posted December 02, 2004 11:24 AM         

My own sense about this issue is that if a Board compensates an executive for anything other than Ends or compliance with Executive Limitations, they are sending a mixed message to the Executive. In terms of compensating compliance with Limitations, these most likely should be seen as gates rather than as targets or goals, or not used in compensation at all as that they could be seen as the minimum performance expected.

Awhile back John and I had several exchanges about this subject in this forum, if you search for it by either his name or mine, as either Lynn A. Walker or Lynn Walker - unfortunately I have posted as both - you should be able to find them. They may give you some additional thoughts.

I am unclear how your Board came up with financial targets for your Ends, especially since you are a credit union. This may also be part of the confusion. Organizational financial performance is almost always a Means, and never an Ends.

posted February 12, 2004 08:44 AM         

To your first question of overstepping your policies, I would say that it appears that you have, however it’s not a grievous error. The second question is more difficult, and is so because it reflects the flexibility of Policy Governance. There are also two parts to your second question about whether a Board should be getting involved in these types of decisions. The first part is how the board gets involved, and the second is in what should they get involved.

It is an often common belief that the board can’t speak to anyone other than the executive. This isn’t quite true; the board just needs to speak through the executive. For example, most of the texts on Policy Governance will identify a whole Limitation category on the treatment of staff. All policies within the treatment of staff heading probably refer to people other than the executive, even if it is just referring to all staff rather than a specific individual. Your situation could clearly fall within this category. However, it needs to be reframed into Limitation language and addressed from the mixing bowl perspective. For example, your policy could read, “The executive shall not fail to provide appropriate recognition for all staff for overall organizational performance at the end of each year.” My point isn’t that you should do this, only that it can be done and still be Model consistent.

A question that might arise is whether this is your recognition or the executive’s. It is certainly less of yours than when you made the whole decision, but you haven’t given away everything. You would monitor this policy to assure that it has happened, and the policy assures that it will continue to happen. You just wouldn’t have to decide that everyone got a gift certificate for a turkey.

The second question that you asked was about whether you should get involved in this. The mixing bowl process should help with this, but realize that those bowls are based on values and therefore may have variations that are specific to each board. In other words, this may be a decision that no other board would do but yours would because your values say that it is unacceptable to not do it.

posted February 10, 2004 11:04 PM         

Recently, at one of our Board meetings (just before Christmas), a director thought we should be recognizing the 'staff' (all the employees) for the good work that they do throughout the year. Because they are in a unionized environment, the board could not give them a monetary reward, so it was decided that a gift certificate that could be used towards a turkey for Christmas would be appropriate.

Our "Board-Staff Linkage" policy states that:
The Board's sole connection to the operational Credit Union, it achievements and conduct will be through a chief executive officer, titled General Manager.

One of the points under this policy is:
"The Board will refrain from evaluating, either formally or informally, any staff other than the General Manager."

Do you think that based on our policy, we have over-stepped our bounds as a Board? Do you think that a Board should be getting involved in these types of decisions?

Any guidance that you can give us would be greatly appreciated.

posted August 15, 2000 06:22 PM         

Having eliminated your point about the term "operations" being too restrictive (by agreeing with you!), let me respond to several of your points. I'll put your words in quotation marks, then add my comments:

"CEOs need to first be able to prove that they have a clear market niche in which they can compete successfully. This is a limitation." The board can use the Executive Limitations device to prohibit the CEO from entering a market for which a clear niche is not demonstrated. If the board does this, then of course the CEO must provide the monitoring data that address that criterion, just as he/she must with other criteria.

"They don't have to be the biggest player but CEOs should be able to prove that their organization can return and continue to return the required shareholder value, given the competition and the efficiency of the organization." The best test of whether the company returns shareholder value is whether it returns shareholder value, not whether its market engagements are what you (or I) think are warranted. So I’d not contaminate the shareholder value (an Ends requirement) with the board’s fears about markets. They can each stand on their own, with the company under sufficient board control.

"Market niche and position is more important for a business corporation board than operations. It is not only not more important, it is significantly more important. They (directors) forget to ask the fundamental question, "Is this a viable market for us." It is all about monitoring. CEO's should be able to prove it. If they can't, then they should be entreprenuerial and move resources to where they can provide the greatest return." Your argument is persuasive, but we must remember that the board must act upon its conviction (if it agrees with your argument) enough to put the requirement in writing, otherwise you are arguing that the CEO should be monitored against your preferences rather than against board-stated criteria.

posted August 15, 2000 01:24 PM         

Even though you have limited this discussion topic to operations, I think that it needs to be broader that that. If business corporations define the Ends as shareholder value, then operations is too small of a mixing bowl, given the other topics listed.

Operations in too small because Business corporation CEOs need to first be able to prove that they have a clear market niche in which they can compete successfully. This is a limitation. They don't have to be the biggest player but CEOs should be able to prove that their organization can return and continue to return the required shareholder value, given the competition and the efficiency of the organization.

Market niche and position is more important for a business corporation board than operations. It is not only not more important, it is significantly more important. Limiting the subject to an operation focus allows CEOs to get better at something at which they may never be good enough.

This whole point is a trap into which business corporations fall. They forget to ask the fundemental question, "Is this a viable market for us." It is all about monitoring. CEO's should be able to prove it. If they can't, then they should be entreprenuerial and move resources to where they can provide the greatest return. This in the value-added that Policy Governance(c) adds to business corporations.