BOARD OF DIRECTORSNext Generation

Carlos Henao

This is William:

A board member for a

manufacturing company

BUT GROWTH & INNOVATION WERE LAGGING

The company was doing fine,

SHAREHOLDERS WERE BECOMINGCONCERNED WITH THE ROLE ANDCONTRIBUTION OF BOARD MEMBERS,

including William

William knew

he needed to

act fast to do

what was best

for the company

and regain trust

This is Sarah:

William’s friend & a successful

board member in another

manufacturing company

Over lunch, she

offered William some

advice about a new

concept:

“Next Generation Boards”

SHE TOLD HIM THAT REVISING

evaluating existing problems

BOARDS BEGAN WITH

For instance, members

did not have a clear &

shared understanding

about the value and

role of the board

What are the board’s main

responsibilities?

Source: PwC’s What is the board’s role in a family business. 2014

56

56

59

61

62

74

85

Evaluate top executive

performance

Succession planning

Oversee risk management

Set/approve compensation for

top executives

Oversee/approve capital budget

and key operating budgets

Set corporate strategy

Monitor company's performance

THEY WERE STRUCTURED TO MEET REGULATIONS,

NOT STRATEGIZE WHAT THE COMPANY NEEDED

FOB Boards

NON-FOB Boards

52%

42%

The skills missing from boards

Source: Boris Groysberg and Deborah Bell

They would spend most of the time

reviewing

REPORTS &

COMPLIANCE

2

6

7

7

15

15

16

24

29

14

25

34

35

40

45

45

42

50

Other

Regulatory Compliance

Crisis Management/Planning

Executive Compensation

IT Strategy

Risk Management

Information Technology Risks

Succession Planning

Strategic Planning

Yes, much more time & focus than in the past

Yes, but not a great increase from the past

Would you like your board to devote

more time in the upcoming year to

considering the following matters?

Source: PwC’s 2013 Annual Corporate Directors Survey

THE BOARD DYNAMICS WERE POOR: MUCH WAS DISCUSSED &

little was decided

Sarah explained that the

Next Generation Boards

were different than this

in three ways...

1.Value & role

2.Structure &

competencies

3.Process

& board

dynamics

VALUE & ROLELEAST INVOLVED TO MOST INVOLVED

The

Passive Board

The

Certifying Board

The

Engaged Board

The

Intervening Board

The

Operating

Board

Least Involved Most involved

Source: David Nadler. Building Better Boards. HBR, 2004.

NEXT GENERATION BOARDS

ARE INVOLVED WHERE THEY

ADD THE MOST VALUE

Boards That Partner

Boards That Monitor

Boards That Take Charge

Boards That Can Step Back

Source: David Nadler. Building Better Boards. HBR, 2004.

DIFFERENTSTRUCTURE

A winning team with a

Chairman or lead

member

Dependent

member

Independent

member

Dependent

memberIndependent

member

ALSO HAVE INDIVIDUAL & TEAM COMPETENCIES

TO DIRECT THIS STRATEGY & FULFILL ROLES

Next generation boards

Professional AssetsMember

1Member

2Member

3Member

4

Internationalization & global management

Professional network, knowledge, & experience in industry & regions where the company competes

Technology

Risk Management

Strategic Talent Management

Processes & dynamics ARE ALSO DIFFERENT

EXPLICITLY DEFINEWHAT ARE THEIR KEY

PROCESSES

Directing strategy & capital

allocation

Risk management

CEO and key executives evaluation

Succession plan for CEO & key

executives

Strategic talent management

& compensation

Board evaluation & management

And for each key process, they define where and

when to intervene each

year

Educating the board

about the business

SWOT

(Strength,

Weakness,

Opportunities,

Threats)

Strategic

Alternatives

Strategic

Choice

StrategyImplementatio

n

Optimal Point

Engage Board

On Strategy

Where most

CEOs Engage

their Boards On

Strategy

BOARD DYNAMICS

IS ACTIVELY

DESIGNED AND

MANAGED

Agenda management

Information management

Session Management

Off-session Coordination

Relationships With Management

& Shareholders

Competencies & Culture Building

Dedication & Compensation

When William explained

the concepts… But later

changed their minds

because they realized that doing nothing would not

change the reality.

The board was hesitant

Implementing this new strategy

would take three steps:

1.Define value

& role

2.Design the

board

3.Lay the

road map

IT WAS HARD WORK FOR THE BOARD

TO CHANGE THEIR OLD WAYS,

but it was worth it.

HOW CAN YOU CREATE A NEXTGENERATION BOARD OF DIRECTORS?

Carlos Henao: Managing partner

E-mail: ch@caplica.com

Phone: 574-386-0999

Cell phone: 310-359-5905