The Board
of Directors (BoD)
The Board
of Directors (BoD) is responsible for strategic
decisions.
Strategic
decisions influence the Working Capital and
the Cash.
Strategic
decisions |
Operating
decisions |
|
|
|
Duties :
Represent shareholders acting
on their behalf and in their interest (dividend,
increase in share value).
Supply clear, detailed and transparent public
information, so that shareholders may take decisions
with full
knowledge of facts.
Approve the company's mission statement, objectives,
strategies and means.
Select, elect and assess the CEO.
Plan the CEO's succession.
Control the company's management (CEO and senior
executives)
Define both the ethical values and corporate
liability of the company :
Rules for an efficient
" Corporate Governance " :
- The Chairman of the BoD and
the CEO should not be one and the same person.
- Skills in the following areas
should be represented among Board members
: marketing, finance, human resources, strategy,
client-orientation.
- At least 2 members specialized
in the area in which the company is operating.
- 1 staff representative with
a good hold on practical aspects of the company's
operation.
- Beware of members coming from
political circles. This may be detrimental
to the company's image.
- At least one meeting a month.
- Independent members who do
not belong to a determined clan, with no specific
connection with partners (suppliers, banks,
consultants, etc).
- Refuse co-optation.
- Refuse to have directors holding
more than two offices.
- Members able to give evidence
of their availability.
- Elected individually through
a secret ballot procedure by the General Assembly,
after informing the shareholders of their
qualifications, other terms of office and
executive positions.
- Avoid suggestions putting
forward groups of directors as a whole.
- Limit the number of directors
to a maximum of 9.
- No more than 2 offices.
- Secret ballot procedures within
the Board.
- Members training : basic training
plus 2 seminars a year in order to give them
an adequate training to carry out their activities
(pension funds cannot wait for them to be
aware of the company's day-to-day business).
- Expel members who do not attend
more than two consecutive Board meetings.
- Depending on requirements,
appoint external and independent "Advisory
boards".
A few interesting and
final comments
In Switzerland, 80% of major companies
have on average Boards of Directors consisting
of 8 members. When shareholding is extremely
fragmented, it is possible to go up to 10 members
or more, 22 being the maximum.
Why do we find the same people
in all major Swiss companies ?
Over 80 % of the recruiting of directors is
achieved through co-optation. It is fairly unusual
to have suggestions being put forward by shareholders.
On a world scale, the average
is 8 directors.
Holding the offices of both CEO
and BoD Chairman : in the USA, 80 % of all companies
are run according to this pattern. However,
when both offices are held by the same person,
the other Board members are independent of the
company's management.
In Great Britain, this same figure
only amounts to 20 %.
© ECOFINE.COM, Bernard Jaquier, Professor
in Economics & Finance, Lausanne, Switzerland, 2018