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Archive for category: Board of Directors

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Technology Industry, Global Regulations and Effective Board Governance

The global economic crisis has imposed higher risks and challenges for board governance.

Boards of technology companies have significant challenges.  Often times they have incomplete management teams, inexperienced founders, lack of resources and more.  In the TechAssure Association annual risk report, we cite that global regulations also impact the effectiveness of board governance.

During the second set of meetings during the Global Strategic Leadership Forum in Atlanta, the World Affairs Council stated that contemporary global companies face more intense governance issues than ever before. Their determinations have led to discussion on how globalization has called on companies to re-examine their risk management strategy in order to successfully adapt to the complicated matrix of the regulatory environment.

The World Affairs Council stresses the fact that the board should re-evaluate governance strategies to include not only profitability and growth, but escalating risks due to the overly complicated regulatory processes they face in the U.S. and other sovereign nations. Unfortunately, government intervention in company dealings can come suddenly and unexpectedly. Rules and regulations across the globe can be conflicting which makes the governance of an international board even more complex; diluting the potency of solid governance strategy.

Regulatory laws such as the Foreign Corrupt Practices Act, the UK’s United Kingdom Bribery Law, and the Dodd-Frank Legislation have had a major impact on internationalized business board governance. Conflicting global legislation can have major consequences for international technology companies. Even if an infraction occurs in a small jurisdiction and is committed by one employee, the board must be informed so that they may take action to avoid catastrophic damage to a firm’s finances and reputation. 

These regulations have increased risks to firms to the technology industry.  A strong board which implements a versatile board governance strategy is the only way in which a company in today’s market can survive and flourish globally. Consistent risk audits must be performed regularly and CEOs and board members must remain vigilant; reassessing strategies and making adjustments which correspond with audit results.  

Board members and officers are faced with increasing personal risk in an ever changing global regulatory environment. Working with a TechAssure Association member can help your board stay protected and help your firm develop a broad global risk management strategy in a rapidly changing world.  Please contact us for more information.

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High Growth Firms, Board Governance and Leadership Succession

Board governance is one of the most important elements in high-growth firms. We often get a wide range of questions on managing risks in high-growth organizations. Adopting risk management best practices early in the development of an organization can put your firm on the path to accelerated growth. If done correctly, high-growth firms have the ability to continue along their successful growth path.

The issue of board governance often comes up as high-growth firms establish their risk management program. Board governance is what really keeps your business moving and growing. Therefore, you must give leadership succession a very high priority. These leaders will move your company forward or backward, depending on their skills and understanding of how your firm operates.

The best way to prepare for succession is for the board to hold several discussions every year about who the best choices for new leaders are. They need to make an effort to get to know these candidates personally and observe how they react in crisis situations. They should also create assignments that will prepare candidates for possible future roles.

Without preparation for leadership succession, board members and investors may find they lack confidence in their inside choices. In such cases, many companies will tend to fall back on outside hires. This isn’t always a good approach, because while the new hires may look good on paper, they often lack the inside knowledge of your company that is necessary for making a smooth and long-term transition. Boards should instead hold leadership succession planning meetings to keep track of candidates and their progress in gaining the needed experiences that will prepare them for their new positions.

High-growth firms should include board governance and leadership succession in their risk management planning. These long-term goals can help prevent potential serious losses resulting from a disruptive transition in leadership. For more tips and strategies on risk management planning for high growth firms, please contact one of our TechAssure Association members today.

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Pointers for Technology Firms that are Establishing a Board of Directors

As your company grows, the time may come when you are in need of guidance and direction from a team of experts. Consider the areas of your business where you lack expertise and need some direction or input to continue your company’s growth. Establishing a board of directors may be the solution to maintaining growth and establishing sound direction.

The board of directors, serving as a company’s governing body, is responsible for the overall management of the business. They set policies, establish long-range goals and approve operating budgets, as well as evaluate and hire key managerial staff. Though they are not required to know everything about your specific business, they are required to act responsibly as they carry out their duties.

Establishing a board of directors for a technology firm can be difficult. At times, a less mature technology firm could take many different directions. However, there are some important points to consider when putting together a board.

• Provide a job description for each potential member of the board. It is vital that prospective board members have a clear understanding of what is expected of them and what their responsibilities will be. Without a job description clearly laying out was is expected, the board is sure to be unproductive.

• Be patient when establishing a board of directors. Proceeding carefully gives you the opportunity to learn more about the individuals you are considering, and decide if their motivation to join the board is compatible with your company’s agenda.

• Look beyond your inner circle. It is crucial to recruit the best talent available when creating a board. While you may know people with the skills you require, they may not have the right expertise or experience.

Establishing a board of directors can be beneficial to your technology firm in many ways. Besides bringing expertise and know-how, a board of directors can provide instant credibility to an organization. Having an independent body overseeing auditing procedures and eliminating potential management abuse and fraud can be very attractive to potential investors.

Once your board is in place, your company is properly positioned to go to the next level. However, it’s important to recognize that with a new business structure comes new risks. The members of TechAssure Association can help you manage your management liability exposures. They have the knowledge, tools and expertise to help you respond to a wide range of risks that face your board members. Please give us a call for more information.

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5 Tips to Avoid Directors and Officer Liability Claims

Directors and Officers of private firms can be held personally liable for a host of activities, including misuse and misappropriation of funds, knowledge of illegal acts, supplying improper loans, fraudulent activity, and transactions or decisions that have not been approved by the bylaws of the corporation. This is why it is important to not let things like informality and a lack of prudence in your decision-making process creep into your boardroom.

Here are five tips to help you and your firm avoid D&O claims:

1. Follow the Rules

Board members are required to know and understand the company’s bylaws. Make the bylaws available and easy to access for everyone involved. Follow all voting and election policies and procedures.

2. Keep Bylaws Current

Stay on top of any changes and conduct semi-annual reviews of all governing documents. Review any law changes with a lawyer to understand the impact they may have on your organization. Be sure to always have the bylaws memorialized and amended properly to avoid confusion.

3. Hire or Elect Responsibly

Be sure that those who are new to the position know without a shadow of a doubt what their position entails and provide them the training they need to discharge their duties. Require them to read all bylaws before their position begins. Whenever you hire or elect someone new, it would also be a good time to refresh all board members as a group on all of your bylaws.

4. Practice Good Record-keeping

Document board minutes accurately and precisely so that there will be no question as to what was discussed. Record communications with everyone involved with your day-to-day business (members, vendors, insurers, etc.). Keep concise financial records, and always be sure to log complaints and responses for future reference.

5. Stay Professional and Unemotional

Avoid personal conflict and clashing personalities, because not only can these actions lead to future problems, they can also cause you to lose a great deal of valuable time better spent on your core operations. Ensure that all procedures are followed and that every member is heard and respected. Operate like a responsible business and keep it that way.

Though these preventative measures can only assist you in avoiding a claim, the bottom line is that claims will happen, and when they do, having accurate information and all the facts available to give to the insurer is imperative for risk management and a quick resolution of situations and claims. For more information on how to protect your firm from D&O claims, please contact a TechAssure member.

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Basic Board Governance and Risk Management Considerations for Technology Firms

Achieving sustainability, especially in today’s market, is reliant on proper board governance. As a company grows in size and its structure changes accordingly, the importance of ERM or Enterprise Risk Management is a necessity for proper board governance and seamless operation. As a business owner, you should understand the board’s duties as they apply to everyday operations. While management is responsible for overseeing operations involving risk, the board plays the most vital role in everyday practices and procedures.

Though ERM is an integral part of board governance, only half of surveyed companies have a functioning ERM plan in place, according to the National Association of Corporate Directors. This is an astonishing and worrisome figure, especially when considering the current state of today’s volatile market.

Common issues of ERM in board governance include:

  • Fragmented or incomplete oversight of risk management across the board
  • Insufficient evaluation of risk and/or board inexperience to handle risk management
  • Inability to hatch a comprehensive risk management plan because of a lack of discourse or strategic insight within the board
  • Weak or non-existent leadership from chief officers of the board concerning risk management

Though these issues can be cumbersome, there are ways to strengthen the board’s ability to conceive and execute a comparable ERM plan:

  • Establish a risk management team. A subcommittee which focuses on risk management can be a vital and effective component of board governance.
  • Integrate strategy plans and risk plans. Make sure each strategic element of the board is accompanied by an equally strong risk management plan.
  • Create a strong communicative relationship between the risk subcommittee leader and the chief officer(s) of the board. Doing so will ensure that the ERM plan is closely aligned with all board governance issues and implementations.
  • Employ a plan which will protect the board from unforeseen or catastrophic risk.

 Please contact us for more details on how our members can help your firm make the connection between risk management and board governance.

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Ten Tips for Establishing a Board of Directors that Will Ensure Your Company’s Growth

Establishing a board of directors helps take your business to the next level. As a company grows, one may find it needs a board to keep the company running smoothly and efficiently. Being an entrepreneur, it is satisfying watching your company succeed, here are some tips to help you decide how to form the board of directors perfect for your firm.

  • Always plan for the long term. Recruit directors you feel will make it a priority to further company growth.
  • Root out the potential leader. During the establishment of your board, there will be an individual who stands out from the rest as your right hand man or woman. This individual should be a natural leader with exceptional governance skills. If possible this individual should be trained or chartered by the National Association of Corporate Directors
  • Create clear and concise job descriptions for each member. Executive and non-executive directors should have a clear idea of their responsibilities. These job descriptions should help the board tackle issues directly and strategically.
  • Each member should be and integral part of the team. Each should be diverse and well versed in their field of governance, but also be able to work well in a team environment.
  • Pick those who are not afraid to disagree with you on certain issues. Each individual should not be afraid of conflict and should be able to challenge certain decisions they feel will be damaging to the company. The board is not there to agree with you %100 of the time, they are their to help the company exceed expectation.
  • Seek consensus on all issues presented to the board. After discussion, presentation, and analysis, the board should be able to come to important decisions in matters of importance. Majority rules.
  • Be clear about each individual’s specific role on the board and allow each to stick to his or her position. For example do not combine or confuse CEO and the chairman as one in the same; delegate accordingly.
  • Respect the Hierarchy established on your board. It is the board’s collective wisdom and enhanced discipline that will get the job done and your company growing.
  • Always seek expert advice. If you need help deciding on how your board should be set up, don’t be apprehensive about asking for help.

In this tough economy, it is the professionals at TechAssure that understand that it is the entrepreneur who will keep America’s economy on track. Contact a TechAssure member to learn more about the insurance products and services we provide in management liability. Let us help you keep your business growing.