1、GovernanceMetrics International,Effective Governance,CorporateCulture,MeaningfulMetrics,Political Agendas(Spitzer),Research Independence (Mandated),Pensions Fund (Activism),D being driven by the productivity of assets CFROI measures cash flow; real return on invested capital N measures cost of capit

2、al; with company specific differentiators,Driver (EPS Growth),Value (PE Ratio),Driver (NCFR0I),Value (Q Ratio),R2 = 0.74,R2 = 0.31, A.T. Kearney and/or Callard Research Proprietary Information,Metrics exist which link Governance to shareholder value,Is this good enough?,Results of A.T. Kearney surve

3、y of over 410 Directors,What Corporate Directors are saying,Critical business issues that need attention,Degree of effectiveness - Self evaluation Survey Results,16%,15%,21%,24%,43%,49%,Probing concerns,Leadership developmentSuccession planning,Guiding strategy,Monitoring risks,Monitoring financials

4、,Performance warnings,A more proactive board culture tops the list of actions to improve effectiveness,What will improve Board effectiveness,Shape meeting agendas,MoreprobingBoard culture,Mgmtsupportfor probing,Process toevaluateBoard,Improvecaliber of individual directors,SeparateCEO& Chair,LeadDir

5、ector,More proactive board culture,Although 55% of the directors were very satisfied with their board structure, most see opportunities to improve,What changes should be made to your Board structure?,MoreQualifiedDirectors,MoreDiverse,MoreIndependent,Represents All Constituents,Representing sharehol

6、ders across broader businessissues requires diverse skills and perspectives,Boards also need to reinvent how they operate,Lack of tools and processesproviding early warning signs,Amount and type of company information,Board culture,What are the impediments to monitoring business performance?(Top 3 c

7、oncerns),Willingness of directorsto challenge the CEO,Directors do not haveenough time,Insufficient operatingmanagement discussions,Lack capabilities withinBoard of Directors,.And recognize they need more objective sources of information,What tools does your Board use to monitor performance?,Industr

8、y Reports Analysts Customers On-site Visits Consultants Investors,Management bias?,Board evaluations can focus improvement efforts but may also need more independent views,85% of boards evaluate annually 55% agreed in 2002 that regular, independent, third-party reviews should be executed but in 2004

9、, only 24% of Boards have them,Does your Board have regular, independent, third-party reviews of your governance practices?,Yes 24%,No 74%,NA 1%,“Board evaluations have been a catalyst for how the board gets better The link to company performance is spectacular” S&P 500 Director,In our judgment, Boa

10、rds need to take action in five critical areas,Monitor corporate performance with forward- looking and non-financial indicators,Rebalance focus on compliance and current performance to include more implications of forward-looking indicators Expand from financials to broader business view Operations

11、Pipeline Competitive trends Market shifts Customer satisfaction Brand value Technology Shifts Stakeholder concerns Increase board access to information, e.g., digital dashboards or web-based reporting (vs. “the package”),1,Represent the shareholder Monitor the long-term health of the business,Streng

12、then business strategy with diverse perspectives and ongoing attention,Shift the board role from review to “debate” bringing out diverse perspectives Expand oversight role from annual approval to include ongoing verification and support for the CEO Is the company executing effectively? Are different

13、 leadership skills needed? Is the strategy still appropriate? Consider new ways to evaluate complex strategies,2,Assist management in developing a successful, executable strategy,Improve risk monitoring and mitigation,Ensure management has effective monitoring and mitigation plansand ability to resp

14、ond effectively,Beyond Financial Risks:,Business Interruption,Disruptive Technology,Customer Demand Changes,Reputation,Operating Obsolescence,Environmental Risks,Product Failure,Competitive Challenge,New Regulation,Supply Chain Interruption,Lawsuits,Inflation / Cost Increases,Partner Failure,3,Shift

15、 from succession policy to successor readiness and broader talent development,Be accountable for the top team not just the CEO Enact “field” observation / board interaction Drive broader talent management (CEO led) as critical to sustain shareholder value Not a list Beyond “replacement” planning Com

16、petencies for key future positions,Identify Talent,DevelopTalent,DeployTalent,4,Foster a constructively challenging culture, engaging as an owner vs. a reviewer,Set the agenda Challenge assumptions and monitor progress Ensure all voices heard formal and informal exchanges Across the board Shareholde

17、rs / stakeholders Take advantage of todays technology “Right-time” communication and open exchanges Information access Alternate self-reviews and independent reviews,5,We surveyed Directors representing 410 large corporate boards companies at the beginning of 2004 and compared this to 2002 findings,

18、38% global and 34% North America only 25 industry sectors 65% 6 years on Board 82% Male 77% Working 33% with same Industry experience Average on 2.3 boards,Size of Company Represented (Revenue),% of Directors,Boards are making structural changesbut at a cautious rate,Does your company have separate CEO and Chair positions?,Yes,No,60% of the 400 Boards represented in this surveyhave implemented an independent Lead Director,We thought through the advantages of going each way and decided that based on our industry and the alignment needed the combined role