Posts Tagged ‘strategic planning’

Keep a Steady Focus on Strategy, but Incorporate Flexibility

January 17th, 2013 | By

For nearly three years, the boardroom maintained a consistent response to a tumultuous marketplace. Whether it was following the 2008-2009 financial crisis, navigating an economic recovery unlike any other, or facing a debt crisis with global implications, reaction from directors seemed to stay the same. Year over year, NACD’s Annual Governance Surveys did not register significant upheavals in methods or structures used. Areas of high priority continue to be strategic planning and oversight, corporate performance and valuation, and risk oversight.

NACD’s Board Confidence Index (BCI), a measure of the boardroom’s attitude toward the state of the economy, told a similar story. Although the index would fluctuate by a few points from quarter to quarter, confidence remained in the slightly optimistic side of uncertain.

This changed last fall when the nation was forced to address the pending fiscal cliff. At November’s NACD Directorship 100 event, DuPont Chairman and CEO Ellen Kullman remarked that uncertainty over future regulatory activity and the general economy had led her company to reevaluate major investments for 2013. Uncertainty in the future of the economy and consumer demand also significantly impacted Coca-Cola’s decisions to make capital investments, according to presiding director James D. Robinson III.

Just a few weeks later, results from the fourth quarter BCI further demonstrated how the economy affected the boardroom. Although the overall index score remained on the positive side of uncertain (51.8), for the first time responding directors indicated outright pessimism in the state of the economy in the next three months. Directors also echoed the statements made at NACD Directorship 100: In preparation for 2013 nearly half (47%) had reassessed corporate strategy.

The need to focus on strategy was also confirmed at NACD’s recently held Master Class in Naples, Florida. Although sessions were designed to address the new and emerging risks entering the boardroom, discussions often returned to the importance of strategic planning in uncertain times. Both panelists and attendees agreed that directors need to keep a steady eye on the established strategic plans at hand.

This recommendation is not without caveat. With a maintained focus, directors should not relegate a discussion on strategy to an annual event. Instead, the established strategic plans should be woven into every board meeting and discussion. Furthermore, plans should be adjusted to incorporate flexibility from the boardroom. This includes shorter response times that are now necessary to address situations that could be presented by emerging methods of communication and rapidly changing technologies.

Kick-Starting the Conversation

August 10th, 2012 | By

According to preliminary data from the 2012-2013 NACD Public Company Governance Survey, top board priorities continue to be strategic planning and oversight, corporate performance and valuation, and risk oversight.

In addition to the foundational areas of oversight, directors have even more responsibilities on their shoulders. Boardroom composition, the constantly evolving risks presented by information technology, and heightened scrutiny on executive compensation packages are just the tip of the iceberg. Regulatory activity has also heated up in recent years as agencies such as the SEC and the PCAOB continually issue new rules affecting corporate governance.

Every year, the NACD Board Leadership Conference convenes directors, business leaders, corporate governance experts, shareholders, and regulators to discuss the issues the boardroom is currently facing and what is just around the corner. This year’s sessions are pulled from today’s headlines, including panels on social media and reputational risk, doing business inChina, and risk and white-collar crime.

To kick-start the conversation ahead of the conference, starting next week, the NACD blog will spotlight key sessions and the speakers scheduled to join us in October. Also pay attention to our Twitter feed and let us know your thoughts—in 140 characters or less—with the hashtag #NACDBLC.

We look forward to hearing from you before the Board Leadership Conference and seeing you at the National Harbor in October.  

 

The M&A Litmus Test: Part 5

August 9th, 2010 | By

We have arrived at the last day of your M&A Litmus test—the most important test of this series. We’ll evaluate your…

…Good Business Sense.

Finally, do your directors really understand your business—and business in general, as in, “I am selling a bolt of cloth, let’s make a deal?”—or are they in compliance mode, focusing on this, that, or the other rule?

Doing a good job in M&A oversight really does come down to good business sense. The late, great J. Fred Weston, a mentor of mine, once boiled reasons for M&A down to ten.  One of them is to increase the size of a company and therefore increase the power and pay of managers—never a good reason for M&A. But the other nine reasons make good common sense. In closing, I’ll share Fred’s list with you now.

Ask yourselves if the merger will:

  • Achieve economies of scale by buying a customer, supplier, or competitor (“operating synergy”)
  • Accomplish strategic goals more quickly and more successfully (“strategic planning”)
  • Realize a return on investment by buying a company with less efficient managers and making them more efficient (“differential efficiency”)
  • Realize a return by buying a company with inefficient managers and replacing them (“inefficient management”)
  • Increase market share (“market power”)
  • Lower the cost of capital by smoothing cash flow and increasing debt capacity (“financial synergy”)
  • Take advantage of a price that is low in comparison to past stock prices and/or estimated future prices, or in relation to the cost the buyer would incur if it built the company from scratch (“undervaluation”)
  • Assert control in an underperforming company with dispersed ownership (“agency problems”)
  • Obtain a more favorable tax status (“tax efficiency”)

All these come down to this: Will this transaction work for our company?

So, with these five items in mind – M&A IQ, Fiduciary Duties, Strategy, Information Flow, and Good Business Sense – let me ask you: Will you pass the M&A Litmus Test?  It’s an important question.  Don’t cram at the eleventh hour. Start studying now!

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