Governance: Roles and Responsibilities Presented by: Stacy Cantu, CAE August 27, 2015

Why do boards exist? American corporation statutes provide, with minor variations in language, that a corporation shall be managed by or under the direction of its board of directors. American corporation statutes provide, with minor variations in language, that a corporation shall be managed by or under the direction of its board of directors. This board-centered model of corporate governance is not only the universal norm in American corporate law, it is also the prevailing model of corporate governance around the world. Yet, viewed in a literal and narrow manner, to say that a corporation shall be managed by or under the direction of a board of directors does not say that much.

Four Rationalizations for Board-Centered Governance Need for central management. Group decision-making. Monitoring of management. Representation of corporate constituents.* *For profit only

Three Underlying Concepts Relationship of the directors to the shareholders (stakeholders). Relationship of the directors to each other. Relationship of the directors to organization’s executives.

The trustee’s fiduciary duties include: Three Legal Duties: Duty of Care Duty of Loyalty Duty of Obedience Trustees of a healthcare organization serve in a fiduciary role and provide guidance and leadership to the organization The trustee’s fiduciary duties include: Complying with mission, bylaws and policies of the organization and applicable laws Exercising ordinary care in the governance and management of the organization Remaining loyal to the organization and avoiding conflicts of interest

Duty of Care Consistently attending board and committee meetings Being informed by obtaining and reviewing appropriate data and information Participating in board discussions and decisions Exercising independent judgment Periodically examining the performance of executive and trustees

Duty of Loyalty Disclosing fully any potential conflicts of interest Complying with the organization’s conflict of interest Maintaining confidentiality as required Avoiding using organizational opportunities for personal interest or gain

Duty of Obedience Adhering to the hospital’s mission and bylaws Ensuring that all applicable laws are regulations are obeyed by individuals as well as organization Understanding all documents governing the board and operation Ensuring that board decisions further the organizations mission and comply with the scope of governing documents

Seat at the Table Community leaders bring to the board table unique skills that match with future strategic needs to improve the health of the community.

Types of Boards For-Profit Boards Not-For Profit Boards 501c3 Boards Public Boards (local, state, national)

Ten Core Competencies Establish and maintain the organization’s mission and vision. Ensure effective financial, legal, and administrative oversight.   Hire, support, and evaluate the CEO Ensure the organization has adequate funds to support its mission.  Ensure effective organizational planning.

10 Core Competencies (continued) Serve as an ambassador for the organization and enhance its public standing.   Maintain a healthy board through recruitment, mentoring, and self-evaluation. Actively participate in board and organizational activities.

10 Core Competencies (continued) Ensure the organization operates in an ethical, accountable, and transparent manner. Determine and evaluate the effectiveness of programs and services

Management or Governance Duties Management Duties Governance Duties

CEO/Board Relationship CEO’s only accountability is to full board as a body, rather than to officers or board committees CEO works with AND for the board CEO should be evaluated annually - have prior agreement on objectives - consider succession planning

Questions to Help Clarify Roles Is it big? Is it about the future? Is it core to the mission? Is it a high-level policy decision needed to resolve a situation? Is a red flag flying or watchdog watching? Does the CEO want & need the board’s support?

Best Board Meeting Ever Agenda Important to Trivial Dashboard Financials Business of the Board Executive Summaries Agreement to Discussion Practices Consent agenda Agenda that focuses the meeting on the important matters Agenda that is well thought out Don’t meet if you don’t have to meet

Best Board Meeting Ever 75% Strategic

Effective Boards Emphasize mission and values Set policy, direction and strategy Participate in education Ensure performance improvement Act as advocates, local, state and federal Focus on the big picture Foster relationships with key constituencies

Ineffective Boards Running the Hospital Investigating operational matters Personnel other than CEO Choosing equipment Staff scheduling Approving day-to-day operational policies or procedures

Questions? We appreciate your invitation! Texas Healthcare Trustees www.tht.org Stacy G. Cantu, CAE scantu@tht.org 512/465-1051