APPA National Conference

Board Governance for the Green Wave: Leadership Skills for Converging Markets

Tracy E. Houston, M.A.Board Resource Services

2009 APPA National ConferenceSalt Lake City, Utah Monday, June 15, 2009 11:00 am- 12:00 pm

2009 National Association of Corporate Directors campaign urges boards to:

Embrace ··NACD’s Key Agreed Principles to Strengthen Corporate Governance for U.S. Publicly Traded Companies and use them as a framework for assessing board practices.

Assess the board’s practices with an emphasis in four critical areas: executive compensation, risk oversight, corporate strategy and transparency. NACD’s new ··White Paper Series, proposes some leading practices that bring the Principles to life at the practice level

Commit to continuous director education and the sharing of knowledge. This helps directors continue to identify and advocate leading practices. NACD will share those insights far and wide with all directors, as well as other stakeholders.

Provide greater transparency by annually sharing board progress on these commitments.

NACD will publicly recognize boards who report that they have fulfilled those commitments with a “Seal of Excellence.”

Current Governance Environment

Governance Environment

WSJ 3/31/09 " Mr. Wagoner has said "that one of the moves he regretted most was G.M's decision to kill the EV-1, an electric car that it leased to customers in the late 1990s. Although the vehicle was not profitable, it helped G.M.'s image with environmentalists, which in 2006 Mr. Wagoner conceded he had understood too late."

Strategy and Stakeholder Relations:Framework for the Green Wave

In an environment of increased expectations for governance performance and accountability, boards must understand their stakeholders’ needs and concerns in order to ensure that their organizations address them.

• Whether the organization acts in ways that are consistent with its mission and values;

• How positively the organization is perceived in the community;

• The organization’s strengths and areas where improvement is needed;

• Opportunities and challenges facing the organization;

• Initiatives or actions the organization should undertake; and

• Relationships the organization should cultivate or strengthen.

Strategy and Stakeholder Relations:Framework for the Green Wave

Strategic intent grows out of a relationship model that helps create strategic intelligence to develop a richer context for establishing organizational priorities

and making decisions to minimize risk.

This strategic intelligence and risk reduction model has four features:

1. It includes internal and external stakeholders, such as customers, employees,and legislative bodies and regulators.

2. It involves systematically gathering and mapping feedback from thesestakeholders against the organization’s strategies, culture and values.

3. It uses strategic and risk intelligence to prioritize issues and concerns andidentifies opportunities where organizational and stakeholder needs and valuesalign.

4. It shapes relationships as the organization moves from a reactive to aproactive position.

Elements of Strategy

Traditional Energy Emerging Energy

Evolutionary Revolutionary

Environment Slow change Increased speed of emergence

Limited interdependencies Increased erosion of industry boundaries

Increased complexity/interdependencies

Opportunity Horizon

Few but large opportunities Many diverse small opportunities

Centralized, organized with economy of scale Decentralized, unorganized without economy of scale

Strategic Agility Scenarios Pattern recognition

Foresight Puzzle pieces - recognized over time with addition of more pieces

New opportunities + overall structure of where and how they fit together

Strategic Sensitivity Superior Foresight - anticipated key trends/changes Foresight + strong insight

Long period of calm Combination of long and almost instantaneous change

Instantaneous Adoption of new standard, commercialize new drug, new regulation

Calm with sudden burst of action

Strategy and Stakeholder Relations:Framework for the Green WaveAnalyzing stakeholder feedback from various perspectives

can also help prompt questions that can lead to deeper insights.

Questions might include:

• How well do our existing programs and services satisfy current and emerging stakeholder needs and concerns? What risks does low alignment pose?

• Do we need to revise current offerings or develop new ones to best meet stakeholder wants and needs and minimize risk?

• How does what we have learned about our stakeholders affect the assumptions that underlie our programs, services and strategy development? Do we need to revisit and perhaps revise these assumptions?

Strategy and Stakeholder Relations:Framework for the Green Wave

Flashpoints

• Potential conflicts, that are likely to emerge between the organization’s values and those of its stakeholders.

• Organizations that engage in ongoing stakeholder feedback assessment are more likely to uncover these conflicts than those that do not.

• Major shifts in values more frequently occur after significant events or an accumulation of events, such as a war or widespread disaster, a market crash or a series of high-profile errors.

Strategy and Stakeholder Relations:Framework for the Green Wave

Market Rebels

• Represent an emotionally laden cause, which a bureaucratic mindset could easily dismiss.

• A deeper look at how rebels engender new beliefs that triggers new behavior is part of risk mitigation and can lead to rewards in market share and innovative ideas.

• Think of how the computer industry became to be personalized. Home brew type clubs gathered to tinker and toy with the technology. Actors in the computer world like inventors and the founders of Apple personalized the computer then stimulated the entry into a larger arena in the business world.

Strategy and Stakeholder Relations:Framework for the Green Wave

Market Rebels

• Social movements also provide threats. Think of the organic food produces and their alliance with environmentalists and advocates of locally grown foods.

• The passion for a better, healthier life is enduring and consumers feel it is their own idea and for their own betterment. This movement started, not as a communication strategy or something done to a customer, but rather at the grass roots with something done with the customer.

• Most leaders want to roll out a change with an eye toward overcoming resistance. Market rebels go to where there is energy and are focused on drawing people in.

Organization's can aquire this skill through enhanced stakeholder relations.

Board Governance for the Green Wave: Leadership Skills for Converging Markets

Tracy E. Houston, M.A.Board Resource Services

P.O. Box 150633Lakewood, CO 80215

T: 303.520.5235E: tehouston@earthlink.net

W: www.linkedin.com/in/tracyehouston

Board Evaluation PartnerThe Board Institute, Inc.

www.theboardinstitute.com