How to Make Boards Work: An International Overview

397 Pages·2013·2.574 MB·English

by  Andrew Kakabadse, Lutgart Van den Berghe (eds.)

How to Make Boards Work
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How to Make Boards Work
An International Overview
Edited by
Andrew Kakabadse
Henley Business School, University of Reading, UK
and
Lutgart Van den Berghe
University of Ghent, Belgium
Selection, introduction and editorial matter © Andrew Kakabadse and
Lutgart Van den Berghe 2013
Individual chapters © Respective authors 2013
Softcover reprint of the hardcover 1st edition 2006 978-1-137-27569-1
All rights reserved. No reproduction, copy or transmission of this
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Any person who does any unauthorized act in relation to this publication may
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The authors have asserted their rights to be identified as the authors of this
work in accordance with the Copyright, Designs and Patents Act 1988.
First published 2013 by
PALGRAVE MACMILLAN
Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills, Basingstoke,
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Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries
ISBN 978-1-349-44633-9 ISBN 978-1-137-27570-7 (eBook)
DOI 10.1057/9781137275707
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Contents
List of Figures vii
List of Tables x
Notes on Contributors xi
Introduction 1
Andrew Kakabadse and Lutgart Van den Berghe
Part I The ‘Outside In’ Perspective
1 E xposing the 20th Century Corporation: Redesigning
21st Century Boards and Board Performance 11
Nadeem Khan and Nada K. Kakabadse
2 C orporate Income Inequality and Corporate Performance:
Any Correlations? 44
F ilipe Morais, Andrew Kakabadse, Nada K. Kakabadse and
Adrian Pryce
3 H ow Chinese Styled Executive Remuneration Works:
Evidence from Chinese Red-Chips 75
Jessica Hong Yang and Nada K. Kakabadse
4 The Secret to Boards in Reinventing Themselves 95
Ouarda Dsouli, Nadeem Khan and Nada K. Kakabadse
5 Reinventing Board Effectiveness: From Best Practice
to Best Fit 137
Lutgart Van den Berghe and Abigail Levrau
6 Fine-tuning Board Effectiveness Is Not Enough 153
Lutgart Van den Berghe and Abigail Levrau
Part II The ‘Inside Out’ Perspective
7 An Effective Board Makes the Necessary Trade-offs 187
Lutgart Van den Berghe and Abigail Levrau
v
vi Contents
8 P romoting Effective Board Decision-Making, the Essence
of Good Governance 211
Lutgart Van den Berghe and Abigail Levrau
9 The Appropriate Board Chair: A Reality Check 268
Abigail Levrau and Lutgart Van den Berghe
10 T he Leadership Attributes of the Chairman of the Board:
An International Study 292
A ndrew Kakabadse, Nada K. Kakabadse, Chris Pierce and
Frank Horwitz
11 C EO/Chairman Role Duality Desire: Resistance to
Separation Irrespective of Effect 311
Nada K. Kakabadse, Andrew Kakabadse and Reeves Knyght
12 High-Performing Chairmen: The Older the Better 342
Nada K. Kakabadse, Reeves Knyght and Andrew Kakabadse
13 Aligning the Board: The Chairman’s Secret 360
Nada K. Kakabadse, Reeves Knyght and Andrew Kakabadse
Index 381
List of Figures
1.1 Towards a new charter for the eco-corporation 21
1.2 Global industrial corporate change – patterns of
innovation for sustainability 24
1.3 Closed trust relational networks of corporations
in society (1900–2012) 27
1.4 Diverse open trust networks of corporations in society
(2012–2050) 33
2.1 Executive pay, 2007 as per the ILLS estimates based
on the annual reports of 15 of the largest corporations
in the respective countries 46
2.2 Percentage of all income obtained by shop floor
employees as a percentage of all employees
(Domestic Operations only) 59
2.3 Ratio of average executive board compensation (R6)
to average and median shop floor employee pay (R1)
(2007–2010) 61
2.4 Company (domestic operations) CGI** & Ratio Rank 6/
Rank 1* (2007–2010) 63
2.5 Investors’ performance measures: CGI, EPS & SP
(2007–2010) 64
2.6 Employee performance measures: CGI, TURN and ABS
(2007–2010) 65
2.7 Financial and accounting performance measures
(Domestic Operations): CGI, SAL, EBITDA (2007–2010) 66
2.8 Financial and accounting performance measures
(Group of Companies): CGI, SAL, EBITDA (2007–2010) 66
4.1 How to make boards work 117
4.2 Selection criteria 119
5.1 Extract from the Walker Report (2009) 141
5.2 Top 5 drivers for an active board of directors in unlisted
companies 143
5.3 (Required) evolution in board evaluation 149
6.1 A congruence model for board effectiveness 154
6.2 Board effectiveness tool 155
vii
viii List of Figures
6.3 A systems framework for board effectiveness assessment 156
6.4 A congruent and best fit board role 157
6.5 Board typologies in function of relationship with
management 161
6.6 Board typologies in function of decision-making role 162
6.7 Reflection questions 167
6.8 Evaluation process of executive management 169
6.9 Conceptual model of the strategy cycle 171
6.10 Aspects of the strategic decision-making process 172
6.11 Reflection questions on strategy 172
6.12 Reflection questions on M&As 173
6.13 A board’s strategic role in practice 175
8.1 The guidance on good decision-making, given by the
Belgian Corporate Governance Code 212
8.2 Effective board decision-making thanks to group
dynamics (2.2) 213
8.3 Benefits of group decision-making 214
8.4 Suggestions for board decision-making 215
8.5 Standard flow of activities in the decision-making process 216
8.6 Extract from the Walker Report regarding pressure for
conformity 217
8.7 A recipe for constructive dissent 220
8.8 Extract from the Walker Report regarding the lack
of challenge 221
8.9 Steps for effective and constructive decision-making 224
8.10 Recipe for managing conflict in the boardroom 225
8.11 Reflection question on board dynamics 228
8.12 The minimum requisite behaviours 230
8.13 Reflection questions on altering board behaviour 232
8.14 Methods for individual director assessment 232
8.15 Attitude elements 233
8.16 Effective non-executive director behaviour 235
8.17 Director types 236
8.18 Flaws in board meetings 239
8.19 Tips for a director regarding board information 242
8.20 Ten key questions on the company’s business 244
8.21 Some business reflection questions 244
8.22 Recommendations for the use of outside board advisors 246
8.23 Extract from the Walker Report regarding director education 247
8.24 Elements of a board (vacancy) profile 258
8.25 Individual and group-oriented selection criteria 259
List of Figures ix
9.1 Extract from the OECD guidelines on board leadership 269
9.2 The role of the chairman 273
9.3 Extract from the Walker Report regarding board leadership 276
9.4 Decision-making styles of chairpersons of BEL-20 and
BEL MID companies 279
9.5 Ten tips and tricks for a non-executive chairman 286
9.6 Selection criteria for the chairman 287
9.7 Extract from the Walker Report regarding time
investment by the board chair 287
10.1 South African chairman performance 307
12.1 Performance: the chairman 352
13.1 Boardroom behaviour 371