This document discusses the roles and responsibilities of boards of directors. It provides a brief history of boards, explaining that they were formally recognized in 1904 as the link between shareholders and a company. The board governs the organization while management manages day-to-day operations. An effective board mixes skills, ensures strategy and financial prudence, and hires and oversees the CEO. Director duties include fiduciary responsibility to act in the organization's best interests. The chair ensures effective board discussions and information flow. Committees allow boards to delegate work in key areas like audit and risk.

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Boards 101
By Ruchir Punjabi

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An Agency of Shareholders
Shareholders /
Members
CEO
Management
Board of Directors
Committees

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Brief History
Informal examples include :
 Governing councils & Parliaments
 East India Company
Formal :
 Courts in England recognised the
relationship between the
shareholders and a Board in 1904

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The Board Governs and
the Management Manages

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Purpose
Further interests of the Organisation
Define and assess strategy
Trade solvently
Drive financial performance
Hire, manage and fire the CEO
Manage legal, OH&S, compliance and all
other risks (Australia)

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When?
Entrepreneur with Advisors
(<$2Mn)
Advisory Board
(<$15-20Mn)
ASX / Compliance Specialists
(Post-listing Experience)
Statutory & Executive Board
(Pre-Listing or >$20Mn)

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Ideal Board Size
Preferably always less than 10
Preferably an odd number
Organisation / Board Ideal Number
Advisory Board 3 to 5
Listed Board / Large
Organisation
5 to 9
Not for Profit 7 to 9

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A Good Board
Mix of Skills & Experience
Strategy
Financial Prudence
Compliance
Independence & Accountability
Credibility (inc. Fundraising for NFPs)

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Director’s Duties & Responsibilities
Fiduciary Duty
 Fiduciary duty is a legal duty to act solely
in another party's interests (in this case,
the org)
 Act in good faith for a proper purpose
 Avoid conflicts of interest and not misuse
information or position
 Act with care and diligence
 Specific duties related to laws
(insolvency, declaration of interests, etc)

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Role of the Chair
 Single most important role in
determining effectiveness of a Board of
Directors
 Key liaison between the Board and the
CEO (inc Management)
 mentor and sounding board for the
CEO
 Ensures that the information flow to the
Board is comprehensive
 Creates an effective environment for
robust discussions

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The CEO Relationship
 Single most important function of the
Board is to hire, fire and manage the CEO
 Enablement and Accountability of the
CEO crucial to the organisation’s success
 Create an environment for the CEO to
leverage the Board to help the CEO and
organisation reach their full potential

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Board Remuneration
 Depends on stage of your business
 A stipend + expenses normal
 Vesting of shares over time also a
common option
 NFPs normally only cover expenses
 A remuneration committee can help
 Surveys available (similar to employee
pay surveys)

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Independence of the Board
Executive v/s Non-Executive
 Managing Director v/s CEO
Different countries have different
trends on independence
 Consistently however independence is
considered positive

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Board Operations
 Role of the Agenda
 Planned agenda really useful
 Distribute papers in advance
 Focus on high-level discussions;
keep details for noting
 Secretary of the Board and/or Company
 Committees

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Committees
 Committees useful to “delegate”
deliberations in key areas
 A Board can never delegate responsibility
i.e. committees only recommend – Board
doesn’t have to adopt the
recommendations
 Example committees include Audit &
Risk, Investment, Infrastructure,
Appointments & Nominations, etc.
 Also an opportunity to leverage expertise
in different areas

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Questions?
 It is easy to over cook the process
 Start incrementally and build on the
process
 Add people slowly over time – no
need to rush but key to get people
and Board culture right
 Chair and CEO roles and their
relationship crucial to the success of
the Board
?

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Thank You
Langoor
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Ahmedabad, Bangalore,
Hong Kong, Singapore
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