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Board Governance Best Practices-- Review the CEO Annually

In early October, the Working Group on Director Accountability and Board Effectiveness will release an expanded version of "A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors."

During the summer, in addition to working on this new content for the white paper, we also expanded the Working Group itself and will be announcing nine new members from across the United States and from Israel.

In addition to new information related to the process for annual CEO review, important content additions include new material on the importance of internal controls and detailed recommendations on the logisitics and optimal processes associated with individual director and board self evaluation.

The original "Simple Guide..." points out that boards should conduct a formal annual performance evaluation of the CEO.

An excerpt on the importance of CEO evaluation follows from the new Guide:

"Anecdotal evidence in the venture capital industry suggests that the CEO is the least reviewed employee of the typical venture backed company.

A VCBC board is highly unlikely to support the notion that the CEO should adjust employee salaries or issue new options grants without first reviewing individual employee performance. Why should the board be held to a lower standard when it comes to reviewing the CEO’s performance? The importance of having in place a process for board review of the CEO cannot be overstated. Having this process in place facilitates an effective mechanism to promote the proper management of expectations between the board and the CEO.

An annual CEO review process does not need to be cumbersome, and it need not be associated with compensation adjustments for the CEO. It should be viewed as an opportunity to make sure that the CEO and the board are on the same page with respect to the CEO’s current business plan objectives and priorities. It can be particularly useful to combine the CEO review by the board with a 360 degree review of the CEO by all of his direct reports.

Some process recommendations to consider:

· Create a common, short, written questionnaire to be used by the directors and by the direct reports.

· Separate the reviewers:

o Designate a non-management director to circulate the questionnaire to each of the non-management directors

o Designate either an outside consultant or the head of human resources to perform the same aggregation function for the CEO’s direct reports

· The board reviewer should consolidate the director questionnaires into a single document that is shared among the directors. This document should represent a consensus view by the directors.

· The designated director should coordinate with the consultant or HR person conducting the 360 review and receive a written synopsis from the team reviewer which summarizes the comments from the direct reports." ...

There is more to this section-- but you will have to wait until October to see it-- stay tuned.

Thanks But I'd Prefer Not To Be Able To Take the Shortcut

I've excerpted a portion of an article from the European Space Agency's website describing the emergence of the "Northwest Passage", which eluded explorers for millenia.  Now, thanks to unbridled carbon emissions and global warming, it is emerging.  In my view, the implications of this for mankind are staggering and are not good:

The area covered by sea ice in the Arctic has shrunk to its lowest level this week since satellite measurements began nearly 30 years ago, opening up the Northwest Passage – a long-sought short cut between Europe and Asia that has been historically impassable.

In the mosaic image [below], created from nearly 200 images acquired in early September 2007 by the Advanced Synthetic Aperture Radar (ASAR) instrument aboard ESA’s Envisat satellite, the dark gray colour represents the ice-free areas while green represents areas with sea ice.  

Leif Toudal Pedersen from the Danish National Space Centre said: "We have seen the ice-covered area drop to just around 3 million sq km which is about 1 million sq km less than the previous minima of 2005 and 2006. There has been a reduction of the ice cover over the last 10 years of about 100 000 sq km per year on average, so a drop of 1 million sq km in just one year is extreme.

2007 Envisat mosaic of Arctic Ocean

Again, this is not good.It may already be too late to reverse this course of melting ice, but the collective "We" need to do something about it, now.  Suggestions welcome.

How Do We Prevent Religion From Degenerating Into Fanaticism?

Many people are asking this question today and not finding any satisfying answers.  To my surprise, Maimonides answered this question concisely 800 years ago.

Kenneth Seeskin's analysis of Maimonides' positions on religious fanaticism and false prophets is profound and refreshing:

"... Maimonides had firsthand experience of religious intolerance.  He knew that Jewish people are not immune to to ignorance or superstition.  His answer is that our prime criterion for deciding who speaks for God is truth (Guide 2.40).  If we are presented with a body of law which inculcates true beliefs, which encourages intellectual growth and critical reflection, which makes sound recommendations for personal health and social harmony, then, and only then, do we have a basis for believing that the message may be divinely inspired.  So the criteria for deciding who is a prophet are just as rigorous-- indeed, more so-- than those for evaluating expertise in other walks of life. . . . only the most extraordinary individuals have the right to claim that they speak for God.  And the only way they can earn this right is to provide both a vision and a rational defense of it. . . . the more a person asks us to make leaps of faith, the less likely it is that he or she is carrying a divine message."

Maimonides' approach is so basic that it is novel: Question the messenger.  Raise the credibility bar.   Ask yourself if the message makes sense and if it is in harmony with moral absolutes. 

Seeskin continues:

"God does not want people to starve themselves,  torment themselves, take vows of celibacy, or endure physical deprivation.  What He wants are honest dealings with our fellow human beings, moderation of the passions, respect for the poor, the sick, the widow, the orphan, and the stranger, rest on Sabbath, and in general a life in which we grow to our fullest potential."   

Maimonides has been criticized by some as being an elitist, and he is certainly not popular among ultra-Orthodox Jews (or among fanatics of any brand).  In my view, these critiques fall far short.

I strongly agree with the view that not everyone can be a prophet, just as not everyone can become a brain surgeon or a semicondutor designer.  In Maimonides' philosophical construct:

"True prophecy is instructive; it teaches us about God and calls us to our highest moral ideals and aspirations.  It is founded on a thorough understanding of the universe and human efforts to grasp the principles thatr underlie it.  A person ignorant of those principles, whose only claim on our attention is an intuitive feeling or dreamlike image, cannot speak for God.  Allow such people to determine our religious practices or beliefs and we are certain to get chaos."

Why does this seem so reasonable and yet sadly true in the context of current global affairs?  It is because unscrupulous people continue to manipulate religion to their will for power.  Unfortunately, these manipulators are not held to a higher standard of accountability.  Why? In my view, these answers have more to do with the weaknesses of man than the weaknesses of religion and the shortcomings of faith.

Kenneth Seeskin's Maimonides: A Guide for Today's Perplexed, was first published in 1991.

Maps of War: A Geographical Rendition of the History of Religion

To see a 90 second graphical map representation of the origin and spread of various religion across the world over the past 5,000 years, click here.