Board Leadership Seminar: The Corporation & Its Board September 15, 2015

Not-For-Profit Does Not Mean  The Enterprise is not intended to be profitable  The Enterprise does not need to be well-managed  The Board of Directors has less responsibility  The Board of Directors has fewer duties

Not-For-Profit Does Mean  Directors cannot directly profit from the Enterprise’s profitability  Actions are directed at providing service and value to the Enterprise’s constituencies  All of the enterprise’s energies must be directed toward achieving the mission

BOARD PURPOSE  To make sure the Enterprise is successful for the benefit of the stakeholders/beneficiaries  To represent and be the voice of the stakeholders/beneficiaries  To define and measure success  To be visionary and provide long- term leadership

BOARD AUTHORITY  Board has all authority  Must strike a balance between rubber-stamping and micro- managing  Boards Govern Provide oversight  Managers Manage

DUTIES

Duty of Care  Not-for-Profit Corporation Law §717 “Prudent man” standard Good faith Business judgment rule

Duty of Care  Keep informed, inquire, exercise independent judgment  Trust and confidence  Ensure that the enterprise adopts, maintains and achieves standards for operating efficiency and quality of service

Duty of Loyalty  “Punctilio of an honor the most sensitive”  Corporate opportunities belong to the Corporation  Do not compete with the Enterprise  Do not use Director position to gain personally - conflict of interest  Confidentiality  The Board speaks with one voice

Duty to Add Value to the Enterprise and its Stakeholders/Owners  Beyond duty of care  Duty to be an active and creative Board member bringing new and different approaches and suggestions to management  External role Understand the views of the various stakeholders/beneficiaries Be an ambassador for the goals and interests of the Enterprise

RESPONSIBILITIES

Board Level Responsibilities  Select and provide oversight of the CEO Provide guidance to and demand accountability from the CEO and, through him/her, the entire staff  Ensure that there is a Board- adopted strategic and operating plan that is being implemented

Responsibilities  Continually improve Board performance Establish clear goals and set standards for the Enterprise Measure performance against those goals and standards  Ethics - Demand that all connected with Enterprise act ethically

Responsibilities  Individual obligations Knowledge of the Enterprise Commitment to success of Enterprise  Time  Effort Board/governance arrangement and continuous improvement will be discussed later in the season

BOARD STRUCTURE

SIZE  As Large as Necessary  As Small as Possible

CHAIR OF THE BOARD  A first among equals  Primary Responsibility – Make sure the Board stays on task and accomplishes it purpose  Make sure the Board adheres to standards

CHAIR OF THE BOARD  Manages the Board, not the Enterprise Review and approve meeting agenda Conduct meeting  Primary contact with the CEO CEO – Accountable to the board, responsible to the chair

COMMITTEES

Committees - Purpose  Assist the Board in carrying out its responsibilities and functions  Increase the Board’s understanding of factors and options  Assist and advise the CEO and staff

Core Committees  Audit  Compensation  Governance  Beyond these -- unique to the institutions Hospital... Quality Committees Health Plans... Investment Committees Museums... Development Committees

Audit Duties  Oversee reliability and validity of financial statements  Independent Auditor – selected by and works for the committee  Study and identify possible sources of fiscal jeopardy  Establish and oversee control processes and systems  Sarbanes-Oxley requirement Financial Literacy

Compensation Duties  Approval/oversight of compensation and benefits  Set policy for the enterprise approve CEO compensation, pay, benefits, etc.  Assure market rates, pay for performance, human resource assets

Governance Duties  Assess needs of Board and continuous improvement and board education processes  Determine qualifications for Board membership and recruit new members  Develop and recommend to the full Board corporate governance principles  Oversee Board organization, including committee assignments  Oversee and approve succession planning for the Board

“Non-Core” Committees  Executive Not Mandatory Can act for the Board - - between meetings Duties otherwise specified  Enterprise specific committees

“Non-Core” Committee Benefits  Assist in the efficient operation of the Board – Especially important for large Boards  Flexibility - Can be formed for a specific purpose and then dissolved

Role of the Board  Values Maintain commitment to Mission Operate as stewards of a social resource Assure that the diversity of stakeholder interests and perspectives are brought to the table Maintain productive working relationships

Role of the Board  Values  Approvals Hiring and evaluating the CEO Approving corporate policies Approving the operating/strategic plan

Role of the Board  Values  Approvals  Monitoring Monitor compliance with respect to:  Mission  Corporate policies Monitor with respect to the:  Strategic plan  Quantified performance objectives Including budget

SUMMARY  Board is responsible for the overall direction of the Enterprise  Find good employees, appropriately delegate operational responsibility and monitor performance  Keep informed and exercise independent judgment  Always act in the best interest of the Enterprise