CFA Institute report offers 'checklist' for visionary boards
NEW YORK, July 12, 2012 /CNW/ - The string of recent news concerning global companies such as Barclays,
JPMorgan Chase, Olympus, Sino-Forest, and Duke Energy, underscores the
immediate need to change the corporate culture perpetuated by some
corporate boards. One way to accomplish this is to build visionary
boards and leaders, according to a newly-released report from CFA
Institute, Visionary Board Leadership: Stewardship for the Long Term. The report aims to change the historically short-term thinking of
publicly-traded companies and to identify tangible ways in which
visionary boards can foster and promote longer-term thinking that
restores the trust and confidence of investors globally.
"Recent events have clearly shown us that better board leadership is
needed," said Matt Orsagh, CFA, CIPM, director for capital markets
policy at CFA Institute. "Visionary Boards must have the leadership and
foresight necessary to combat the short-term thinking that has
dominated our markets for too many years and that has exacerbated the
effects of the current global financial crisis. These Boards must be
stewards of not only the long-term interests of the corporations they
serve, but also of their shareowners."
CFA Institute, which interviewed current and former directors,
investors, issuer representatives and corporate secretaries to gain
valuable insights on effective corporate governance, urges Visionary
Boards and Visionary Directors to be accountable for their role in
actively eliminating corporate malfeasance. Ethical behavior starts at
the top, Orsagh added, and boards should proactively use Visionary Board Leadership as a checklist on how to truly serve as stewards of the company.
Steps to building a Visionary Board include:
Quarterly Earnings Practices: A Visionary Board expects management to deliver investor guidance with a
longer-term bias and in greater detail by identifying long-term value
drivers for the company. This helps to incent share "ownership" among
the investors the board represents.
Shareowner Communication: A Visionary Board listens to the concerns of its shareowners, and
consistently communicates on long-term vision and strategy.
Strategic Direction: A Visionary Board actively oversees and understands the corporate
strategy, and regularly monitors - with management - the implementation
and effectiveness of the strategic plans. A Visionary Board also
commits focus and attention to the relationship between corporate
strategy and any risks inherent in the strategy.
Risk Oversight: A Visionary Board proactively and continually sees risk as a board-level
responsibility, overseeing robust processes for identifying, managing,
and when necessary, mitigating risks to the operations, strategy,
assets, and reputation of the company. At the same time, a Visionary
Board understands that companies generate profits by taking risks, and
encourages intelligent risk-taking that aligns with a company's
Executive/Director Compensation: A Visionary Board understands a company's compensation policies and
ensures underlying objectives consistently support the long-term
strategy and performance of the company, as well as an appropriate
company risk profile.
Corporate and Board Culture: A Visionary Board thoroughly understands not just the business and
industry in which a company operates, but also recognizes that strong
corporate and board cultures are essential to the achievement and
sustainability of a company's long-term value, and therefore diligently
seeks to reinforce and build such cultures.
The report serves as a guide for corporate boards to break free from the
short-termism that has had a stranglehold on the financial markets.
Proactively taking the initiative to become 'visionary' is crucial
toward repairing the trust and restoring the vitality of markets around
About CFA Institute
CFA Institute is the global association of investment professionals that
sets the standard for professional excellence and credentials. The
organization is a champion for ethical behavior in investment markets
and a respected source of knowledge in the global financial community.
The end goal: to create an environment where investors' interests come
first, markets function at their best, and economies grow. CFA
Institute has more than 110,000 members in 139 countries and
territories, including 101,000 charterholders, and 136 member
societies. For more information, visit www.cfainstitute.org.
SOURCE CFA Institute
For further information:
CFA Institute, New York
+1 (212) 705-1738