Today CFA Institute will issue the latest in a series of corporate governance reports: Visionary Board Leadership: Stewardship for the Long Term.
Quite simply, a “Visionary Board” is a board committed to working with management to make a company successful in the long term and one that does not tolerate corner-cutting strategies to meet fleeting short-term expectations. Visionary Boards act as proper stewards of shareowner assets and true representatives of shareowner interests.
CFA Institute worked with current and former corporate directors, investors, issuers, corporate secretaries, and a number of individuals from professional organizations to determine how Visionary Boards can help companies look beyond myopic short-termism and ensure companies are managed for long-term success.
In the wake of the financial crisis and the never-ending examples of boards that are anything but visionary, we feel that Visionary Boards are the embodiment of leadership and foresight necessary to break through the short-term noise in the markets to ensure public companies are managed and governed for the long-term benefit of all stakeholders by focusing on:
- 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.
- Shareowner Communication: A Visionary Board proactively 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 strategy and regularly monitors — with management — the implementation and effectiveness of strategic plans.
- Risk Oversight: A Visionary Board embraces risk as a board-level responsibility. It oversees robust processes for identifying, managing, and when necessary, mitigating risks to the operations, strategy, assets, and reputation of the company.
- Executive/Director Compensation: A Visionary Board ensures that the underlying objectives consistently support the long-term strategy and performance of the company.
- Board and Corporate Culture: A Visionary Board recognizes that strong corporate and board cultures are essential to the sustainability of a company’s long-term value.
In the past year this space has focused often on the lack of vision at a number of boards around the world: Olympus, Citigroup, JPMorgan, Chesapeake Energy, and Duke Energy, to name a few. The boards at each of these companies failed in at least one, but often multiple, visionary-board characteristics listed above. We hope Visionary Board Leadership can help guide investors and boards to demand better leadership from corporate boards. But such leadership will not come unless investors expect more from their boards, and boards demand better from themselves.