Empowering the Board

Jay W. Lorsch

Group: B08
 Introduction
Traditionally, directors are responsible for counselling & support in time of crisis. Board
empowerment will strengthen the board and CEOs association.

Grant
powers

to monitor the performance of to influence management to

01
top management and the 02
change the strategic direction of
the company
company

their newly defined relationship will in the most extreme cases, to

03
strengthen management and to monitor
corporate performance.
04
change corporate leadership.

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 Pressures for Empowerment
The driving forces to empower outside directors are:

01 Intervention of
investors

02 Link between corporate

governance and
competitive success

03 Controversy around CEO

compensation

04 Rumors generates about

the company

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 Invalid Assumptions
Many CEOs and others with reservations about empowering outside directors
proceed from incorrect premises about power and the boardroom.

Power is zero sum: The one party gain power without

1 the other party losing it leads to diminish of company
45%

Advising and monitoring are in conflict: Director requires

2 information & time to discuss which perceived as forceful
25%

expression of their opinion

There is no need to act unless a crisis strikes: Directors

3 are considered firefighters rather than they act as enabler
65%

to prevent crises.

One size fits all companies: Similar procedures

4 and processes in all boards
75%

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 Sources and Limits of Directors Power

Legal framework provided by the:
Government
Other authorities like Stock
Exchanges, Securities and
Exchange Commision
Real power and ability depends on:
Knowledge
Solidarity as a Group
 CEOs Versus Board of Directors

CEO Board of Directors

Knowledge Solidarity as a Group

 Characteristics of Empowered Boards

Most of the directors come from outside

The board is small enough to be cohesive

Members represent a range of business and

leadership experiences

Members communicate freely with the

committee and board members

Committees are made up of entirely of

outside directors

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Effective Monitoring by the Board
 STRATEGIC PLAN PROCESS

The Way Ahead

Strategic Retreats
Explicit CEO reviews
Thorough Evaluation Process of CEO
Schedule of Planning and Review for the Board and Management
 Effective Empowerment
There is a fine line between a director who contributes ideas to company strategy and one who tries to manage the company. For that
reason, both CEOs and directors must have a means of reviewing and adjusting the line between the boards and managements
prerogatives.
STRATEGY
focused on CEO performance
evaluation annually and corporate
strategy

IMPLEMENT SUGGESTIONS
allows the CEO to discuss his ANALYZE
or her reactions with the avoid the problems that
directors plagued in the past decade

INDUSTRY BEST
PRACTICE

MONITORING
understand their company DESIGN To-Be
and its leader better and delivers a clear message to both the
will be more effective CEO and the directors that the
monitors former is accountable to the latter
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 Directors Knowledge
The challenge for directors is to turn a broad array of information into useful knowledge quickly.

Knowledge is the appropriate word here instead of the more frequently

used information because the directors real problem is not lack of
information but its content and context.
SUCCESS

practice followed by boards is to ask directors periodically

for their assessment of the information they receive.

PROCESS

Data are organized efficiently and provide a

concise but comprehensive overview
IDEA

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 Self-Monitoring

01the idea of the entire boards reviewing its own activities

annually is sound because it enables all directors,

02
directors need to assess how well they are
understanding and monitoring the companys strategy.

03
the directors have designed in advance an explicit
set of principles

04
employee empowerment has improved productivity
and quality

20% 80%
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 Thank you!
Group B08
Mayank Pratap Singh (16PGP030)
Shaleen Jain (16PGP050)
Anjali Pal (16PGP005)
Kamlesh Kumar (16PGP026)
Gaikwad Ankit (16PGP144)
Bhalerao Kunal (16PGP127)