CEO-Board relationship in Strategy Process

Deborah Rosati, FCPA, FCA, ICD.DFederated Press-Strategic Panning for Boards

March 27&28, 2014

CEO-Board Relationships in Strategy

Overview role of the board

CEO’s strategic planning responsibilities

Best practices for interaction of the Board & the CEO

Basic Strategy Model

Generate/analyze strategic

alternatives

Preliminary strategic analysis

Strategy recommendation Implementation

plan

Recommended point of engagement with

BOD

Typical point of engagement with BOD

Reference: Great Companies Deserve Great Boards by Beverly Behan

Overview role of the board

...the directors’ duty of care requires the board to provide responsible oversight of risk, and the risks associated with the context for and choices made in the strategy are among the most significant....the board must understand the strategy well enough to:

• assess the inherent risks• offer advice• influence the direction if necessary• achieve confidence that the plan is sound &warrants board approval.

validation of products/service differentiation (independent customer interviews)

competitive analysis & business model benchmarking

strategy process audit (engage strategy consultants)

major strategic initiatives (engage external experts)

external strategy validation

stress testing through financial modeling

Tools to help boards to oversee strategic risk

Overview role of the board

Is the board prepared for events that could place directors on the front line of high-stakes strategic decisions....

take-over or merger offer

unexpected loss or removal of the CEO

Crisis beyond management’s experience

CEO’s strategic planning responsibilities

Clarifying the rules of engagement on strategy

Engaging the board earlier in the strategy process

Educating the board about key business issues

CEO’s strategic planning responsibilities

Get the Board out of the Boardroom

Strategy Implementation: updates & measure

Get the Board involved earlier in the strategy process

Best practices for interaction between the Board and the CEO

3 Questions to spur high-quality engagement

1.Does the board understand the industry’s dynamics well enough?

2. Has there been enough board-management debate before a specific strategy is discussed?

3. Have the board and management discussed all strategic options and wrestled them to the ground?

Reference: McKinsey Quarterly-Strategy Practice-Feb. 2013 Tapping the strategic potential of board

Best practices for interaction between the Board and the CEO

Board’s increased involvement in strategy development.....

introduces new voices & expertise to the debate and puts pressure

leads to clearer strategies but also creates alignment necessary to make bolder moves with more confidence and to follow through by committing resources to key decisions.

Emerging best practice...

to use the Corporate Social Responsibility (CSR) lens to find better business solutions. By looking at business problems or opportunities through multiple lenses from the start, ideas sometimes emerge that satisfy multiple goals at once: (environmental impact/shareholder value/community and economic development/brand and corporate reputation/employee impact/corporate competitiveness).

Reference/resources

Great Companies Deserve Great Boards by Beverly Behan

CPA Canada, 20 Questions Directors Should ask about Strategy

McKinsey Quarterly-Strategy Practice-Feb. 2013 Tapping the strategic potential of boards

CPA Canada, A Framework for Board Oversight of Enterprise Risk

Thank-you!

deborah@shantiliving.ca