Quantifying the impacts of renewable portfolio standards (RPS) on utility integrated resource plans (IRP) sounds straight forward—just add more wind, solar, hydro, biomass, etc., to the plan and...
Boardroom Directors: Caught in the Matrix
Building a system to evaluate the leadership's ability to meet corporate goals.
Nominating committees and CEOs need to ask hard, fundamental questions about their own boards and their board's ability to formulate and govern effective and ethical business strategies. One way to know where you stand is to draw a basic matrix chart. Along the top, list the skill sets your board will require to move the company toward its future goals. Down the left-hand column, list each director. Then begin to check the skills that each current director brings to the board. This is a simple way to see if there are gaps in needed areas.
This matrix chart can also apply to fundamental types of skill sets. For instance, are the directors qualified to perform the critical oversight function? Does each director truly understand the business today? Do they have a track record of excellence in his/her own field? Will each be additive to the board culture and make us a more dynamic group given their individual participation?
When you have the appropriate skills in place that reflect the company's long-term strategy, you now need to manage expectations. As a management review process should be in place in the company, so should a formal board review process. However, this concept is not popular.
That being said, a formal board review process helps greatly to formulate a governance strategy that complements established corporate strategy, and it ensures that adherence to both is managed accordingly. Currently, only about 40 percent of North American companies conduct such reviews, and even fewer review individual board members. Further, some companies that conduct reviews do so only as a prelude to removing a particular board member.
In our view, this sells the process short. If your board is willing to be formally and objectively assessed-as every public company board should be-and it is committed to acting on the findings of such a review, good things can come of it. More effective corporate governance, for starters.
Companies evolve, as should the boards that guide them. Without an infusion of new perspectives and skills, boards can become stale and insular. The challenge of this difficult task going forward is knowing when a board member's abilities are no longer relevant or of high value, and then replacing that member with new talent. There are many capable, committed directors whose talents and experience simply no longer meet the needs of the utility served. Their removal is no disgrace-it merely constitutes an acknowledgement that times change and their skill sets may be better suited for a company in a different stage of evolution.
A dynamic, engaged, and well-skilled board is the first step toward better corporate governance. And better corporate governance is the foundation of competitive advantage. Creating this kind of competitive advantage will put competitors in a position of trying to duplicate down the road what your organization is already appraising and implementing today.
Building an Outstanding Board
The governance and accounting scandals that have scarred the business landscape in recent years have had at least one positive effect: Executives,