Tuesday, May 19, 2009
DeDominic on Panel for Corporate Board Directors at UCLA
UCLA, Anderson School of Business is THE
place this week for executive education for
Corporate Board Directors.
who is ISS (Institutional Shareholders Certified)
spoke from her experience as a CEO,
Investor and Board member on
"Becoming a Risk Intelligent Organization"
Fay Feeney invited Patty DeDominic to speak on the panel
she helped create with Carol Fox of RIMS, Cam Findlay, Sr. Executive and General Counsel of Aon Corporation and Cesca de Luzuriaga, a former Mattel President and on the Board of Office Max on Becoming a Risk Intelligent" Organization.
Their presentations followed welcome and introductions from UCLA Luminaries such al Al Osborne and Carla Hayn.
Prestigous legal minds from both Gipson Dunn and Crutcher LLP and Latham & Watkins presented on Regulatory Changes Impacting the Board Room. The Obama administration and our representatives are busily working to change the way the Securities and Exchange Commission leads and promises plenty more enforcement.
Fay and Carol asked the Audience to identify the key RISKS that boards might encounter and the list was long! It is NOT JUST about Insurance now a days and the whole board and executive team must be aware of some of the things that could tank an otherwise healthy company's financials or it's reputation. Just a few of the Risks mentioned were Fraud, Product Liability, Operations or employee negligence, unstable governments, overeager regulatory enforcement of new legislation which might try to change corporate compensation, stock trades and securities rules. We also talked about the Contingency Plans that must be put into place...about the things board/corporations/executives/owners could easily anticipate and those things which one would have no way of knowing could go wrong. (Like buying triple A bonds of a top financial house only to have it go belly up)
DeDominic spoke briefly about the P's, D's and R's of the boards role in risk minimization.
I feel it is the board responsibility to ensure sustainability of the enterprise and maximize profitable and mission driven performance in the organization.
Reduce exposure to Risk with these two P's Prevent and Promote: Prevent problems before they snowball and Promote best practices though out the whole enterprise.
The two D's are Detect and Discern: by observing the executives, employees and other board members in and out of the boardroom, smart directors can detect irregular or behavior which does not pass the "gut or smell test". The board must ensure there are sufficient controls, e.g., audits, documented policies, exit interviews, procedures and people in place to do things right.
As a board member, you must always balance corporate culture with your Duties of Care as a director. I strive to create a culture of discernment, quest for integrity and enhanced productivity. How much to rock the boat? Or "get along"? Some issues are not work fighting over, yet you must always keep the organization moving towards positive progress without taking unnecessary risks due to fear of reduced productivity or costs of compliance.
This is a true Balancing Skill which I like to show as Progress ) Practicality ) towards Perfection.
The Final R's in the circle of Board member responsibilities are Respond and Resolve.
Board members must ask themselves, Is the Problem Unique or Systemic? If systemic then
it is important to install a regular process to look for, flush out and resolve risks and errors, vulnerable problem areas and potential concerns. The "Unique mistake" or flukes can happen at any time......but you can reduce the potential of problems by doing best practices audits in every area of vulnerability. It's important for the board not to let a Wild Card kill your organization due to not having a way to surface problems while they are still mole hills!
My two favorite types of planning are Contingency and Succession Planning. With good
plans in place most big problems can be reduced and often avoided. I am especially interested
in Succession Planning and have been an advocate for these types of strategic discussions on every board I have ever served on. Almost every month I help my organization clients talk about this important issue and feel it is a Key Component of a Risk Intelligent Organization and told the audience at UCLA Directors Education and Certification Program.
Today I pulled the following off the Harvard blog and I appreciate authors Goldsmith's insight:
Change is in the air.
Is it the smell of spring coming early?
Nope, it’s change, and it’s in the form of succession.
Leaders come and leaders go, whether we plan for it well or not.
How do you as the current leader gauge the readiness of your potential successor?
Obviously, internal succession is a little easier. We have opportunities to observe up-and-comers on the job, so we should know when they’re ready for the next step. But there are pitfalls to watch out for with internal succession:
Don’t assume that a person who excels at her current role will automatically succeed at the next level. Moving up is like going from playing high school basketball to playing college football. New skills will be required.
When evaluating the potential leader, think about the runway. What load (baggage) is the person carrying now? What engines (e.g., brains, judgment, strength) do they possess? What time do you have? Will he be able to take off when you need him?
Doing is the best teacher. It’s also the best evaluator. Give your potential new leader responsibility at that higher level and see how she performs.
Give feedback to the prospective leader that is projective (thinks ahead to the next role) and evaluative/instructive (how far from the target and how to improve).
Commit to coaching, or find someone to do it. Ideally you’ll find a person who has incredible potential, but there will be a need to smooth out the rough edges and ensure transition success.
For more on how you as the current leader can ensure that succession goes smoothly, check out Harvard Business Publishing’s blog post on the topic:
Remember, succession is an intentional process that won’t be successful if you just let it happen naturally. Your legacy is not based on how you left the company on your last day.
Your legacy will be determined by how the organization fared in the decade after you left.
If you have more questions about the UCLA Directors Education and Certification program please leave a comment here and or visit the Office of Executive Education, UCLA Anderson