principles and seek detailed legal advice in their own jurisdiction. The first volume of newsletters is published and available at http://www.amazon.com/Dilemmas-Practical-Studies-Company-Directors/dp/1449921965/ref=sr_1_1?ie=UTF8&qid=1321912637&sr=8-1

What would you advise?

Julie Garland-McLellan has been internationally acclaimed as a leading expert on board governance. See her website atwww.mclellan.com.au or visit her author page athttp://www.amazon.com/Julie-Garland-McLellan/e/B003A3KPUO

Women on boards has been one of the most contentious topics of the last few years. In the UK, we had the Davies Report in February 2011 which set out a series of recommendations with the aim of increasing female representation to 25% on the boards of FTSE 100 companies by 2015. Although this was non-binding, the report has been used as a basis for the UK government and the FRC to adopt various measures to try and encourage the recruitment of female directors.

It’s not just in the UK, but across the world that people have been looking at how to encourage female representation on boards. The Scandinavian countries of Norway, Sweden and Finland have all adopted mandatory quotas for female representation and now the EU as a whole is looking at it.

First the disclaimer. This is based on a (well) leaked report from the EU which is resisted by certain countries, notably the UK. Before it could become law, it would have to pass through numerous legislative steps which would likely change it dramatically. Nevertheless, it is still very instructive in showing how the powers that be are approaching this issue.

The draft proposal that has been leaked would look to mandate that at least 40% of the non-executive directors of large listed companies in the EU were female by 2020. A company would be considered ‘large’ if it had more than 250 employees or €50 million in annual revenues. The penalties for non-compliance could be extreme with fines and, arguably more importantly, they would be barred from state aid or bidding for government contracts.

Now, this draft proposal has often been reported in terms thatexaggeratethe detail. The proposed quota is only relevant to non-executive directors and therefore there is no proposed restriction on the gender diversity of executive directors. The draft proposal also states that the quota should not force a company to reach 50% or more female non-executive directors. So, if a company has four non-executive directors, the proposed quota would only require the company to have one woman amongst these four. The reason being that if the company was forced to have two women, they would have 50% female directors.

Nonetheless, mandatory quotas across one of the largest economic blocs in the world would be a huge step and could well lead to other countries adopting similar measures. To answer the question posed in this blog, will the EU insist on such a quota? Personally, I don’t think it will come to pass, at least not in its current form. However, I do think some form of gender diversity legislation will be passed by the EU in the next few years and it will be telling to see what the nations of the EU finally agree on.

This article was written by Nick Lindsay of Elemental Cosec, UK providers of company incorporations and company secretarial services. This article is for informational purposes only and should not be relied upon as specific advice or acted upon without seeking legal advice.

Rina has asked for your advice. She is a long standing director of a holding company for a large group of companies. The holding company Chairman, Quentin, has been a friend and mentor to her over many years.

Recently the holding company bought a stake in a small listed company and Rina was appointed to the board as Quentin’s nominee. She was aware that some of her co-directors believed that Quentin wanted to gain control of the company without paying a premium and worked hard to demonstrate her independent judgement so as to win their trust.

Robert, the CEO of the listed company is an outstanding individual with a commercial flair and detailed but quick grasp of the key issues facing his company. He is vitally important to the company’s success. Rina has often praised Robert in her talks with Quentin. Now Quentin has decided to offer Robert a position as CEO of one of the large wholly owned subsidiaries of the holding company with a clear indication that, if he performs well, he can become CEO of the holding company.

Rina is torn. She knows that she has a duty to the listed company that includes acting to retain key staff and protect the IP that exists within the management team; she has a duty to the shareholders of the holding company which would include ensuring that each subsidiary had the best management it could find, and she also feels beholden to Quentin, who has helped and advised her in her career thus far.

Quentin has asked Rina to urge Robert to accept his offer but she is not sure if that would be ethical and, indeed, feels partly responsible for bringing Robert to Quentin’s notice.

What should Rina do?

Many readers of this blog will be familiar with my newsletter The Director’s Dilemma. This newsletter features a real life case study with expert responses containing advice for the protagonist. Many readers of this blog are practicing experts and have valuable advice to offer so, again, we are posting an unpublished case study and inviting YOU to respond.

If you would like to publish your advice on this topic in a global company directors’ newsletter please respond to the dilemma above with approximately 250 words of advice for Rina. Back issues of the newsletter are available at http://www.mclellan.com.au/newsletter.html where you can check out the format and quality.

The newsletters will be compiled into a book. If your advice relates to a legal jurisdiction, the readers will be sophisticated enough to extract the underlying principles and seek detailed legal advice in their own jurisdiction. The first volume of newsletters is published and available at http://www.amazon.com/Dilemmas-Practical-Studies-Company-Directors/dp/1449921965/ref=sr_1_1?ie=UTF8&qid=1321912637&sr=8-1

What would you advise?

Julie Garland-McLellan has been internationally acclaimed as a leading expert on board governance. See her website atwww.mclellan.com.au or visit her author page athttp://www.amazon.com/Julie-Garland-McLellan/e/B003A3KPUO

Peter has asked for your advice. He is a director of a not-for-profit company in the arts sector. A few months ago his organisation’s funding was increased by 40%. The board and management were ecstatic.

Shortly after the funding was announced the Chairman informed the board that he had authorised a staff member to change working arrangements and move to a part time role in other premises and reporting directly to the board.

The CEO had been informed of this decision verbally immediately before the meeting and was clearly not happy. The grant funding application had stated that this role was full time and in head office very close to the government department to allow frequent liaison.

At the end of that meeting the Chairman solicited dates for an ‘in camera’ (NED only) board meeting which Peter attended a week or so later. At that meeting the Chairman discussed ‘general staff discontent’ and a need to restructure.

Peter and a few colleagues asked why the CEO was not involved in this discussion and were told that he was too busy with day to day issues to think strategically. This seemed strange as the organisation was running well and Peter felt the CEO was capable of making a great strategic contribution.

At the meeting the NEDs resolved to restructure and split the organisation into two parts; one would be headed by the part time staff member and one by the CEO. Peter asked that the CEO and staff member both present to the board before this decision was finalised but was overruled by the majority who wanted fast progress.

Now the CEO has resigned and is taking leave. Worse, the organisation is rudderless with junior staff unable to operate either of the two new structures without the CEO’s leadership. The Department is asking for explanations and threatening to cancel the funding.

What should Peter do?

Many readers of this blog will be familiar with my newsletter The Director’s Dilemma. This newsletter features a real life case study with expert responses containing advice for the protagonist. Many readers of this blog are practicing experts and have valuable advice to offer so, again, we are posting an unpublished case study and inviting YOU to respond.

If you would like to publish your advice on this topic in a global company directors’ newsletter please respond to the dilemma above with approximately 250 words of advice for Peter. Back issues of the newsletter are available at http://www.mclellan.com.au/newsletter.html where you can check out the format and quality.

The newsletters will be compiled into a book. If your advice relates to a legal jurisdiction, the readers will be sophisticated enough to extract the underlying principles and seek detailed legal advice in their own jurisdiction.

The first volume of newsletters is published and available at http://www.amazon.com/Dilemmas-Practical-Studies-Company-Directors/dp/1449921965/ref=sr_1_1?ie=UTF8&qid=1321912637&sr=8-1

Julie Garland-McLellan has been internationally acclaimed as a leading expert on board governance. See her website at www.mclellan.com.au or visit her author page

(Guest post from Hank Lewis.)

An email said:

My organization is 2nd in my life only to my family. I also feel responsible for the integrity of the organization and for protecting it from changes that would endanger that integrity. This organization works to create programs that bridge educational gaps between and about indigenous cultures. A lot of what we do is very sensitive and, if mismanaged, could do more harm than good.

The idea of hiring the wrong person for the job of ED when the time comes is terrifying to me. However, the idea of giving up my position on the Board is even MORE terrifying. Having been involved with other organizations that … became oligarchies full of power-struggles and politics [and having] watched those organizations sacrifice the quality and purpose of their programs because the politics became more important or because someone “found a shortcut, cheaper method, etc.,” that placed “efficiency” over quality.

Response:

You sound like any mama protecting its cub, and we would expect no less of someone who cared enough to begin the process/organization in the first place.

The answer to your specific question, right now — where you can maintain the direction and focus of your organization, and still derive compensation from the process — is to help your board become the “mature” group that will assume the governance role and help ensure funding, while you resign your board seat and become the ED (only).

Email:

I agree that someone being the top of the Board AND a paid staff member could create a conflict of interest.

Response:

Not “could.” It is a conflict !!

If you can create a board that will do what’s needed, and continue to support your vision, you can give up your board role and become a paid employee.

It sounds like you’d benefit from conversation with a consultant who specializes in helping NPOs with needs like yours – look around, wherever you’re located, there are likely to be folks with the expertise you need.

Email:

I can see from experience why some people would feel strongly about protecting “their” organization and/or what it was doing. I can … see, from experience with a young organization, how it can require a full-time commitment from key volunteers who may or may not afford to give it full time.

Response:

It is extremely unusual to find “full-time volunteers” especially those whose mindsets duplicate yours. Be careful that, with your passion and protectiveness, you don’t wind up creating the kind of “oligarchy” you despise.

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I’d be pleased to address your comments in a future posting.
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Have a comment or a question about starting, evaluating or expanding your fundraising program? Contact me at Hank@Major-Capital-Giving.com With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, I’ll be pleased to answer your questions.
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If you’re reading this on-line and you would like to comment/expand on the above, or would just like to offer your thoughts on the subject of this posting, we encourage you to “Leave a Reply” at the bottom of this page, click on the feedback link at the top of the page, or send an email to the author of this posting. If you’ve received this posting as an email, click on the email link (above) to communicate with the author.

Olba has asked for your advice. She has been appointed to a government sector board to represent her local peoples in decision-making and resource allocation. The organisation has been constituted with legislation that mirrors many provisions of the corporations act. Directors are not paid but Olba is happy to gain experience and serve the community.

The Minister appoints the board members and also a ‘facilitator’ to chair the board meetings. Olba resents the facilitator and knows that her colleagues on the board share her feelings. The government use this facilitator for a number of board and committee functions; she is well credentialed, politically well-connected, and somehow a ‘power behind the throne’ with several local organisations.

The facilitator is paid a sitting fee and does not appear to carry the duties that are imposed upon directors under the legislation. She is also often late for the meetings, arrives without having read the papers beforehand, and, on one memorable occasion, got some way through the agenda before realising which board she was chairing. This appeared to be a major conflict of interest as it became obvious she was currently also chairing a board that competes with Olba’s board for funds.

Olba has done some governance training and a lot of reading on the topic. She aspires to be a prominent and useful board member and a good ambassador for her people. The facilitator could cause an embarrassment that would thwart Olba’s aspirations. She is also, in Olba’s opinion, not performing well enough and possibly harming the organisation.

What should Olba do?

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Many readers of this blog will be familiar with my newsletter The Director’s Dilemma. This newsletter features a real life case study with expert responses containing advice for the protagonist. Many readers of this blog are practicing experts and have valuable advice to offer so, again, we are posting an unpublished case study and inviting YOU to respond.

If you would like to publish your advice on this topic in a global company directors’ newsletter please respond to the dilemma above with approximately 250 words of advice for Olba. Back issues of the newsletter are available at http://www.mclellan.com.au/newsletter.html where you can check out the format and quality.

The newsletters will be compiled into a book. If your advice relates to a legal jurisdiction, the readers will be sophisticated enough to extract the underlying principles and seek detailed legal advice in their own jurisdiction. The first volume of newsletters is published and available at http://www.amazon.com/Dilemmas-Practical-Studies-Company-Directors/dp/1449921965/ref=sr_1_1?ie=UTF8&qid=1321912637&sr=8-1

What would you advise?

 

By David Gebler and Donna Boehme

In the wake of the Penn State child abuse scandal, many in the media were outraged by the NCAA’s decision to instantly vacate the university’s win record from 1998 through 2011. As two ethicists with a combined 40+ years working in the trenches with organizations and their cultures, we’d like to offer the opposite view: the NCAA got it exactly right.

Former FBI agent and assistant US attorney Louis Freeh was unflinchingly stern toward Penn State’s “culture of reverence” for legendary coach Joe Paterno, his coaching staff, and the entire football program in his detailed 270-page independent report. Culture is a dramatic influencer of behavior for better or for worse.

While each individual is personally responsible for his or her actions, the culture we’re immersed in determines how hard it will be to maintain our integrity, and whether our human vulnerabilities will drive us to do things we’re not proud of.

Culture can neither be internally mandated nor externally legislated. In short, culture is “the way things are done around here.” Good or bad, an organization’s culture is grown organically from within and driven by the words and actions of its leaders. At Penn State, that culture was a blind hero worship of all things football, and it permeated every level of the organization and the community, with terrible results.

So entrenched was its hero worship culture that crowds of angry students rioted and women sobbed after the board’s unanimous decision to fire Paterno, even after the shocking revelations of unrestrained child sexual abuse were widely disseminated. That one scene alone said it all about the powerful impact an embedded culture can have on an entire organization.

Healthy organizations have checks and balances to guide how they govern themselves, allocate resources, and make important decisions. It’s the role of boards, internal and external audits, legal and compliance policies, and even individual employees to enforce accountability and serve as controls on the operation of unchecked power. But in some organizations, like Penn State, the entire system of checks and balances can be subverted by culture.

A hero worship culture trumps controls. It creates blinders that can cloud decision-making and destroy any sense of individual responsibility or “the right thing to do”—even for a 28-year-old assistant coach stumbling upon a horrific attack on a child in a locker room shower.

That culture drives an entire university community—from an acquiescent board, to deferential administrative officials, to devoted students and public fans—to create a cult of personality around a legendary coach and an entire football program.

In his report, Freeh describes it as a “culture of reverence for the football program that is ingrained at all levels of the campus community.” In the face of such idolatry, a mere victim, a victims’ family, or an observant employee doesn’t really stand a chance.

Faced with a potential scandal, and influenced by their hero worship culture, Penn State officials repeatedly hid damaging facts, empowering Sandusky to continue his despicable acts. The Freeh report confirms a conspiracy of silence designed to save an institution’s reputation (and lucrative revenue stream) at the cost of young lives, both those who had already been harmed and those who were yet to be harmed.

The independent panel describes “callous disregard for child victims” and “an active agreement to conceal”—all of this to save the institution from scandal and negative press.

Although Freeh may have found elements of a conspiracy, no one had to be told what to do. As one janitor who was an eye witness to the abuse said in his testimony, reporting what he saw to the police “would have been like going against the President of the United States.”

Penn State’s culture acted as an unstoppable force rising up to protect the institution and its officials, with unthinkable, monstrous consequences.

What’s needed at Penn State is a complete blood transfusion of good culture for bad. Joe Paterno’s hero status and the university’s “win at all costs” identity have to be replaced by accountability and transparency.

Presaged by the symbolic removal of Paterno’s iconic statue in the same week, the NCAA’s debilitating penalties have set the table for the institution to spend years, perhaps decades, resetting “the way things are done around here,” initially under the careful watch of a court-appointed monitor.

During what will undoubtedly be a long and painful rebuild, one hopes that a new leadership and a meaningful system of checks and balances will begin to create a new culture of individual responsibility and integrity, ultimately exorcising the hero worship culture that brought a once-great institution to its knees.

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Donna Boehme is Principal, Compliance Strategists LLC, member of the advisory board of the RAND Center for Corporate Ethics and Governance, and former global compliance and ethics officer of two leading multinationals. Learn more at www.compliancestrategists.com.

David Gebler (www.skoutgroup.com) is the principal of Skout Group, LLC, a global firm advising organizations on reducing culture-based risk and is the author of The 3 Power Values: How Commitment, Integrity and Transparency Remove the Roadblocks to Performance (Jossy-Bass, 2012).

(Guest post from Hank Lewis.)

An Email Said:

My organization has no paid staff, is essentially unfunded at this time, and Board Members receive no compensation of any kind including expense reimbursement. I’m the chairman of the Board and founder of the organization. When I sign things, I use the title “Executive Director,” even though (in actuality) I’m the chair.

I Responded:

What you describe sounds like an organization in its infancy — one that hasn’t been around for too long or that hasn’t yet begun the process of “maturation.”

First stage in the life of a NPO is where a group of people in a community recognize the existence of a specific need and get together to do something to address that need. The organization typically has one or two “founders” — who are the heart and soul of the org, and are the ones who tend to make things happen.

The situation, where you are Board Chair and Executive Director, can only continue to work to a point…. It is really only acceptable up to where your NPO can assemble a “representative board,” one that brings skills, perceptions, experiences, commitment, passions to the role, and is (to some degree) representative of the “community” being served. (The Board of a NPO is the community’s watchdog over that organization.)

The role of the initial board is to get the NPO to the point where it can make that transition from “infancy” to “maturity,” with the transition stage being the “adolescence” — a period of painful change and growth. Painful, because the original board members and founders may have to give up some or all of the roles they’ve been playing. They may even have to turn governance responsibility over to others — who have the traits needed to ensure….

Another Email:

While we hope and are working to achieve a level of success that requires paid staff, corporate offices, etc., our current focus is on our programs and resources.

My Response:

Again, what you describe is typical of an organization in its infancy; but, if you want your baby to grow, somewhere along the line you’ll have to remove some of the restrictions. You’ll have to allow your baby to become a different person than what you envision for “it.” Otherwise, your org will never be able to provide service to all who need it. You’ll keep it dependent on you and, God forbid, if/when something happens to you, your baby won’t be able to survive.

You don’t need the corporate offices or lots of bells and whistles, but you do need to consider how you will allow your baby to grow. If you stifle it, it will never be what it can be.

But, right now, you’re in the creation process. Go ahead and create. You’ll feel good about what you’re doing and about the people you’re helping. Just make sure that, when the time comes, you don’t fight your teenager — you help smooth its road to growth.

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Any thoughts about recognition?? I’d be pleased to address your comments in a future posting.
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Have a comment or a question about starting, evaluating or expanding your fundraising program? Contact me at Hank@Major-Capital-Giving.com With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, I’ll be pleased to answer your questions.
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If you’re reading this on-line and you would like to comment/expand on the above, or would just like to offer your thoughts on the subject of this posting, we encourage you to “Leave a Reply” at the bottom of this page, click on the feedback link at the top of the page, or send an email to the author of this posting. If you’ve received this posting as an email, click on the email link (above) to communicate with the author.