Kristina Veaco is a corporate governance consultant and founder of Veaco Group, a corporate governance advisory firm. Ms. Veaco and her team provide practical corporate governance advisory and support services to public, private and nonprofit entities and their boards of directors. They also specialize in providing independent board evaluations, skills assessments, governance audits, stock administration governance and other governance projects. We had a chance to talk with Ms. Veaco about her tenure, how she advices boards to achieve better corporate governance, and how technology has impacted the boardroom. What follows is a transcript of our conversation, lightly edited for clarity and length.
1. Can you give me a little background on yourself and what began your interest in corporate governance practices?
I was an in-house corporate securities lawyer for many years and was responsible for the corporate secretary function at large public companies that had really strong governance practices. I also worked for a spinoff company where we had to put in place the entire governance function, and all the governance documentation. It’s always been a part of my job.
I got involved early on with the Society of Corporate Secretaries and Governance Professionals to connect with others who were doing the same work. We would share ideas, stay abreast of best practices, etc. A few years ago I decided to take my in-house practical experience implementing governance practices and formed my own corporate governance consulting firms to offer that experience to boards and organizations who might need some assistance in the area.
2. How would you describe good corporate governance, when you go in and offer advice to company’s consulting for, what does a company with good corporate governance practices look like?
First we should say the term “corporate governance” is really broad, and it means different things to different people. To me, good corporate governance means having strong systems and processes in place. I like to focus particularly on board governance. In my experience, organizations that have thoughtful governance processes and practices in place ensure several positive outcomes: their board in able to focus on what it needs to, the board gets the information it needs from management, its decisions are properly memorialized in in well drafted minutes, there is appropriate record keepings of its actions, board committees are addressing their responsibilities pursuant to their charters, the board considers its own composition and succession plan, they possess a strong new director orientation program, and they are engaged in strong individual and board evaluations. All of these reflect sound corporate governance practices. Organizations that don’t have these features run the risk of developing a board that isn’t as effective as it otherwise might be.
3. What is the outcome of organizations that don’t embrace these best practices, does it impact their bottom line, does it lead to poor management?
Well I think both those things are possible. You have to remember that boards have fiduciary duties to their stockholders or beneficiaries, depending on the nature of the boards. The best practices I have mentioned really help the board members to meet those fiduciary duties. I don’t think there’s anything that guarantees a good outcome, because it’s very dependent on the people who are on the board, and the business. But with these strong processes in place, it really gives the organization and the board an opportunity to be effective and to have a successful outcome.
4. How have corporate governance practices changed since you started, has there been an evolution in the thinking in your field, what has it changed since you began?
What has changed, I think, is that over time regulations expanded as a result of the passage of Sarbanes-Oxley and then Dodd-Frank, due to governance failures in companies. That really caused people to start looking at what the practices were of these companies. Why weren’t the boards able to pay attention to what was going on in their organization? Were they getting the right materials and so on. So regulations were adopted requiring companies to have certain types of documentation around their governance, with particular language. That resulted in, for many of us who had good strong practices, our having to tweak our existing documentation to comply precisely with the regulation.
There were many companies who simply didn’t have sound governance practices in place and they suddenly had to adopt some of these practices that many companies had been doing for some time. Private companies and nonprofits have really followed suit. There’s also been pressure from investors and proxy advisory firms to adopt certain practices that are viewed as protecting the company – such as poison pills and staggered boards. I also think that the proxy advisory boards spend a great deal of time and energy coming up with their views on what constitutes good governance. There are many investors who are focused on boards having greater democratic processes, allowing them to more easily nominate directors or have majority voting in director elections.
4. You describe one area of trouble with board materials and presentations is because of “length, jargon, lack of analysis, lack of clarity in written materials; oral presentations that simply repeat written materials.” What are the consequences of poor preparation and what are some solutions you advice to avoid these pitfalls?
When we do a board evaluation, one of the areas we always explore is board materials. We look at what the board gets and ask if they are satisfied with the quality and quantity of the materials and presentations. Inevitably we hear that at least some of the board members are not happy and theywill complain about the quality and quantity of materials and about having insufficient time with those materials. Boards really rely on the materials that are provided by the management team to make their decisions and the materials help the board members to meet their fiduciary duties to their stockholders or beneficiaries.
So management should be providing materials at least a week prior to the meetings whenever possible. In my experience materials are best able to be absorbed when they have an executive summery to focus the board’s attention and that set forth management’s recommendations and why. They should always include some sort of proposed resolutions if the board is being asked to take actions, and always ensure that background materials are organized and clear. If specific industry terms are going to be used there should be a key so that board members can look up the definition of what those terms are. You have to remember that board members come together four or five times a year and aren’t as steeped in company acronyms and jargon.
Corporate secretaries will often develop guidelines for materials and presentations and there should be a review process for anything that goes to the board to make sure it meets these standards. Rehearsals for presenters can also be helpful, just to get them ready for the board meeting.
5. How has technology impacted the way boards function and what challenges and benefits are a consequence of moving away from paper?
I think technology in the boardroom is supposed to make boards more efficient. Let’s talk about the use of board portals for the secure electronic delivery of board materials. I do think that secure electronic delivery if used properly is an efficient way to get the board their materials, often more quickly than previous delivery methods, and more information can be available to board members from one central location. Emailing sensitive board information is not a secure method of delivery unless the material is encrypted and should be avoided.
When I was in house, we were an early adopter of secure electronic delivery through the use of a board portal. Back then, and it continues today, that security is extremely important given the highly sensitive nature of board materials. Tablets weren’t available at the time, so board members would view materials using their desktop or laptop. Either we would have paper in the boardroom for them or they would bring their laptops. But that wasn’t the norm. The board really appreciated having all the materials in one place. We posted other resource materials in addition to meeting materials, such as the committee charters, the bylaws, and so forth.
I think that the tablets have made board members more open to electronic delivery while adding a coolness factor; they are much easier to carry around than laptops. But security for sensitive board information is really important and has to be considered in case a tablet gets lost or mislaid. I also think that you have to respect your board members style of working. For example having the ability to print the materials is an important feature for those who want to have some paper copies of the materials.
One thing I would caution about the use of tablets in the boardroom, is that I’ve seen is a tendency for board members to be looking down at their tablets rather than looking at the presenter or their fellow board members. So I recommend that presentations be displayed on a large screen in the boardroom and and encourage directors to look up. You don’t want your members missing the body language or other cues from their fellow directors.
7. Where do you see the future of governance going, will it be a slow evolution, or impacted by a change in the law? What do you see as the future of good corporate governance?
It’s hard to say. I continue to believe that boards need to be responsible for their own governance practices and processes. I think investors are going to continue to want accountability, and I think they are going to want to continue to look to at the composition of the board and whether their directors have the right set of skills. The thing is, board composition may need to change overtime along with the company. Maybe the group that has been in place for many years needs to be expanded or changed to allow for new skills. Perhaps the direction of the company has changed that would require new perspectives. So boards really need to take responsibility for their own composition and be regularly looking at that. They also need to regularly conduct a board evaluation to be able to evaluate their own effectiveness.
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