Didier Cossin, Lausanne, Switzerland, is the founder and director of the IMD Global Board Center and the originator of the Four Pillars of Board Effectiveness methodology. In his work with boards, Professor Cossin helps them enhance organizational performance through strategy involvement, best-in-class decision making, enhancing board culture and general governance (including board restructurings). Professor Cossin is an advisor and/or executive teacher with the United Nations, the central banks of several countries, ministries as well as sovereign wealth funds and supranational organizations (including the European Central Bank, IFC, IOC), the boards or executive committees of corporations, financial institutions and funds in Europe, Asia, the Americas, Africa and the Middle East. He has worked extensively with the oil and gas industry (Schlumberger, Shell, Sinopec, Saudi Aramco, Qatar Petroleum, and others) and the banking industry (HSBC, Bank of America, Goldman Sachs, ICBC and others), but also with many other industries, including media, luxury goods, retail, shipping, and asset management. He also advises some leading non-profit organizations (UNICEF, the Red Cross) on governance issues. Didier is a member of the Risk Who's Who Society, the American Finance Association, the Eastern Finance Association, and the European Finance Association.

IMD, Lausanne, Switzerland, is an independent university institute with campuses in Lausanne and Singapore. For more than 75 years, IMD has been a pioneering force in developing leaders who transform organizations and contribute to society. IMD has been ranked in the top three of the FT's Executive Education Rankings (combined ranking for open & custom programs) since 2012. It has also been in the top four for 18 consecutive years.
Since 2004, IMD has sustained the premier "triple-crown" of AACSB, European Foundation for Management Development EQUIS, and AMBA accreditations, and, in 2022, IMD earned Swiss institutional accreditation, confirming IMD's commitment to delivering the highest quality teaching, research and services.

About the Author xi

Acknowledgements xiii

Preface xv

Part I: The Four Pillars of Board Effectiveness 1

Joanne Marker and Board Service 3

Chapter 1 The Four Pillars of Board Effectiveness 9

The First Pillar: People Quality, Diversity, Focus, and Dedication 11

The Second Pillar: Information Architecture 13

The Third Pillar: Structures and Processes 14

The Fourth Pillar: Group Dynamics and Board Culture 16

Chapter 2 Governance Challenges around the World 19

Scientific Lessons from Natural Selection 21

What is Transformational Leadership? 22

Should We Trust Leaders? 23

The Governance DNA 24

Chapter 3 The Successful Director: Values and Character 27

Duty of Care 29

Duty of Loyalty 30

Duty of Compliance (or Obedience) 31

Integrity: A Key Characteristic of Board Directors 31

Chapter 4 The First Pillar: People Quality, Diversity, Focus, and Dedication 35

Quality and Diversity 35

Focus 38

Dedication 39

Chapter 5 The Second Pillar: Information Architecture 43

How Complete is Your Information? 44

Chapter 6 The Third Pillar: Board Structures and Processes 51

Processes 52

Committee Structure 53

Board Secretary 54

Lead Director or Vice Chair 54

Chapter 7 The Fourth Pillar: Group Dynamics and Board Culture 57

Understanding Group Dynamics 59

Coalitions Within a Board are Inevitable - and they Feed into Politics 62

Boards Fall into Traps 64

Drawing Strength from the Board's Potential 67

Developing Self- awareness 68

Board Culture 69

Summary Table to Part I: The Four Pillars of Board Effectiveness Toolkit 72

Checklist on People Quality, Diversity, Dedication, and Focus 72

Checklist on Information Architecture 73

Checklist on Structures and Processes 73

Checklist on Group Dynamics 75

Part II: Board Failures and Challenges 77

Chapter 8 Four Areas of Board Failure 79

Chapter 9 Risks and Ensuring the Right Board Risk Philosophy 83

Chapter 10 A Board Member's Practical Guide to Risk Thinking 87

The Physical Health Check: Technical Risks 87

The Mental Health Check: Behaviours 93

The Strategic Risk Check 96

The Governance Risk Check 98

Chapter 11 Elements of Advanced Risk Techniques for Board Members: From Quants to Cyber 101

The Why and How of Quantitative Risk Assessment for Boards 102

Integration of Risks 105

The Outcome of Risk Assessment 105

Cyber Risk 107

Chapter 12 Crisis Management 111

Crisis as a Turning Point 114

There is Work to be Done in Peaceful Times 114

Communication Principles 115

Another Powerful Weapon: Gathering Information 116

A Crisis Will Shed Light on Boardroom Fissures 118

Procedure vs Authenticity 119

Communicate Your Way to Rebuilding Trust 120

Chapter 13 The Four Tiers of Conflicts of Interest 123

Tier-I Conflicts: Individual Directors vs Company 124

Tier-II Conflicts: Directors vs Stakeholders 126

Tier-III Conflicts: Stakeholders vs Other Stakeholders 132

Conflicts of Interest within a Group of Stakeholders 136

Tier-IV Conflicts: Company vs Society 137

Chapter 14 High-level Fraud and Active Board Oversight 143

Why Does High-level Fraud Happen? 145

How to Create an Effective Oversight Environment 153

Tools for Anti-fraud Activities: Assessment, Prevention, Detection, and Investigation 159

Part III: Board Leadership 165

Joanne Marker and Board Values at Comfre 167

Chapter 15 Board Leadership and Values 169

Quality Boards Live and Breathe Integrity 169

Which and Whose Values? 171

Board Values vs Organisational Values 173

Family Values in Business 174

A New Board Arena for Joanne Marker: Chairing the Board 175

Chapter 16 Becoming the Chair 179

The Role of the Chair 179

Effective Chairs are Active 181

Transitioning into the Role of the Chair 182

Chairs as Transformational Leaders 185

Making the Right Decisions about Chairmanship Roles and Styles 187

Managing the Transition 190

Leaving a Lasting Organisational Impact as Board Chair 193

Appendix 16A - Checklist: Board Chairs as Stewards 194

Joanne Marker Enters the Chair Arena 195

Chapter 17 The Chair-CEO Relationship 197

Chair-CEO Dynamics - the Hallmarks of a Productive Relationship 198

Tests of the Chair-CEO Relationship 201

The Ideal Attributes of a Chair to be a Secure Base to the CEO 202

Joanne Marker Confronts Failing Board Culture 205

Chapter 18 The Board-Management Relationship 207

Supervision 207

Support 209

Blurring the Board-Management Relationship 209

Writing Governance Codes is Easier than Changing Behaviours 211

Chapter 19 Effective Diversity 213

Diversity is Good . . . But Why; and When? 213

Diversity as a Considered Choice 214

We Have Embraced Diversity . . . Now What? 221

The Chair's Role in Building and Nurturing Diversity 222

Chapter 20 Stewardship from the Board 225

Building Upon a Rich Cross-disciplinary Legacy of Thought 227

Psychological, Organisational, and Cultural Influences on Stewardship 227

Steward Leaders Build on their Unique Strengths to Drive Stewardship 227

Steward Leaders Deliver Long-lasting, Meaningful, and Inclusive Impact 228

Becoming a Steward Leader: What it Takes 231

Stewardship Risks 231

Boards are Key to Fostering Stewardship 232

Part IV: Board Best Practices 233

Chapter 21 The Board as a Strategic Asset 235

Five Definitions of Strategy 236

Clarifying the Board's Role 238

Taking Context into the Mapping Process 241

The Impact of Context on Strategic Views and Roles of the Board 241

The Board's Ultimate Strategic Significance 242

Chapter 22 Is the Board a Team? 245

Fundamentally, the Board is Not a Team 245

Boards Must Allow for Controlled Instability and Dissent 246

Convictions can be the Fuel in a Board's Teamwork 247

The Overarching Objective is to Make Boards Cohesive and Potent 249

Ways to Nudge a Board up the Maturity and Potency Curve 250

Effective Board Teams are Adept at Juggling Competing Priorities 254

Potent Boards Know When to Converge and When to Diverge - and Value Both 254

Appendix 22A: Characteristics of a potent board checklist 255

Appendix 22B: Board members' cultural and cross- cultural competences checklist 256

Chapter 23 A Primer on Finance Essentials for Directors 257

Reading Financial Reports 257

Understanding Ratios to Analyse Operating Strategies 259

Interpreting between the Lines of Financial Statements 261

How to Identify Red Flags in Financial Statements 262

Implementing Desired Capital Structure 263

Understanding Valuation Fundamentals 264

Making Better M&A Decisions 265

Overseeing Risk 267

Chapter 24 The Intricacies of Subsidiary/Holding Governance 271

Structures 273

Culture 275

Chapter 25 Fostering Entrepreneurship from the Board 277

'Best Practice' Governance vs Entrepreneurship 278

Boards Should Actively Encourage Entrepreneurship 278

Chapter 26 The Board's Oversight Framework for M&As 283

Creating a Deal-making Mindset 284

Seeing the Bigger Picture 285

Staging Deals with Maximum Precision 285

Integration 290

Confronting Litigation Involving M&As 291

Acknowledgement 293

Chapter 27 Boards and Oversight of KPIs 295

KPIs are a Language - and are Indispensable for Boards 295

KPIs Need to be Credible to be Useful 296

Zooming in on the KPIs that Matter - and that Tell a Story of How the Company Creates Value 297

KPIs Should Measure What is Critical 297

A Keen Focus on Value Creation 298

KPIs Help Diminish Substantial Business Risks Linked to ESG 299

KPIs and Human Capital 301

A Dynamic Approach to KPIs 301

Hi-tech Display and Review of KPIs 302

A Renaissance of the Balanced Scorecard 304

KPIs for Board Members 304

Appendix 27A 305

Chapter 28 The Talent Pipeline 309

The Board's Responsibility for Talent Management 309

The New Talent Dynamic: Culture, Values, Community 311

Chapter 29 Human Capital Evolution for Boards 315

Board Responsibility for Human Capital 316

Growing Stakeholder Demands for HCM Disclosure 318

Culture as the Safeguard of Long-term Value Creation 320

Staying Current with Emerging Expectations of the World of Work 321

Chapter 30 Boards and Social Media 323

JP Morgan's Failed Foray into Twitter Q&A 324

Why Boards Should Understand Social Media 324

What Boards Should Do 326

Acknowledgement 330

Chapter 31 Boards and Investors 331

The Move Toward Increasing Shareholder Engagement 332

The Surge in Shareholder Activism on Boards 334

Chapter 32 Managing Stakeholders 337

Shareholders vs Stakeholders: A Definition 337

How to Identify a Company's Key Stakeholders 339

The Board can be Instrumental in Shaping the CEO-Stakeholders Conversation 340

The Process of Stakeholder Engagement 340