Jul, 2023

The Big Idea: New CEOs should take the time to learn about corporate governance.

Consider subscribing to “Directors & Boards”, “Agenda”, “Directorship”, or “Corporate Board Member”.

Terminology for the new CEO

1. Nonexecutive Chair: a chair who is an outside, independent board member
2. Executive Chair: lacks the independence from management, is sometimes the company’s outgoing CEO
3. Lead Director: outside, independent board member, chairs executive sessions, liaison between CEO and directors
4. Executive Sessions: required by SEC of public companies, board meets without CEO

Eight components of a high performing board

1. Board Composition: most important but not the only component
2. Board Leadership: chair needs to run an effective meeting, know who/when to call on members for balanced input
3. Board Information: don’t overlook the importance of well-organized board packets
4. Board Dynamics: meetings should be positive, productive, candid, vibrant, respectful
5. Board Agendas and Meetings: balance presentation and discussion 50/50, focus the agenda
6. Board<>Management Dynamics: candor and mutual respect, thought partner > audience
7. Board Committees: chair needs to run these meetings well, needs support from company executives
8. Board Processes: discussion of strategy, risk, succession planning

Traits of a high performing board:

1. CEO believes that board adds value (and can provide specifics).
2. Individual board members believe they add value (and can provide specifics).
3. Individual board members are always looking to improve.
4. Board meetings are open and vibrant.
5. Company achieves good results — financially, operationally, and strategically.
6. A great board should steer a company towards positive performance and value for shareholders. 

Board/CEO dynamics to avoid:

1. Imperial (CEO runs the company, board is filled with old buddies)
2. Entrenched (board maintains the status quo and resists change)
3. Hostile (no trust in either direction)

CEOs should not hesitate to discuss an emergency CEO succession plan, aka the hit-by-a-bus scenario.

CEOs should engage the board early in the strategy process, instead of presenting the final strategy in the board meeting.

Outside directors cannot engage effectively if they lack information. Find the gaps and help fill them.

SEC requires three committees for public companies:

1. Audit Committee: financial audit, risk oversight, financial controls.
2. Compensation: sets compensation for CEO and for board members.
3. Nominating/Governance Committee: board composition, recruitment, orientation, evaluation, exit.

Not required but common committees:

1. Strategy Committee
2. Finance Committee

Not as common committees:

1. Executive committees were more popular a decade ago. Useful in quick response crisis situations.

Recruit before you shoot: focus energy on expanding the board before expending energy pruning the board.

Avoid the trap of naming an individual during board expansion. Keep focused on skills and experience.

If you need to get rid of a boardroom bully or a constant contrarian, it’s the job of the Lead Director (or the Nonexecutive Chair) not the job of the CEO.

Director peer reviews are the preferred way to evaluate director performance. They are conducted with discretion by the Lead Director (or the Nonexecutive Chair).

Common pitfalls for CEOs to watch out for:

1. A failure to understand and address all eight components (above.)
2. Asking for greater openness between the board and the CEO but responding in a way that is defensive or critical. Cuts both ways.
3. Delegation of board changes that require leadership from the CEO. Eg. Board packets, board agendas.

Common trust-breakers

1. The Garden of Eden: everything is presented as positive and wonderful.
2. Only One Solution: only one solution presented or considered.
3. Heard It Through The Grapevine: directors should never learn about an important development by reading it in the morning newspaper.
4. Let Them Eat Cake: outwardly dismissive and disrespectful towards board members.

The Big Idea: Mastery is not a question of genetics or luck, but of following your natural inclinations and the deep desire that stirs you from within.

Introduction

• Masters practice harder and move faster through the learning process.
• Masters feel an intensity desire to learn and a deep connection to their field of study.
• Desire, patience, persistence, and confidence >> reasoning ability.

I: Discover Your Calling: The Life’s Task

• Your inner calling was probably clear to you during your childhood.
• Connect with your inclinations.
• View your path as a journey with twists and turns, rather than a straight line.
• Return to your origins; look back at your childhood interests.
• Occupy the perfect niche; choose an area that interests you; look for side paths that interest you, and continually move towards a narrower niche. Alternatively, blend two distinct areas of expertise that compliment each other.
• Avoid the false path; beware forces (fame, money, attention, status) pushing you away from your true path.
• Let go of the past; follow your calling and don’t be tied to a particular career or position.
• If you lose your way, make public your return to your path, so that it becomes a matter of shame and embarrassment to deviate from this new path.

II: Submit to Reality: The Ideal Apprenticeship

• After your formal education, comes The Apprenticeship.
• The goal of The Apprenticeship is simply to learn.
• Choose an Apprenticeship that offers the most opportunity to learn.
• 3 Stages of Apprenticeship: Deep Observation, Skills Acquisition, Experimentation
• Observe: observe the rules and procedures.
• Observe: do not make the mistake of imagining you must get attention, impress people, or prove yourself in this stage.
• Skills Acquisition: focus on practice and repetition.
• Skills Acquisition: reduce the skills to something simple and essential.
• Skills Acquisition: begin with one skill that you can master, and that serves as a foundation for acquiring others.
• Experimentation: in this stage, move to a more active mode of experimentation.
• Experimentation: exercise your problem solving skills by working with your hands and learning more about the inner workings of the machines and pieces of technology around you.
• Value learning over money.
• Read books and materials that go beyond what is required.
• When you enter a new environment, your task is to learn and absorb as much as possible.  For that purpose you must try to revert to a childlike feeling.
• Trust the process; push through the point of frustration and continue to practice.
• Move towards resistance and pain.
• Repeated failure will toughen your spirit and show you with absolute clarity how things must be done.
• Take the extra effort to learn how things are done, not just how they appear, and gain a deeper understanding and feeling for the whole.
• Through trial and error, find out what work suits you, and what doesn’t.  

III: Absorb the Master’s Power: The Mentor Dynamic

• The right mentors know where to focus your attention and how to challenge you. Their knowledge and experience become yours.
• During the Apprenticeship Phase you will need mentors whose authority you recognize and to whom you submit.
• The reason you require a mentor is simple: life is short; you have only so much time.
• You will want as much personal interaction with the mentor as possible.
• Choose the mentor according to your needs and inclinations.
• Choose a mentor who will give you tough love, reveal your strengths and weaknesses.
• Learn from your mentors, listen, but cultivate some distance by altering their advice to fit your own inclinations and style.

IV: See People as They Are: Social Intelligence

• Success attained without social intelligence is not true mastery, and will not last.
• Social intelligence means getting inside someone else’s world and seeing and accepting them as they are.
• Pay attention to tone of voice, the look in their eye, their body language.
• Initial impressions are often misleading.
• If you have a gift for a certain skill, make a point of displaying weakness in another area.
• If you have a rebellious streak, be careful not to display your difference too overtly.
• When you need something from someone, appeal to people’s self-interest, and get used to looking at the world through their eyes.
• Be prudent and keep your ideas close so they can’t be stolen. Secure credit in advance as part of teams working together.
• We like to think we are rational, but we are largely governed by our emotions.
• The root cause of passive aggression is human fear of direct confrontation.
• Be efficient, detail-oriented, and make what you write or present clear and easy to follow. This will show your care for the audience or public at large.
• People will judge you based on your outward appearance. Be aware of this and plan for it.
• See yourself as others see you. Seek opinions from those you trust about your behavior as well.
• Be tolerant of stupidity or incompetence in other people. It is simply part of life.

V: Awaken the Dimensional Mind: The Creative-Active

• As you accumulate skills, become increasingly bold and begin to experiment.
• If your work comes from a place deep within, its authenticity will be communicated.
• Let go of your need for comfort and security. Creative endeavors are by their nature uncertain.
• Keep a notebook with you at all times. The moment any idea or observation comes, you note it down.
• Observe things. Conduct thought experiments.
• Train your mind to look at things from multiple perspectives.
• Anomalies usually contain the richest information, so do not ignore or explain them away.
• It’s obvious to observe what is present, but don’t ignore what is absent.
• The emotions we experience at any time have an inordinate influence on how we perceive the world.
• Make creativity rather than comfort your goal, and continue to be bold.
• Like an athlete, enjoy practice, push past your limits, and resist the easy way out.
• Love learning for its own sake.
• Read from many different fields, and look for interesting implications and anomalies in others that have implications in your own field.
• Whatever you are creating or designing, you must test and use it yourself.
• Embrace slowness as a virtue
• If we are not careful, however, we get locked into seeing every problem the same way.
• What really makes successful entrepreneurs is their willingness to adapt their idea and take advantage of possibilities they had not first imagined.
• Fluidity of mind is the essential entrepreneurial trait. The other essential entrepreneurial trait is supreme tenacity.
• Mastery takes years of practice, endless routines, hours of doubt, and tenacious overcoming of obstacles.

VI: Fuse the Intuitive with the Rational: Mastery

• Time x Focus = Mastery.
• Masters internalize all the individual parts, and gain an intuitive feel for the whole.
• Cultivate a greater memory capacity. Intellectually stimulating hobbies can serve this purpose.
• Mastery is not a function of genius or talent. It is a function of time and intense focus applied to a particular field of knowledge.
• The ability to connect deeply to your environment is the most primal and in many ways the most powerful form of mastery.
• To achieve mastery, play to your strengths instead of struggling to overcome your weaknesses.
• Transform yourself through practice.
• The person who has the wider, more global perspective will be able to think beyond the moment and control the overall dynamic through careful strategizing.
• Get inside the mind of others so you can understand their perspective.
• Build connections between different fields and ideas.