Board Governance, Board Development Part 1

Speaker A: Hi everyone. Thank you for joining us here today. We're gonna be talking today about board governance and board development. So in these sessions I like to brainstorm all kinds of questions. I'm going to ask Randall and post to the group. And because we've done a couple of these sessions before, I tried not to uh, uh, bring up the same subjects we talked about last time. Anybody wants to catch up on those recordings, we have them on our website and on YouTube and on Spotify. Um, so anything that comes to mind for you today, please do bring up. Um, and as usual we're going to start with some words from Randall Craig. Our CEO is going to get us started thinking with some ideas, get the conversation going and then we'll flip into questions from you and from me. And as usual, Randall has no idea what we're going to ask him. So it makes it kind of exciting to see what's going to happen. So let's kick us off, we'll have Randall Craig, I'll share a few words about him. Uh, Randall has founded several successful startups. He's held a long time position at a big four consulting firm. He was a senior executive at an American public company, the author of eight books in the speaker hall of fame and master facilitator. He's helped over 100 organizations scale and he works with me at the Brain Trust Professional Institute, helping leadership teams, boards, board development days, executive retreats, leadership, uh, training, executive coaching and helping teams align and row in the same direction. So Randall, where do you want to start today?

Speaker B: I'm going to add a little bit to that bio. It's a little embarrassing listening um, to that over Ronnie, but, but um, I've sat on public boards, I've sat on private company boards, I've sat on not for profit boards and I've also sat on charitable organization boards. So we'll see where the questions come from. And uh, either working with senior executive teams, working with boards, or actually sitting on them myself. Uh, that's kind of the perspective and the context that I'll give any answers. So just to get started, let me frame it. No board is perfect. Every organization's got its history, it's got its future, it's got the, the personalities that are around the table and everything. And there's no shortage of where dysfunction can actually come from. Um, you know, is the board a strategic board or is it an operational board? You know, is there issues with respect to everybody preparing for the meeting or actually putting together prepare the preparation notes in the first place? Um, Are there real conversations that are happening at the board or is it really more of a box checking exercise? You know, how is the board dealing with conflicts of interest or a true understanding about what the individual board members fiduciary responsibilities are, whether, and particularly for public companies, you know, the role of the independent director. Um, how's the board, um, uh, getting ahead of or understanding what some of the trending issues are, you know, um, cyber security, for example, or the whole question of IP and IP protection or dealing with disruptive issues. At one point it was Covid, now it's AI. Um, there'll be something coming up every couple of years. It'll be very different. And how do we deal with the issues of. I don't call it stale directors, but people who've been there in a long time but maybe are not, uh, offering as much value or not doing the full job of that director. Or maybe the board's actually evolved as the organizations matured as well. Um, you know, um, the unengaged director. There's no shortage of where we can actually take this conversation. And uh, as Rania said, the time is yours. Ask away. And, uh, I'm sure Rania's got some questions as well. Um, what I will say though is these problems have been solved before. And if you're involved in a board that has some of these or the many other particular challenges. Um, excuse me. Uh, you know, there, there is help, right? We, and it's not just Google or chat GPT. Uh, but the problem's been solved before. I have not seen a problem that's not being solvable. Solvable. Um, I think we should just start the questions and just see where we go. Rania. Uh, how's that?

Speaker A: Sure. Okay. Uh, you can go anywhere you want. I'm happy to get us, uh, uh, started with some questions. But if anybody here has questions, you can type it in the chat. I can read it out loud. You can just. Come on, Mic. We're pretty informal here. You can put your little zoom hand up. I can get us started. Randall, how much should boards be talking about their own governance and their own professional development? And like, what avenues are there? We talk to people all the time. We're in the board member community. I'm also a board member. And you know, it's hard to move that culture. Hard, hard to get that appetite for change and development happening. Like, how do you, what, what, what formal mechanisms should be put in place to talk about it so you don't feel like you're the squeaky wheel

Speaker B: um, gee, you know, with all the focus on, on, you know, you know, certainly with our work with, with CEOs and anyone in the C suite, there's always this question, you're spending so much time in the business, how much time are you spending on the business? It's the very same thing that's true at the board level, isn't it Rania? Um, I would say, I, I would say this. There's this assumption magically that when somebody sits around the board room for the first time, maybe they've sat in other board roles elsewhere, maybe they're a senior person. So there's this almost assumption that everybody understands, uh, issues of governance and the role of the director and the role of the chair and the relationship between the board and the management team and so on and so forth. And that's an incorrect assumption. I think on one point there's a question of what's the onboarding that's needed for a new director. Right? How do you make sure that they're up to speed not just on the business of the organization, the business of the company, but with respect to what the expectations are, uh, on the actual interplay within the board meeting. Right. Or the expectations with respect to preparation, um, and so on. Um, once everybody's around the table then it's a question of saying, okay, how do we make sure that we have a common understanding and alignment with respect to how we're going to operate? So if we take a look at um, um, um, boards in smaller, small or small organizations, whether it's a charity, not for profit, or whether it's a, um, a ah, private company, that's maybe in the startup phase, um, in those cases the board might actually be very operational, in which case the board in a certain sense also takes board members in a certain sense take on a little bit more operational roles m. To, to assist the enterprise doing whatever it's doing. You know, it doesn't take long however, before a board becomes a little bit more strategic, more focused on policy and risk management and strategic direction and a whole bunch of other things. And obviously when it comes to being a public company, there's a whole other level, uh, of regulatory compliance and so on. So an oversight. So the question of how do you actually make sure that everybody understands what does fiduciary duty actually mean? Okay, at what point and what are the shared norms in terms of how we're going to stick up our hand and say something? Right. And some of that is absolutely the responsibility of the chair. And the chair can just Say, okay, everyone, uh, go away and just do your own education. And between Google and ChatGPT, perhaps we can trust everybody to just increase their level of knowledge. Oh, by the way, find books on Amazon or the public library that you think might be helpful. That's one way of doing it. Another way is to say, well, you know what, maybe, maybe some formal board education, uh, that each individual member should, uh, get, you know, icd, for example, nacd, uh, is one. Uh, both Ronnie and I have got, uh, igp, which is just another, um, uh, board, uh, governance certification, etc. And gee, we can get everybody to get those, ah, particular designations. And they're all good in the sense that they help, um, rise the level. Okay, A third way, which is to say, well, you know what, we actually do want to invest in the board, but it's perhaps more important to have everybody, um, learn the same language and build that shared vocabulary and, and have the conversations in context, etc. In which case it might be, okay, you could, well bring in somebody like, like us and we could do a board development thing where we could actually go through a number of these topics and have that conversation specifically with a particular organization. Whatever way the organization chooses to build, uh, this kind of working, um, on the business kind of thing for the board, it becomes exceptionally important to say, um, let's not just leave it to happenstance, you know, let's make sure that everybody understands what actually fiduciary duty means. Let's just make sure everyone understands. At what point should they actually put up their hand and say there may be a conflict of interest here. And the chair of the board, who obviously has got some, uh, other responsibilities beyond just being a board member, is, gee, how do you handle that kind of situation and who do you owe your duty to, etc. So there's all those dynamics at play. But the real answer is you shouldn't do nothing. Not for profits and charitable boards. It's particularly difficult because you might have a very fast rotation of board members, which means you have to constantly be redoing this kind of education, you know. And by the way, what we would have done 10 years ago would be very different than what we're doing now, which is very different than what we might do in two years ago. Because the issues, uh, change when we

Speaker A: think about the modes that a board needs to operate. They have their fiduciary duty, of course, that's foundational, your strategic input and supporting, you know, the priorities of the organization, but also that generative self reflecting. How are we operating aboard, are we asking the right questions? What questions aren't we asking? And in the board work that we do as board members, but also working with boards with their development days and their training, like we, how, how. We've never seen a board have a board development committee that's planning their own professional development. I'm hopeful, hopeful. The future, the future will, will have this. Um, so let's talk about this board. My, my dream of the board development committee. When it comes to a leadership team, Randall, when we work with a team, it's so important that they be on the same page and be hearing the same message, same vocabulary that they have a lot of clarity and not be running in different directions. Right? When it comes to, uh, the board, the value there is all the different perspectives and you're standing on all these different shoulders. When it comes to board development, you said, you know, send you off on your way, go to Chachi PT, go to YouTube, you know, find your own development. Would you say it's the same push that we want the board members to like when it comes to training and development to be in the same view, or would we want them, you go to this convention, you go to this, this, uh, this summit, you know, collect different data. Where do you see that?

Speaker B: I, I think it's an and Rania, not an or. Honestly, I, I think, you know, different viewpoints, you know, means a lot more robust conversation when it comes to the business, but also, you know, means, um, a more robust conversation with respect to any kind of governance. And, and I, I, I, I also just say that, you know, I've seen some boards where the whole question of board development, the committee, if you want to call it, uh, lives, ah, at the, on, on the chair's, you know, steps. Okay. They're the ones who are responsible for it. Right. Um, they need to make sure that the rubric of who's on the board and where they are in terms of their path of understanding is, is right? So that way collectively, everyone's got it sometimes. I've seen it in the governance committee. Okay, gee, you know, if we're responsible for that, and it all depends on what the terms of reference of any particular committee actually is. But sometimes it's there too, right? And sometimes, by the way, it doesn't, you know, sit anywhere. Okay. Which is, which is a problem. Why? Because the board only gets together so many times a year. It's got a huge agenda. Um, you know, the agenda is one that they must get through because, uh, the organization needs it. Whether it's the shareholders or members or the public or whoever the board is doing this. Uh, whatever the mission is. Um, there's only so much time. I'll also say something else. You know, um, the whole question of saying, you know, what kind of conversation is actually happening around the board table, is it a collegial one where everyone's very deferential and you want to make sure you don't step on anyone's feet? Uh, that's way, way at one. On the other hand, is it. Let's try and figure out how to do the gotcha questions. And we're just going to. We're going to get you, okay? We're going to come up with that obscure question that there's no way that anyone could possibly. And I'd say that both of these approaches of uh, uh, this is a social club kind of atmosphere, and this is the very, almost combative kind of atmosphere. Those things are both not functional. Um, I think the best expression that I've seen and uh, um. Rania, to retreat, you use the language. Um, we want to make sure that there's intellectual friction but no social friction, and to make sure that there's respect around the table, right? So you can have substantive conversations and that there be intellectual friction, but no social friction. You're not trying to say gotcha, right? And to do that, that means the board has got to be truly an expert facilitator, right? The, the chair's got to set the expectations, um, you know, right from the point of, uh, you know, the recruitment of the new board members, the onboarding to the conversations to how they facilitate, to the one on one conversations beforehand to sort of set it up to the conversations afterwards about, hey, you know, when we talked about such and such, you know, and you consider doing it this way or that way, um, not every chair has got all of the, um, time, uh, let alone, um, sometimes ability to do all of that part of it. In which case it's like, okay, maybe what we can do is we can just sort of, um, encapsulate this in that board development day and deal with it in one segment there, okay? Or g. Maybe it's a question of getting some coaching for that chair to say, okay, here's how you can be a better chair of the board, right? And, um, you know, all the parts have got to be working in tandem, but we want a whole bunch of speedboat captains here. We don't want everybody just being a deckhand on the Titanic, okay, And wondering why certain things aren't Going the way they are. Or a deckhand on the Queen Mary, maybe a little bit more successful. Uh, metaphor.

Speaker A: Okay, let me read here from Bethann. Could you speak to in camera sessions and how often?

Speaker B: Oh, yes, I sure can. Uh, so in camera sessions are critically important for a whole bunch of reasons. And I'll take a step back here because sometimes the board is, um, um, oh, gee, the board is captive of management. It's like the management runs the board, okay. And sometimes the board is doing the job of management. Okay. And the in camera session is the only time where the board can actually talk without anybody from the management team present. Right. And so you have a choice, um, as a board chair, you can say, well, you know what, we will only do an in camera session when it's necessary. Time is tight, and we're just going to do it when necessary. I've been parts of boards where, uh, that was the way it worked. And I have to say, um, it was disastrous, just absolutely disastrous. Because from a management's perspective, the CEO's thinking, oh my God, they're doing an in camera session this time. I wonder how I screwed up. Gee, I'm going to hear about it. Oh, I'm wondering if they're going to look to turf me or I'm wondering if they're, you know, whatever it happens to be, right. And as a result of that, there's a huge amount of management stress unnecessary. Okay. And you know, the most mature managers, they know that's just kind of part of, part of it. But when you say that, hey, we're having a special in camera meeting just to, just to talk about you, it's not helpful. What's a better way to do it is to say at the end of every single meeting, there should be an in camera session at the end of every single meeting. Right. It can go, uh, it can go for, for five or 10 minutes, or it can go for an hour, um, depending on really what's on the potential agenda. Right. And so part of the thing that you'd want the chair of the board to do, frankly, is to, to, to do a quick, um, uh, check in with everybody, which they should be doing anyway, uh, well, before the board meeting, saying, is there anything that you want to bring up in the in camera session, uh, part of the meeting. And that way the chair's got some ideas, the chair probably have some ideas of their own. Right. And that way you'll get a sense of just how much time is actually needed for that. It may very well be that some of those conversations might take place before the meeting. So when it comes time for the meeting itself, there could be a more fulsome conversation amongst the uh, members of the board who are not part of the management team. Right. And so um, I think it has to happen every single time after the in camera meeting. It's always a good idea to have the one on one between the chair and the uh, and the uh, CEO or executive director just have a conversation about uh, okay, there's a few things that came up that uh, we need to talk about and they need not always be negative. Right. They could also be positive. They could also be some different perspectives. Uh, sometimes what happens in in camera meetings and is that a topic from the regular board meeting, um, leaks into it. Somebody says, you know something, earlier we talked about such and such. I had another idea. You know, there needs to be some soaking in time and gee, it turns out that the in camera meeting happens afterwards. Right. Um, uh, so you know, as the chair of the board, you want to report back to the CEO and say, by the way, there's some more conversations about this or that.

Speaker A: Right.

Speaker B: But um, every single meeting, um, how often should the in camera sessions happen? Um, there is sometimes where you want to actually have a specific in camera meeting that's not attached to the regular board meeting because there may be, maybe there's something more substantial that needs to be discussed and you do not want the management to know that you, that you're actually having a meeting itself. Right. And so, so this is uh, this is something you do. You know, I was involved in one organization, uh, we had to, to make a change in the CEO. Right. Uh, that needed more than just the amount of time attached to the end of a regular board meeting. That needed a uh, significant amount of time just to, to go through the planning and, and gain consensus or not about whether a change needed to be made. So sometimes you need to have that kind of uh, uh, that kind of meaning, uh, which is in camera that they don't know about. Right. So um. Bethann. Okay, um, interesting perspective.

Speaker A: I'll flip into uh, something that you talk about in terms of sharing what we share with our clients. You talk about how to use AI to as the CEO to prepare for a board meeting. You suggested that if they made an avatar using ChatGPT or other tools, you know, who's going to be your, your cfo, uh, advisor, who's the marketing advisor, who's the accountant advisor, you know, create a Persona for them and say, well, here's what I Want to present. Here's my materials. You know, what are they going to, what are they going to ask me? What, you know, poke holes so they can, you know, straighten themselves and, you know, get that. First, be more prepared for the board meeting. Right? So talk to me like, what should board prep look like for a board member? If that's the advice you're giving to the CEOs you're working with, should the, should the, should the CE, should the board members, how should they be leveraging AI to prepare themselves best?

Speaker B: That's a good one. First, uh, of all, what I'll say is that if you're using AI as a board member, you need to make sure that you're using an AI that does not leak anything that you add into the AI, including your prompts and your AI conversation back. It's got to be something that is completely watertight where nothing is being leaked, uh, to the AI provider. So if you're using a free, if you're using a free plan, for example, this does not qualify. Okay? If, if you haven't changed your settings in a paid plan to make sure you are not sharing any of the data, any of the prompts, any of the, um, documents you upload, um, you know, you've just got to check on that. So that, that's number one. Number two is, is this, um, there's no reason why you can't use AI to supplement what you're actually doing. I'll give you a very specific example. But, um, uh, an analogy that I absolutely love is if you think of AI as the college intern, can you imagine the college intern sitting in your spot as a director around the board and them saying whatever they happen to say? You're thinking, oh, my God, um, that's just not mature. I'm not talking about childish or anything. It's just not a mature way of looking at a particular issue. Right? Or, gee, they have no idea of the background. Why would that intern say this or say that? Uh, on the other hand, there's no reason why it can't be used to, uh, power you in terms of the issues under discussion. So, for example, if you're talking about a go to market strategy and there's, uh, a whole plan that the organization has put in place, why can't you put it in there and, and start asking some questions about it? So you load it up into chat, GPT or cloud or one of the others, and then you set, uh, some Personas, okay, um, around the table. Uh, there's an expert in law with this kind of background, what kind of questions would they ask? There's also somebody who's a marketing strategist. What kind of questions would they ask? Who's a finance person? Here's their background, what kind of questions they would ask. Okay. And once you've sort of got this, this, this board, this virtual board, then you could say, okay, now look at this. Go to Market document and, uh, assess it. Does it? And then you ask some very specific questions. Are there other ways of doing it? Are there other organizations that have done it in a different way? Um, what are the biggest risks in this? How do you mitigate the risk, et cetera. And the output from there, in my view, is the raw material to chat. Y o u so that you can then figure out, okay, what am I going to say around the boardroom table, or perhaps as a result of that analysis that you might have done. Excuse me. You can then call up the person beforehand, the person on the management team, say, I've got some questions. I'm wondering if we could, we can grab an hour on the phone or on Zoom or Teams and just have this conversation. I just want to understand a little bit better. So once you've asked all those clarifying questions before the board meeting, you got a much better understanding of it when it comes to the conversation around the board table. Okay. Um, you're not starting from zero. You've, you've got all the, the, the analytical work that the, uh, chat, GPT or Claude or whoever actually, uh, gave you. You've had a conversation with somebody on the management team so that you really have an understanding. You've played around with a bunch of ideas. Now you're prepped to actually have a conversation with your peers around the board table. Right? So, so that's one way. I'll give you another idea. Okay. You sit on the audit committee or responsible for, um, reviewing the financials. And, um, in a public company, for example, there's the mdna, the management discussion Analysis, which is many, many pages of the management's views of what's happening. And then you've got the financial statements with all of the notes. And there might be 20, 40, 20, 30 pages of both of these documents. Um, and so the question is, are there any discrepancies? So you might load them both into, um, uh, an AI and say, are there discrepancies between them? That's called level one. Okay. Level two would be this, uh, reviewing both of these documents. Are there any risks or issues that have not been identified in the mdna? Um, are there any. Like, you just ask a whole bunch of those kinds of questions, you know? Or if you're not so sure what questions to ask, you could say as a. As a. An auditor and a CPA with deep experience in public companies or whatever the sector you're in, um, um, uh, what questions would you ask in order to do an analysis of these financial statements? And so find this is what the questions are, and then you say, okay, now apply it to these documents. Um, how did the management team do? Now listen, remember, it's still a college intern that's actually doing this work for you. So now that you've sort of got a little bit of pointer about where to look or what might be issues, then you can actually say, okay, now what does it really mean? And that brings the conversation that you have in your. In the audit committee or around the boardroom table, uh, in a different sense, there's no way you're, uh, not doing your duty if you're delegating it to an AI. What you are doing, though, is you're saying, okay, how might this deepen the analysis that I need to do in order to do my preparation so I could fulfill my duty as a director?

Speaker A: I love it. Any other questions specifically about AI? Oh, he's sitting in the chat here. Okay, I have a question. Um, what would you say? We've got a couple coming in. What would you say are the top five or more components of an effective board meeting information package, including timing and distribution?

Speaker B: I'm sure all of you listening to this right now are thinking about, uh, getting that information book, like, two days before a board meeting. And there's gazillion documents you got to read, let alone actually analyze, uh, and possibly, by the way, call somebody on the management team to explain or to work through something that maybe didn't understand, etc. And oh, my God, that is so bad. Sitting on the other side of the table, I have to tell you, putting together the deck, the information book, all of that data for the board members is a serious, serious amount of work for the management team. Serious amount of work. And getting it out the door is exceptionally difficult. But guess what? It's also part of the job, right? So I think the number one, number one is the question of saying, okay, our standard here is we need. We need a week, okay, to get all the information to allow people to have it. You do two weeks, that's fine. But, you know, you want to as much information as close to the board meeting as possible. So. So I Like the, the one weekend. So that's my recommendation to clients and also for the boards that I sit on a run. Um, so that's number one. Um, uh, top five components of an effective board meeting, including information package. So the information package needs to have enough there that people can actually understand what's going on. Sometimes management does not remember that the board only sort of swoops in every two months or every quarter or sometimes for earlier, uh, stage organizations once a month. And the rest of the time they're kind of doing their own day jobs. So they might not be up to date on all the details. There's got to be enough in there to remind them to bring them up to speed and to focus their time on the stuff that uh, needs to be done. Okay. Um, uh, the components, well obviously the financials, obviously, um, you know, if there's any particular, uh, um, there's a strategic plan with particular goals, there's got to be progress against there. I like the idea, okay, of not using the board time just as a um, presentation. But really the assumption is everyone's gone through it in greater detail and the conversation is about what was in the actual uh, documents as opposed to actually um, uh, going through them and asking um, at best clarifying questions. So hopefully that's happened before. Um, uh, sometimes if you've got uh, there's a bunch of uh, portals that you can hire or perhaps you just use something as simple as Google Drive or Dropbox etc. As a way to actually physically do the distribution. In the olden days you get this courier package with the binder with a whole bunch of tabs. Okay, Um, I have to tell you, sitting on a bunch of boards right now, um, it's frustrating to get a, ah, zillion different PDFs and PowerPoints and everything. Um, it's, it's much better if it's kind of all in one, um, rather than just following a gazillion links. But I just don't see an easy way around that other than saying, okay, let's just put in a portal. Um, I think if you look at the, if you look at the um, uh, if you look at the management team that you've actually got and say each of these people are responsible for a particular area. So it's very good to allow um, those people to have actually a little bit of agenda time to present some of the information. So it's not just the CEO actually doing the presentations, but it's also somebody else. It means the board can ask um, questions uh, directly, boards can get a, a little bit more confidence in the particular people on the team. So I think understanding who is actually going to be coming and why is particularly important.

Speaker A: Can I share an idea, Randall? I'll ask your. Um, I've been on board meetings where in passing the executive director or uh, someone will say, oh, well, such and such organization or so and so from here, you know, reached out, uh, or offered this sort of partnership or collaboration and, and they just sort of like. With that we're going to pause right here. This part 1 of 2 on board governance and board development. We're going to come back with more in part two, but if anything we talked about so far resonates with you, if you're getting any ideas about what kind of board development you would want for your board that we can help you with to reach out, we'd be happy to have a conversation and share resources. You can contact us at request, Randall craig.com or book a call anytime. Randallcraig.net 30 and we'll see you back for more in part two and see you on LinkedIn.