Abstract
Based on studies of board practices carried out by doctoral students, the following weaknesses have been found in the majority of the companies assessed:
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1.
Insufficient board attention given to strategic direction
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2.
A lack of professionalism in the selection, feedback, remuneration and development of members of the board and top management and
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3.
Insufficient strategic control and risk management on the board level
In order to address these weaknesses, we propose an integrated board management concept (illustrated in Fig. 4.1).
This concept comprises three dimensions:
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1.
The strategic elements that are the focus of attention (as discussed in Chap. 3) remain:
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Exemplary board team
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Constructive, open board culture
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Effective board structure and
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Stakeholder‐oriented board success standards
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2.
The main processes of the integrated cycle concept presented in this chapter are:
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Selection and composition
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Review and feedback
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Remuneration and
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Development (including succession planning)
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3.
Using an evaluation methodology (described in Sect. 5.5) the success of board work is reviewed regularly.
This concept fits in with the modified “KISS” principle, which forms the basis of Chaps. 3, 4 and 5 of this book:
The most important board management instruments need to be aligned with the firm’s strategic objectives in a holistic way, and they need to involve all relevant share‐ and stakeholder groups in the phases of development, implementation and evaluation.
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- 1.
I differentiate between three versions of the KISS principle:
− the codex from the United States, “Keep it simple and stupid”
− my reinterpretation of that codex, presented in a 1995 book on Integrated HR Management and here as the basis for Chaps. 3, 4 and 5
− the reversed KISS principle presented in this book: “Keep it situational, strategic, integrated and controlled.”.
- 2.
See Beatty (2003, p. 7), who recommends that a chairperson “devote time to serve effectively by not committing to too many other corporate and non‐profit boards.”
- 3.
In this regard, see Byham’s (1977) “targeted selection” interview method.
- 4.
See, for example, Porter (1992, p. 81): “Compensation systems need to move in the direction of linking pay more closely to long‐term company prosperity and to actions that improve the company’s competitive position.”
- 5.
See the guidelines for designing stock options developed by Brandes et al. (2003).
- 6.
Gray (2002, p. 43). Elson (2003, p. 73) adds three reasons why stock options should be replaced by stock: “First we’ve got to link pay to performance. But stock option plans are adopted for accounting reasons and are not geared to performance. Second, we want executives to hold onto equity portions longer. Executives paid in options can get out of their stock right away after they have exercised their options. Third, we want executives to bear some downside risk, and stock options, in the main, do not do that.”
- 7.
Margerison and McCall (1985): in which, paradoxically, “creative” and “practical” are defined as opposites. Indeed, this fact is often criticized (see Henley 2000).
- 8.
“Every one of the top ten on the list of the world’s most admired companies … has a boss who was appointed from inside” (The Economist, 6 March 2004, p. 61).
- 9.
Conyon and Peck (1998) found that “top management pay and corporate performance were more aligned in companies with outside dominated boards and remuneration committees.”.
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Hilb, M. (2016). Integrated Board Management Dimension. In: New Corporate Governance. Management for Professionals. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-49060-0_4
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DOI: https://doi.org/10.1007/978-3-662-49060-0_4
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