Governance Planning: A Holistic Roadmap for Better Board Performance

What is Governance Planning and why is it important? Let’s look at a Tale of Two Boards:

The Red Board

Nom & Gov Committee members of the Red Board knew they had a lot on their plate for the year: Finding and appointing a new director, designing a formal process for designating committee chairs, and codifying new ESG oversight responsibilities.

Then suddenly it was mid-year: A long-standing board member facing a family health concern stepped down early, while a challenging strategic decision for the company required a great deal of the board’s time and attention. By late summer, committee members were calling former colleagues and putting the word out that they needed to find two new directors, more or less immediately; they also opted to rely on management’s guidance on ESG issues rather than starting with an independent survey of the issues as originally envisioned.

Committee members managed to take care of the essentials, albeit in a harried way that left some feeling that they might have found better solutions had they had more time. They realized that, in focusing on urgent matters, some important tasks got bumped so far down the list that they would have to wait for next year.

Rethinking the committee chair nomination process, which was directly tied to the broader vision of developing a robust board succession plan, was one of the things that didn’t get done. It wasn’t a crisis-level issue, but it did mean that a board member whose skills could have been very valuable to the Audit Committee was appointed to chair the Compensation Committee and the Nom & Gov Committee had to rework its board member expertise matrix after it had already begun the recruiting process.

The Green Board

Meanwhile, the Nom & Gov Committee of the Green Board had a similarly full calendar with two new directors to appoint; a revised committee rotation schedule to implement; a new corporate sustainability directive for the committee to oversee; and a routine board performance assessment and director evaluations for those individuals up for re-election.

The Green Board NGC mapped out all its activities at the start of the year. The committee’s chair pushed to stay on track, even as the board was called on to guide the CEO through the unexpected departure of the CFO and the emergence of a new technology that threatened to disrupt a lucrative product line.

By mid-year, the NGC, with help from outside search partners, identified one new director and was interviewing candidates for a second director from a carefully calibrated shortlist; it had completed a board performance assessment and begun addressing a communications issue that had been identified in the resulting report. The committee had also scheduled individual director evaluations for those up for re-election for late fall so as not to conflict with the upcoming board retreat nor the Comp Committee’s plans for a CEO Review and calendared all other initiatives.

Committee members had been busy but had been able to complete their goals in an intentional way that gave them confidence; their governance house was in good order. When the inevitable surprise challenges arose, they would be prepared to focus on them without losing a beat.

Do either of these boards look familiar? If your current board seems more Red than Green, it might be time to think differently about how your board or committee approaches its tasks. What’s the difference between the two outcomes? It comes down to one valuable exercise: Governance Planning.

What is Governance Planning?

Governance Planning is an intentional approach to identifying and mapping out the entire year’s governance activities, by Committee and for the full board.

Often, the Nom & Gov Committee takes a leadership role in Governance Planning, bringing thoughtful consideration to the full suite of governance issues the board needs to address. While the NGC doesn’t schedule the work of other committees, it may spearhead a process of scheduling activities that involve the full board and/or work with Audit, Compensation, and other committees to avoid situations in which members who sit on more than one committee find themselves unnecessarily overloaded at different junctures.

Thinking holistically about board governance

Well-run boards look comprehensively and holistically at everything they intend to accomplish in a year and make a thoughtful plan that leaves nothing out. From a scheduling perspective, a well-crafted Governance Plan:

• Eliminates unnecessary scheduling conflicts while taking into account disclosure deadlines, meeting schedules, distribution of workload across the calendar, and more
• Prevents a mad dash at year-end or when other committee deliverables are due
• Ensures that as urgent matters inevitably arise, the board doesn’t lose its focus on significant governance matters that also need attention
• Provides peace of mind: What gets scheduled, gets done!

But true Governance Planning goes beyond the calendar. The first time through the Governance Planning process provides an opportunity for the Nom & Gov Committee to step back and think about its mandate and processes, then identify all the governance activities it sees as valuable and best practices for each. This can set the stage for incorporating improvements to current processes or considering additional initiatives for the future. Governance Planning is how boards become strategic about providing great governance.

Through Governance Planning, the board can identify:

• Processes in need of an update or improvement
• Areas of expertise needed, so you can craft a plan to build or acquire that knowledge on the board or hire outside experts
• Evolving board responsibilities that may lead to conversations around new committee structures or board composition needs

For example, taking a closer look at the full spectrum of governance responsibilities while pursuing Governance Planning might get a board thinking about both Board and Management Succession Planning. Do we have the right processes in place? Are we following best practices? Which directors have expertise in this area or where can we find helpful resources?

Another board might use this as an opportunity to look at how it monitors ESG oversight. How do we know we’re considering all the right issues? Who on the board has relevant experience? Should ESG oversight be relegated to one committee, or should different issues be overseen by different committees or the full board?

Governance Planning and the Red Board

Let’s go back to the Red Board. If the board adopted Governance Planning, it would start the year prioritizing objectives, mapping them out, and determining what resources they might need to keep on track: new processes, technology, third-party experts, additional board talent or something else.

This exercise would not only help the board accomplish its objectives in a timely fashion, but it would also likely lead to better outcomes: An ideal new director because of a robust search process; more confidence in ESG oversight after devising a thoughtful and deliberate approach to identifying and monitoring specific issues; a transparent, intentional process for appointing committee chairs as part of a robust board succession plan. Having more governance structure in place would also give the board more headroom to deal with the urgent, unexpected matters that crop up throughout the year.

Finally, the board would likely expand its perspective on what good governance looks like, enabling it to do a better job for the organization. A more thoughtful approach to initiatives involving other board members–and better advance communication–would instill greater confidence, trust, and alignment across the board. And maybe best of all for those on the Nom & Gov committee, they could avoid the stress of the mad scramble and rest assured that they are contributing at the highest level.

[Photo by Brand & People on Unsplash]