1.
Some Impressionistic takes from the book of D
Dr. Ram Charan
“Boards that Deliver”
by Ramki
ramaddster@gmail.com

2.
About the Author
 Ram Charan is a world-renowned business advisor, author and speaker
who has spent the past 35 years working with many top companies, CEOs,
and boards of our time. In his work with companies including GE,
MeadWestvaco, Bank of America, DuPont, Novartis, EMC, 3M, Verizon,
Aditya Birla Group, Tata Group, GMR, Max Group, Yildiz Holdings, and
Grupo RBS, he is known for cutting through the complexity of running a
business in today’s fast changing environment to uncover the core business
problem.
 His real-world solutions, shared with millions through his books and articles
in top business publications, have been praised for being practical, relevant
and highly actionable — the kind of advice you can use Monday morning.
 Ram has authored over 25 books since 1998 that have sold over 2 million
copies in more than a dozen languages. Three of his books were Wall Street
Journal bestsellers, including Execution, which he coauthored with former
Honeywell CEO Larry Bossidy in 2002, which spent more than 150 weeks
on the New York Times bestseller list. He also has written for publications
including Harvard Business Review, Fortune, BusinessWeek, Time, Chief
Executive and USA TODAY.

3.
Prelude- 1/2
 A book that brings the vision of truly good governance down to earth.
Ram Charan, expert in corporate governance and best-selling author,
packs this book with useful tools and techniques to take boards and
their companies to a higher level of performance.
 Charan puts his finger on a growing problem for boards: the disconnect
between directors' efforts and their results. The added time and
attention boards invest is not translating into better governance that is,
governance that adds value to the business.
 Boards That Deliver gets beyond the rhetoric of corporate governance
reform. It captures the tried-and-true practices used by high-
performance boards. In contrast to experts who base prescriptions on
number-crunching exercises,
 Charan identifies the real problems that drain directors' time and
suppress their best judgments and explains clearly and succinctly how
boards can solve those problems. These battle-tested solutions help
boards achieve what rules and regulations alone cannot to get
succession right, refine a winning strategy, and design a rational CEO
compensation package.

4.
Why the old style “ Ceremonial Board” is outdated
How to create a “ Progressive board”
How to select, compensate and oversee a CEO
What areas the board must monitor.
Why the chair and CEO roles should separate
Prelude- 2/2

5.
How Boards are Changing ?
 After the notorious Enron, World Com, Tyco and Adelphia
scandals, and the enactment of the Sarbanes-Oxley Act and other
reforms, we would expect modern boards to be more independent.
 However, in the wake of many years of dominance by CEOs and
combined CEO-chairs, most boards were not immediately
equipped to take charge.
 Whole Board members try to provide responsible Corporate
governance, their individual levels of readiness, experience, talent
and ability to collaborate inevitably vary.
 Boards tend to pass through the following stages as they evolve
from old-fashioned CEO-driven governance to contemporary
active oversight.

6.
Ceremonial Board
 The first type of board is the Ceremonial Board.
 This is often described as a “good old boys” board.
 All the board members were friends or former colleagues of the
CEO and were there more to rubber stamp the CEO’s strategy
and business plan.
 This is often the case in private companies, especially when the
board is comprised of advisors that do professional work for the
company such as a banker, lawyer or CPA.
 This type of a board brings little value to the company.

7.
Liberated Board
 The Second is a Liberated Board.
 This is a more involved board in the true governance of the
company.
 A Liberated Board is a truly independent group of directors or
advisors.
 This means that there are no ties to the company and the
directors vote and act independently.
 This can, at first, be very distracting to the CEO and the
company trying to satisfy a variety of independent directors or
advisors

8.
Progressive Board
 The third and final one is the Progressive Board.
 These boards come together as a team but maintain their
independent viewpoint.
 A telltale sign of a Progressive Board is one that is very diverse.
This includes age, gender, race, geography, experience, etc.
 Progressive Boards work closely with the CEO and the senior
management team inside and outside the boardroom. The
board members best represent the stakeholders (ownership,
employees, customers, suppliers, communities, etc.)
 A Progressive Board is within reach of any company when the
benefits achieved help keep the company going steady during
stormy times and blossoming in good times

9.
Building a Progressive Board
 Board Progressive foster 3 primary characteristics
 Group Dynamics – The board cooperates with Managements. Members
share a high level of mutual respect & achieve constructive, positive results
 Information architecture – The board has access to the current data it
needs.
 Focus on substantive issues- The board actively participates in running the
company rather than being consumed by minutiae and procedural details.
The Board & CEO create a 12- month agenda, and the board focuses on
specific oversight & value creation rather than just holding the CEO
accountable for performance.
 A board’s effectiveness strongly correlates to its members’ individual talents &
their teamwork.
 Everyone must feel free to contribute to the discussion & every voice must be
heard.
 Each member of the board must understand the rules of engagement, and the
expected norms for behavior & productive contributions.
 As the members get to know each other & see how their talents are distributed,
formal and informal leadership roles will fall naturally to certain members.

10.
Building a Progressive Board
 Some boards meet in executive sessions to discuss & investigate
issues. As a member , be aware that your Board should handle these
sessions carefully, so they do not undermine the CEO or create a
difficult working relationship between the board and executive
management.
 Boards should evaluate their own effectiveness & act on their finding.
When a board determines that one or more of its members is a drain
on the panel or the company, it must manage these members, or
remove them as the situation allows.
 No matter how well your board members collaborate, you need the
right information to fuel discussions and support decisions can lead to
costly mistakes.
 Board should balance information that describes what has already
happened (i.e. financial reports) against information that looks ahead
( i.e. budgets, forecasts and projections)

11.
Building a Progressive Board
 Reports with raw data are much more useful when accompanied by relevant
metrics.
 Board members are usually part of day-to-day operations, so they need to
see at a glance how the numbers relate to performance & projections, and
how they affect present & future operations.
 Analysts usually design such reports, but board members should feel free to
ask questions, request changes, and ask for specific information about their
concern & responsibilities.
 While many reports are scheduled , others, such as survey for specific
purposes or special committee findings, are generated irregularly.
 Manage such reports with care so that their cost does not grow beyond their
worth & the information is used while it is still timely.
 Board should understand the role of strategy and select CEO who can
manage the company in the present & fulfill its future promise.
 Viewing the company in the context of its market space, determine if the
CEO is leading it in a way that exploits opportunities & manages threats.
 Of course, the firm’s financial health is pivotal. The board must insist on
getting bad news early, without any spin.

12.
Compensating & Containing the CEO
 If you doubt that having the right CEO matters, just think about a few high-
profile failures, such as Sunbeam, K-mart or Apple consider major firms that
were on the ropes until the right CEO revived them, including such success
stories at Steve Jobs’ return to Apple and John Akers’ appointment at IBM
 Board must define its CEO selection criteria rigorously, and create
relationships with likely internal & external candidates before the need to
hire arises.
 To build future leaders, the board should foster the development of strong
management below the CEO level.
 Dig down into the firm’s new positions. The state of your corporation’s
leadership development is an important indicator of its cultural & competitive
strength.
 Astute boards notice these indicators & oversee improvements before the
need to promote new leaders becomes acute.
 Present leaders greatly influence firm’s future , so the board must know if the
CEO is managing the leadership pool, developing talent & retaining key
people

13.
Compensating & Containing the CEO
 CEO compensation goes far beyond being just a large pile of cash. It has a
profound impact on the Chief Executive’s incentives to manage a certain
way.
 The CEO needs to be fairly, but not outlandishly, compensated on a scale
that is linked to shareholder benefits, and the company’s success.
 To determine the CEO’s compensation, first decide what company needs an
dhow it should run.
 What is its winning strategy ? How should the board allocate its resources?
Who benefits from short-term gains ? Should the CEO get the lion’s share ?
What is the proper debt level ? How leveraged should the firm be and what
risks does that leverage create?
 The board should give the CEO multiple objectives that reflect a balance
among the company/s needs, rather than allowing the CEO to manipulate
goals for an outsized payday.
 Be cautious about planning a huge CEO severance package, because it can
create a complex moral hazard, a situation in hard times in which the CEO is
better off being fired than trying to fix the company.
 How much damage would a CEO willingly inflict on a firm to collect a big
severance package ?

14.
Company Performance Challenges
 Once a new CEO is in place, the board must support him or her during a
minimally disruptive transition period, review his or her performance, and
provide ongoing feedback.
 A board does not define or implement strategy, though your board must
know it, ask questions about it and offer input.
 Certainly your board must understand how the CEO's proposed strategy
will earn a profit and must settle upon metrics for monitoring its progress.
 By doing its own careful analysis and asking questions, the board can
help avoid expensive mistakes. Before the company launches a strategy,
determine if available resources can support it.
 Strategic discussions too often focus only on internal factors, but many of
a company's hurdles are external. Board members should bring their
experience to bear on how external factors may support or undermine
strategic initiatives.
 Due diligence may require special sessions and subcommittees that
report back to the board. Do not let such fact-gathering slide into
becoming antagonistic toward the CEO, and undermining his or her
confidence and authority.

15.
 The board must monitor the company's financial health, performance
and risk management. A company's fiscal wellbeing relies in many
ways on its liquidity.
 Your board must deeply understand the cash situation and how
various scenarios affect it. How well can the firm respond to a crisis?
While financial leverage can improve the bottom line in good times, it
also can magnify problems in difficult times.
 When a company has borrowed heavily to finance large new
initiatives, it can face a crisis if the assumed growth fails to
materialize. The board should examine financial statements
thoroughly and consider them under various scenarios.
 Careful analysis can help your board evaluate operating performance
and market share.
 Does the company's growth derive from solid, profitable sales or is it
discounting?
 Do profits stem from aging products with falling market shares or are
new, popular products coming on line?
Company Performance Challenges

16.
 Most companies face a variety of risks involving market position,
products and services. This includes legal and financial risk and
liability. Your board must analyze every risk that can materially affect
the company, know how to mitigate it and decide how much risk to
take on to gain market rewards. Most boards form a risk committee
that reports to the full body.
 The board needs a flexible agenda for reviewing these concerns.
Twice a year assess financial progress and results, as well as
leadership development. Review CEO compensation, corporate risks,
strategy and crisis management at least annually, and more as
needed
Company Performance Challenges

17.
Positive Energy & Direction
 For a time, high-profile CEOs also served as board chairs. This dual role
fostered the growth of ceremonial boards, because it was all but
impossible for the board to oversee corporate management and hire the
CEO. Was the chair going to dismiss him or herself?
 With the growth of liberated and progressive boards, companies are
hiring directors to provide specific expertise, such as accounting and
marketing. Just as members of your board should build a pipeline of
prospective CEOs, they also should be on the lookout for solid board
member candidates to call upon as veteran directors' terms expire.
 Even as companies separate the role of board chair and CEO, the CEO
should continue to be the corporation's public face. Using the chair in this
role diminishes the CEO and creates confusion about the company's
leadership. The chair should govern the board, and let the board do its
job in overseeing the company.
 While your board's primary obligation is to its shareholders, in reality
shareholders of widely held public companies rarely speak with a unified
voice. They usually form groups and factions with specific interests.

18.
Positive Energy & Direction
 The board must monitor the company's financial health, performance
and risk management. A company's fiscal wellbeing relies in many
ways on its liquidity.
 Board must deeply understand the cash situation and how various
scenarios affect it. How well can the firm respond to a crisis? While
financial leverage can improve the bottom line in good times, it also
can magnify problems in difficult times.
 When a company has borrowed heavily to finance large new
initiatives, it can face a crisis if the assumed growth fails to
materialize. The board should examine financial statements
thoroughly and consider them under various scenarios.
 Careful analysis can help your board evaluate operating performance
and market share.
 Does the company's growth derive from solid, profitable sales or is it
discounting?
 Do profits stem from aging products with falling market shares or are
new, popular products coming on line?

19.
... · .-
..:.
· . .
,..-
.
_, .
- •- ,. . .,..
... '
__.,.a."I"......••. .
-. .-,-, -
· .
• "". -· . - -
.....:
.1
..'" •
"""C: .......
..
.- •. ..
.
- -- - · . . -..., . . .., . -- -. - · --
'"" "
-
.
-.-..
---. ·.
.. .. ..
. - .. ·-
...._. ."""' - - "' . :t
••
·- . - .
- -
-'· ..11._,........
-
-
" " " '
-•
. . .
.
-.---_,..,- -4
• •
-
•
-
• • . ......
•-
- "."'
"" -· .
.... ·-,
..J5-'':''
....
.
-
oa!
llf'
'
-
6
.,
.
.
....
..l

20.
Learning’s for Application
 Define the roles of your board of directors and build a board that can
fulfil it.
 Replace a “ Ceremonial Board” of directors with more active “
Progressive board.” Do not let the minutiae of process side track
your board members
 Board members who work together can provide effective oversight.
 Separating the roles of chair and CEO creates more opportunities
for the board to have oversight of the CEO, Management and
Strategy.
 The Board does not create Strategy, but should evaluate it.
 The Board needs access to wide variety and range of information.
 Board members should develop ongoing relationships with possible
future members and CEO candidates rather than beginning to
consider succession only when the need arises.
 Your Board should monitor the company’s leadership pool as an
indicator of its health.

21.
Mail your comments to ramaddster&gmail.com