SSA Executive Search Int’l Ltd President, SSA Executive Search Int’l, Ltd. Chief Executive Officer, The Board Institute, Inc. Central Arizona Resource Exchange May 4, 2005 “ STRATEGIC BOARDS OF DIRECTORS – How to Avoid DIRECTORS – How to Avoid the 10 Most Common Mistakes ” the 10 Most Common Mistakes ” Presented by: Susan F. Shultz

SSA Executive Search Int’l Ltd Boards first line of defense – recognized as a critical risk factor

SSA Executive Search Int’l Ltd We have a rare opportunity to make a difference – to transform boards from being the problem into the solution. We have the best governance system in the world.

SSA Executive Search Int’l Ltd “None of us is as smart as all of us.” Warren Bennis

SSA Executive Search Int’l Ltd FOUR BOARD TYPES: 1. Destroy Value 2. Passive 3. Good Fiduciary 4. Add strategic value My premise is simple Better boards = Better companies.

SSA Executive Search Int’l Ltd Three Success Factors I. Structure and Make-up II. Role of the Director III. Leadership of the Board

SSA Executive Search Int’l Ltd I. Board Structure and Make Up A.Recruit Strategically B.Independent Director C.Diversify

SSA Executive Search Int’l Ltd I. Board Structure and Make-up A. Recruit Strategically 1. Board Charter and Structure 2. Needs Matrix 3. Position Profile 4. Recruit Proactively 5. Reference 6. Comprehensive Orientation 7. Recruit in a Continuum

SSA Executive Search Int’l Ltd I. Board Structure and Make-up B. Independent Directors – The Mistakes 1.Too Many Insiders 2.Too Many Paid Consultants 3.Cronyism, Cloning and Interlocking Directorships

SSA Executive Search Int’l Ltd II. The Role of the Director A. Be Proactive – Avoid Group Think 1.Identify and Support the Right Leadership 2.Provide Strategic Oversight 3.Serve as a Multiplier 4.Say what needs to be said

SSA Executive Search Int’l Ltd III. Leadership A. Drive the Ethics B. Inform and trust your directors C. Empower the Board 1.Recruitment by the board 2.Evaluations 3.Independent Resources D. Agenda focused on strategic issues E. Accountability

SSA Executive Search Int’l Ltd Director Concerns Director Concerns:  Power shift to board  Process  Transparency & accountability  Liability  Cost  Time  Regulation/Compliance

SSA Executive Search Int’l Ltd  Culture threat  Restatements  404  Shareholder activism  Risk  Create shareholder value  Is the information accurate?  Are we spending our money well? Director Concerns (cont.) Director Concerns (cont.):

SSA Executive Search Int’l Ltd “The only bad idea is no idea.” Susan Shultz

SSA Executive Search Int’l Ltd The dramatic untold stories are the companies that have avoided crises and succeeded, because of the advice and counsel of strategic boards of directors.

SSA Executive Search Int’l Ltd Enhancing integrity and excellence in Governance – enabling companies to benchmark, demonstrate, and enhance best practices in the boardroom..

SSA Executive Search Int’l Ltd Better Boards = Better Companies A Rare Opportunity

SSA Executive Search Int’l Ltd Susan F. Shultz President/Founder SSA Executive Search Int’l, Ltd. CEO, The Board Institute, Inc For copies of The Board Book (AMACOM)