1. ‘Building Better Boards’ Prof. Niamh Brennan Michael MacCormac Professor of Management, University College Dublin Phillip Matthews Director, Executive Education UCD Smurfit School

2. ‘BUILDING BETTER BOARDS’ Thursday 4 th March 2010 Presenter: Prof. Niamh Brennan Moderator:Phillip Matthews

3. AGENDA What is Corporate Governance? What makes great Boards great? Lessons from the Banking Crisis 25 minutes Questions and Answers 15 minutes

4. Centre for Corporate Governance at UCD (www.corporategovernance.ie)  Established February 2002 1.Training for company directors a.Director Development Programme – 10 half day courses on various aspects of corporate governance b.In-house, customised courses for individual company boards c.Diploma in Corporate Governance 2.Promote research in corporate governance

5. Purpose of Companies  What is the purpose of companies?  Limitation of liability  Encourage entrepreneurial activities  Risk management

6. Risk Management

7. Requirements of Company Law  Bar is low!  Why?

9. Challenges to non-executive directors adding value An independent director is like a bidet. “Nice to have, adds a touch of class, but nobody knows what it’s there for” Michael Grade, Chairman BBC

10. Corporate Governance Definitions  System by which companies are directed and controlled (Cadbury Report: paragraph 2.5)  Process that “deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment”. Shleifer and Vishny (1997: 737)

11. Corporate Governance Definitions  “ …the set of mechanisms – both institutional and market-based - that induce the self- interested controllers of a company (those that made the decisions on how the company will be operated) to make decisions that maximise the value of the company to its owners (the suppliers of capital)” (Denis and McConnell 2003: 1)  “the effectiveness of mechanisms that minimise agency conflicts involving managers…” Johnson et al. (2000: 142)

12. Corporate Governance Definitions  “…a set of relationships between a company’s board, its shareholders and other stakeholders. It also provides the structure through which the objectives of the company are set, and the means of attaining those objectives, and monitoring performance, are determined.” (OECD, 1999)

13. Corporate Governance Definitions  Do the thing right – Do the right thing  If a thing is worth doing, it is worth doing badly (get the ball over the line, we’ll clean the blood up later!)

14. What makes great boards great? The human element What distinguishes exemplary boards is that they are robust, effective, social systems (Source: Sonnenfeld, Harvard Business Review, 2002)

15. What makes great boards great?  Not enough to have appropriate structures in place  Not a formulaic corporate ritual!  More important is the social system that is the board Strong, high-functioning work groups Members trust each other Members challenge each other Members engage with senior managers on critical issues facing company

16. What makes great boards great? 1. Create a climate of trust and candour 2. Foster a culture of open dissent 3. Engage in constructive conflict 4. Avoid destructive conflict 5. Work together as a team 6. Ensure individual accountability 7. Utilise a liquid portfolio of roles 8. Know appropriate level of strategic involvement 9. Address decisions comprehensively 10. Evaluate board’s performance Source: Sonnenfeld (2003) and Finkelstein and Mooney (2003)

17. Personal Lessons from the Banking Crisis  Business judgement rule  Herd effect  In the bush, the price of being caught out of the herd is certain death  Be engaged  Interfere in day-to-day management???

18. Questions and Answers The Diploma in Corporate Governance, a one-year, part-time accredited programme leading to a UCD qualification in corporate governance is now in its sixth year. The next intake on the diploma programme will be in September 2010.Diploma in Corporate Governance Please contact Liz Knight, Programme Manager liz.knight@ucd.ie Tel (01) 7168801

19. Next Webinar - 14 th April 2010 Viral Marketing with Prof. Damien McLoughlin In this webinar Prof. Damien McLoughlin will discuss how you can successfully use Viral Marketing to market your business. For further information email businessalumni@ucd.ie.businessalumni@ucd.ie