Towards More Effective Board Functioning

1. Towards More Effective Board Functioning Fall 2013 - Lausanne Confidential to CEO-CF and CEO-CF members

2. Today’s Flow • Board Functioning & Performance • Readings (why did I provide them) • The Workings of an Effective Board • The results from your recent survey • Key Discoveries and Milestone Commitments

3. Basic Board Functions & Performance • Provide Superior Strategic Guidance Guide & approve company strategy Review & approve strategic plan and operating budgets Approve strategic financial decisions/transactions Set up external relations’ policy • Ensure Accountability Supervise & monitor company progress & performance Supervise on behalf of the shareholders Monitor the main enterprise risks Evaluate the corporate governance’s effectiveness • Build & Maintain Senior Management Team (SMT) Advise & evaluate CEO & SMT Nominate & remunerate CEO/SMT and plan succession Confidential to CEO-CF and CEO-CF members

4. Determinants of Functioning & Performance Board Composition Board Performance Board Systems & Structure • Inputs • Independence (and complimentary) • Diligence (commitment and preparation) • Competence (changes with time) • Flexibility (in schedule and topics) • Ethics... Processes • Board structure (leadership, size, & committees) • Productive meetings (agenda and culture of challenge to the CEO & members of Board) • Succession planning (CEO/SMT growth and replacement) • Financial reporting/risk management (independent audit committee) • Performance evaluation • Overall corporation (strategic & financial) • CEO (the rigor of KPIs) • Board & member (refer to CEO-CF) Confidential to CEO-CF and CEO-CF members

5. Determinants of Functioning & Performance Board Composition Board Performance Corporate Performance Board Systems & Structure Result • Long run financial success Results • Superior strategic guidance • Ensure accountability to all stakeholders • Ensure highly qualified executive team in place Confidential to CEO-CF and CEO-CF members

6. For the next slides, please refer to Nadler Building Better Boards Confidential to CEO-CF and CEO-CF members

7. Level of Engagement • The Passive Board • The Certifying Board • The Engaged Board • The Intervening Board • The Operating Board Confidential to CEO-CF and CEO-CF members

8. 7 Habits of an Effective Board • Own the Strategy Creates ownership and facilitates better/quicker decisions • Build the Top Team Continuum to select, build, and grow their skills • Match Reward to Performance Process to define the KPI • Process to review attainment (or not) Ensure Financial Viability • Value of a concise 1-2 page “Dashboard/Flash Report” Match Risk with Return • 70% of major acquisitions fail to create value Manage Corporate Reputation • Drive Effective Board Processes Value of sub-committees Confidential to CEO-CF and CEO-CF members

9. Does Your BoD Really Work? • Do BoD members individually and collectively understand the changing external picture of the industry? • Are BoD members individually and collectively clear about the company’s strategic direction? • Is the process in place for frequently reviewing the CEO and providing unmistakable and clear feedback? • Is the BoD comfortable that the company has the right CEO? If not, is the BoD actively dealing with the issue? • Does the BoD have a robust process for self-evaluation/improvement? • Does the BoD construction have value in diversity (global diversity, age balance, experience mix (financial, industry, etc.) and perspective? Confidential to CEO-CF and CEO-CF members

10. Management Will… • Lead the BoD in understanding the changing external environment (industry, competition, etc.) • Tell the BoD what it is trying to accomplish in the near and long term • Provide sufficient and efficient information to allow the BoD to assess whether goals are being achieved • Put good and bad news on the table • Create and support an atmosphere conducive to critical discussion • Listen to and learn from the BoD Confidential to CEO-CF and CEO-CF members

11. Board Members Will… • Engage in dialogue on substantive issues to add value • Maintain independent judgment at all times about issues/management • Put forth, without hesitation, any potential conflict of interest • Take initiative to counsel other directors and CEO, as appropriate, inside and outside the Boardroom • Help make BoD dynamics positive and effective • Constructively participate in reaching concurrence on strategy • Use judgment in navigating through the ‘grey’ area of active involvement/micromanaging • Passive role is not welcome • Seek to improve their own performance

12. Improving BoD Functioning & Effectiveness FROM • Reactive Boards • Rectifying the past • Unilateral agendas • Trying to deal with too many must-accomplish items • Constantly dealing with the same issues • Directors with long terms • Too little/much information • Subjective evaluation TO • Proactive Boards • Building the future • Agreed agendas • Focus • Adjusting Board to company & ownership’s challenges/priorities • Directors with shorter terms & selected according to company/ownership’s challenges • The right information • Planning, doing, measuring, & evaluating objectively Confidential to CEO-CF and CEO-CF members

13. Key Discoveries & Milestone Commitments • What are your Key Discoveries from this session (3-5)? • As a result of those Discoveries, what will you do differently with your Board for in 2013? Confidential to CEO-CF and CEO-CF members