IV: The Work of the Board: F. Legal and Governance Responsibilities of Directors
by Richard Leblanc
The Handbook of Board Governance, 2nd Edition
- Cover
- Foreword
- Preface
- About the Editor
- 1 The Handbook of Board Governance
- Introduction
- Diversity of Authorship
- Improved Corporate Governance
- Part I: The Board's First Responsibility: The Right CEO
- Part II: The Board's Second Responsibility: The Right Board Chair
- Part III: Who Is at the Board Table? Board Composition, Dynamics, and Decision-Making
- Part IV A: Climate Governance
- Part IV B: Technology Governance
- Part IV C: Risk and Financial Governance
- Part IV D: Strategic Governance
- Part IV E: Human Capital and Compensation Governance
- Part IV F: Legal and Governance Responsibilities of Directors
- Part V: Shareholder Engagement and Board Accountability
- Part VI: Not-for-Profit Governance
- Part VII: Small and Medium Company Governance
- Part VIII: Global Corporate Governance
- Conclusion: Future of Board Governance and Unresolved Issues
- References
- I: The Board's First Responsibility: The Right CEO
- 2 CEO Succession Planning Trends and Forecast
- 3 CEO Succession Planning
- 4 CEO Succession: Lessons from the Trenches for Directors
- Introduction
- The Talent Disconnect
- The Reluctant Retiree
- The Absence of Human Resources
- The Assessment Tool Obsession
- The Irrelevant Criteria
- The Culture Conundrum
- The Mysterious Talent Pool
- The Never-Ending Transition
- The Forever CEO
- The Persistent Myth: It's Just for the Big Guys
- Conclusion
- About the Author
- References
- APPENDIX 1: Model CEO Succession Planning Charter
- APPENDIX B: Model CEO Position Description
- II: The Board's Second Responsibility: The Right Board Chair
- 5 The Nonexecutive Chairman
- 6 Great Boards Don't Exist Without Great Chairs
- 7 What's in a Name? The Lead Director Role at U.S. Public Companies
- Introduction
- Part I: Where Did the Lead Director Role Come From?
- Part II: Who Are Today's Lead Directors?
- Part III: What Responsibilities Do Lead Directors Have?
- Part IV: What Challenging Issues Demand the Most Attention from Lead Directors?
- Part V: What Behaviors and Key Relationships Set the Most Successful Board Leaders Apart?
- Conclusion
- About the Authors
- Notes
- APPENDIX 3: Model Board Chair Position Description
- III: Who Is at the Board Table? Board Composition, Dynamics, and Decision-Making
- 8 Director Independence, Competency, and Behavior
- The Regulatory Focus on Director Independence May Occur at the Expense of Industry Expertise
- Moving Beyond Director Independence
- Regulatory Emphasis on Director Independence
- Boards Should Collectively Decide: How Much Compromising of Director Independence Is Acceptable?
- Director Competency
- Board Diversity Matrix
- Director Behavior
- Assessing Overall Director Effectiveness
- Conclusion
- About the Author
- Notes
- References
- 9 Board Behaviors: How Women Directors Influence Decision Outcomes
- 10 The State of Gender Diversity in Boardrooms
- 11 Every Seat Matters
- 12 The Art of Asking Questions as a Director
- 13 Board Succession, Evaluation, and Recruitment: A Global Perspective
- Introduction
- Who Has the Right to Nominate and Elect the Board?
- Basic Board Structure and Independence
- Board Succession Management
- Building a Fit-for-Purpose Board
- The Hot Topic of Diversity on Boards
- Board Evaluation
- Board Recruitment
- Vetting of Board Candidates
- Board Candidates' Own Due Diligence
- Conclusion
- About the Author
- APPENDIX 4: Model Individual Director Position Description
- APPENDIX 5: Model Conflict of Interest Policy for Directors
- 8 Director Independence, Competency, and Behavior
- IV: The Work of the Board: A. Climate Governance
- 14 Climate Change and Directors' Duties: Closing the Gap Between Legal Obligation and Enforcement Practice
- Introduction
- Why Climate Change Is a Core Corporate Governance Issue
- Incorporating Climate Change into The Board's Role on Governance, Strategy, Risk Management Oversight, and Disclosure
- Climate Change and Directors' Duties in Key Common Law Jurisdictions
- Practical Tools for Climate Governance and Disclosure
- Conclusion
- About the Authors
- Notes
- 15 Board Oversight and Climate Change: What Directors Need to Know
- Introduction
- Incorporating Climate Change into the Overall Board Governance Framework
- Understanding the Dynamic of Climate Risk, Climate Opportunity, and Financial Impact
- What the Board Needs to Know About Risk and Opportunities Analyses
- What the Board Needs to Know About Climate-Related Risk Management and Strategic Planning
- What the Board Needs to Know About Climate Change–Related Disclosure
- Closing Comments
- About the Author
- Notes
- 16 Responsible Boards for a Sustainable Future
- 17 Corporate Governance to Advance Business and Society
- 14 Climate Change and Directors' Duties: Closing the Gap Between Legal Obligation and Enforcement Practice
- IV: The Work of the Board: B. Technology Governance
- 18 Technology and the Corporate Board 2020 and Beyond
- 19 Responsive Governance in a Digital World: The Need to Up-Skill
- Introduction
- Digital Transformation
- Why IT Governance Capability Is Necessary Across the Board
- Seven Areas of ETG Risk Boards Need to Know About
- Three Barriers to Effective Board-Level ETG
- Board ETG Accountabilities and New Competencies
- Five Practical Steps to Start Transforming Your Board
- Conclusion
- About the Authors
- Notes
- References
- 20 The Impact of Blockchain Technology for Corporate Governance
- Executive Summary
- Glossary of Terms
- Introduction: Blockchain Enhancements in Corporate Governance
- Voting Rights and “Smart Contracts”: Compliance Automation
- Digital Currency: Securities Regulatory Implications
- Security Token Issuances: Board Considerations
- Impact of Digital Currency: Key Lessons Learned
- Conclusion: Governance Efficiency and Effectiveness
- About the Author
- Notes
- References
- 21 Blockchain: An Introduction for Boards of Directors
- 22 Reflections of a Board Chair on the Christchurch Massacre: Governing Social Media
- IV: The Work of the Board: C. Risk and Financial Governance
- 23 Financial Literacy and Audit Committees: A Primer for Directors and Audit Committee Members
- Editor's Note
- The Board and Audit Committee's Financial Literacy and Oversight of Financial Reporting and External Audit
- Audit Committee Oversight of Internal Audit
- Audit Committee Oversight of Risk Management
- Audit Committee Oversight of Business Conduct, Ethics, and Whistleblowing
- Audit Committee Oversight of Technology and Cybersecurity
- Conclusion
- About the Author
- Notes
- 24 Corporate Governance in an Age of Populism
- 25 A Call to Action for Geopolitical Governance
- 26 Governing Boards, Risk Management, and Deliberative Thinking
- 27 Lawyers' Advice to Directors on Overseeing Executive Pay
- Introduction
- The Overarching Principle of the Fiduciary Duty
- The Approval of a Compensation Committee Isn't Necessarily Enough
- If It Looks Too Good to Be True, a Court Is Probably Going to Feel the Same Way
- Don't Stop Being Scrupulously Honest Just Because a Contract Is Signed
- If Your Company May Have an Executive Who Breached Their Duty, Contemplate Asking a Court to Set It Aside
- Conclusions and Lessons from the Law
- About the Authors
- Notes
- 28 Accountant's Advice to Company Directors: Directors' Obligations to Detect Top-10 Frauds
- Background
- Fraud #1: Absent Board Independence
- Fraud #2: Hiring “Rubber-stamp” Consultants
- Fraud #3: Over-Ranked Financial Specialists
- Fraud #4: Incentive Programs Gone Awry
- Fraud #5: Weak Financial Controls
- Fraud #6: Non-Arm's-Length/Self-Dealing
- Fraud #7: Ponzi Schemes
- Fraud #8: “Cooked Books”
- Fraud #9: IFRS
- Fraud #10: Corporate Reorganizations
- About the Author
- 29 Ten Tell-Tale Signs of Possible Fraud: A Director's Primer
- Introduction
- The Chief Executive Officer (CEO) Is a Narcissist
- The CEO Takes a Keen Interest in Basic Accounting Entries
- The Company's Operation Represents One Person's Vision
- The Corporate Organization Chart Does Not Reflect Reality
- The Board Does Not Understand All Aspects of the Business
- The Minute Books Are Not Up to Date
- The Audit Committee Is Inactive
- Senior People Have a Flamboyant Lifestyle
- Noncore or Unusual Business Activities Generate High Revenue
- The Corporation Is Not a Securities and Exchange Commission (SEC) Registrant
- Conclusion
- About the Author
- 30 100 Questions Directors Should Ask When Assessing the Effectiveness of Risk Systems
- 31 Risk Oversight for Directors: A Practical Guide
- 32 Risk Governance: Leading Practice and Demographic Impacts
- Introduction
- What Is Enterprise Risk Management and Risk Governance?
- Corporate Governance Regulations: Risk Governance Expectations
- A Risk Governance Approach
- How Should the Board Organize Itself to Oversee Risk?
- What Should the Charter of the Board Include Regarding Risk Oversight?
- What Skills Should Directors Possess to Fulfill the Board Risk Oversight Charter?
- Emerging Role of the CRO
- Policy
- Assurance
- Risk Governance Framework Implementation
- Demographic Influencers of Effective Risk Governance
- Conclusion
- About the Author
- Notes
- 23 Financial Literacy and Audit Committees: A Primer for Directors and Audit Committee Members
- IV: The Work of the Board: D. Strategic Governance
- 33 Agile Governance
- 34 The Three Dilemmas for Creating a Long-Term Board
- Chapter Summary
- Introduction: Making the Case for Why Boards Should Care About Being Long-Term
- The Dilemma of a Time-Constrained Board
- The Dilemma of Using Stock Ownership as a Means of Aligning Interests
- Shareholder Engagement: The Dilemma of How and When Directors Should Engage
- Solutions for Long-Term Boards
- Conclusion
- About the Authors
- Notes
- 35 Strategic Blindspots in the Boardroom
- IV: The Work of the Board: E. Human Capital and Compensation Governance
- 36 Winter Is Coming: The Approaching Human Capital Management Storm
- 37 The Effective Compensation Committee
- Introduction
- Keys to an Effective Compensation Committee
- Compensation Committee Charter
- Compensation Philosophy
- Compensation Committee Calendar
- Aligning Pay to Performance: Best Practices
- Succession Planning and Talent Development
- Say on Pay and Shareholder Engagement
- Conclusion
- About the Authors
- Notes
- 38 Compensation Governance and Performance-Based Executive Compensation
- Introduction
- Typical Responsibilities Found Within the Charter of the Compensation Committee
- Compensation Governance Background
- Compensation Governance Process
- Performance-Based Executive Compensation
- Governance Process to Review and Design the Annual Bonus
- Governance Process to Review and Design the Long-Term Incentive Plans
- Governance Process to Design Performance-Based Incentives
- Final Thoughts
- About the Author
- 39 Measuring and Improving Pay for Performance: Board Oversight of Executive Pay
- The Three Basic Objectives of Executive Pay
- A Brief History of Executive Pay
- Why Percent of Pay at Risk Is Not a Meaningful Measure of Incentive Strength
- Measuring the Three Basic Objectives of Executive Pay
- The Design Implications of the Measurement Analysis: Perfect Pay Plans
- Benchmarking Pay for Performance
- Executive Pay Has a Big Impact on Shareholder Wealth
- Directors Need to Ensure That They Themselves Have Strong Incentives to Increase Shareholder Value
- Institutional Investors Don't Do a Good Job on Say on Pay
- ISS Doesn't Do a Good Job for Institutional Investors
- Conclusion
- About the Author
- Notes
- References
- 40 Designing Performance for Long-Term Value: Aligning Business Strategy, Management Structure, and Incentive Design
- Defining Performance and Missing Metrics
- What About Earnings per Share (EPS) as a Performance Metric?
- Connecting Current and Future Value to Total Shareholder Return
- Aligning Management Structure with Innovation and Future Value
- Current Value, Future Value, and Rethinking Long-Term Incentive Design
- Explaining Performance and Pay for Performance
- Conclusion
- Glossary
- About the Author
- Notes
- 41 Mind the Gap: How Human Resources Can Become More Integral to the Corporate Boardroom Agenda
- IV: The Work of the Board: F. Legal and Governance Responsibilities of Directors
- 42 Board Risk and Responsibility Under Regulatory and Criminal Law
- Board Governance, Regulatory and Criminal Law
- Leadership Failure and the Westray Mine Disaster
- Moral Panic and Political Policy Proclivity
- Legal Differences Between Regulatory and Criminal Law
- “Due Diligence” or “Do Diligence” in Risk Governance
- Directors' Personal Risk and Due Diligence
- No DPAs for Directors
- Indemnity and Insurance for Directors
- The Charter and Legal Risk Management
- International Directions in Directors' Legal Liability
- About the Author
- Notes
- References
- 43 Riding Between Cars: The Position of the Corporate Secretary
- 44 Ensuring Good Governance and Business Success in International Subsidiaries
- Align the Purpose of the Subsidiary and Its Board to the Parent
- Align the Processes of the Subsidiary with the Needs for Good Governance
- Align the Leadership of the Subsidiary with the Needs of the Board
- Identify the Operating Needs of the Parent: The “Non-negotiables”
- Clarify and Align the Needs of the Subsidiary with the Parent Organization
- Making It Work—The Glue That Binds: “Trans-Cultural Conduits”
- Conclusion
- About the Author
- References
- 42 Board Risk and Responsibility Under Regulatory and Criminal Law
- V: Shareholder Engagement and Board Accountability
- 45 The Rise of Investor Stewardship
- 46 Director/Shareholder Meetings
- 47 Dual-Class Share Firms in Developed Market Economies*
- 48 For Directors: The Long-Term Relationship Between Directors, Companies, and Institutional Investors
- Background
- Why Are Institutional Investors Important?
- Long-Term Ownership by Institutional Investors: Should Directors Care?
- What Are the Keys to Engagement? What Triggers Advanced Engagement? Which Issues Are of Utmost Importance?
- Overcoming Impediments and Realizing Benefits Through Engagement
- How Do Institutional Investors Evaluate Governance and Select Engagement Strategies, Including Quiet Diplomacy?
- How Do Institutional Investors Evaluate Directors Through Proxy Voting?
- What Will Be the Next Major Governance Focus for Investors and Directors?
- Candid Advice for Board Members
- Suggestions for Directors, Investors, and Boards to Improve Their Governance
- Conclusion
- Acknowledgments
- About the Author
- Notes
- Useful Citations and Reference Materials
- 49 Proxy Scorecards Will Empower Investors
- Executive Summary
- Externalities and “Forced Capitalists”
- Main Street Investors Should Have a Say
- Knowing How Funds Vote
- Organizing Around Common Values
- Real-Time Proxy Voting Disclosure
- Giant Funds Clash to Determine American Values
- Broader Shareholder Base Needed to Reflect American Values
- About the Author
- Notes
- VI: Not-for-Profit Governance
- VII: Small and Medium Company Governance
- 53 Governance of Small and Medium-Sized Entities
- 54 Private Versus Public Company Governance: Top-13 Questions for Board Members to Consider
- 55 Cannabis Governance: Advice for Current and Prospective Directors in This Emerging Industry
- Introduction
- In These Early Days, There Are More Stocks Than There Are Companies
- Getting Underneath the Canopy
- Be Realistic About What Governance Is in This Space
- Board and Management Need to Keep Each Other Focused
- Setting Pay in This Space
- The Board and Overseeing the Capital Expenditure Budget
- Challenge Management on Big Bets by Looking to the Informal Market
- Mergers, Acquisitions, and Consolidation Present Unique Challenges for Cannabis Boards
- About the Author
- VIII: Global Corporate Governance
- 56 Cross-Border Corporate Governance
- Historical Perspectives
- Social, Cultural, and Legacy Issues
- Emergence of the “Emerging Economies”
- Common Governance Themes Crisscrossing International Borders
- Corporate Governance: Examining Approaches Taken by Australia, India, Singapore, the United Kingdom, and the United States
- Dealing with Shareholder Empowerment
- Disproportionate Voting Rights
- Emerging Governance Issues for Multinationals
- About the Author
- Notes
- 57 Corporate Governance in Asia-Pacific
- 58 Boards of Directors of Chinese Companies
- 59 The Russian Corporate Governance Story
- Learning to Fly: Russian Corporate Governance Origins
- Set the Controls for the Heart of the Wealth: Regulators, Shareholders' Activists, Directors' NGOs
- The Dark Side of the Boom: Attempting to Refine Governance in SOEs
- Sberbank's Bold Analysts' Riot: Comfortably Numb?
- The Final Cut: Conclusions and Recommendations
- About the Author
- 60 CARICOM (Caribbean Community) Governance
- 61 King IV: Taking Corporate Governance to the Next Level
- A Focus on Outcomes Within an Ethical Context
- New Foundational Elements of King IV
- King IV and Ethical Consciousness and Leadership
- King IV Focuses on Conduct
- King IV Promotes an Outcomes-Based View
- The “Apply-and-Explain” Regime
- Broad Applicability of King IV
- Greater Clarity Is Obtained
- Proportionality Is an Important Concept
- Specific Content Shifts in King IV
- Conclusion
- About the Authors
- Notes
- 56 Cross-Border Corporate Governance
- Index
- End User License Agreement
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