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Healthcare Org 1, 3.11 (R) [INFO] Topic 5. Governance and a Board of Directors

3.11 (R) [INFO] Topic 5. Governance and a Board of Directors

Topic 5. What is the relationship between governance and an effective Board of Directors? Organizational governance structures/frameworks are related to the organization's Board of Directors. Not all business structures, however, have a Board of Directors. The Board of Directors is a required governance structure for public for-profit corporations and non-profit corporations. In a non-profit organization, however, the Board of Directors is often called the Board of Trustees. Note [FUN]: Links within this section lead to external [FUN] readings not needed for the certificate work. You do not have to visit these external links. Do so only if you have the interest and the time. Note [CERT]: Pay attention to the text in bold. It just may be included on the [CERT] Lesson Three Quiz. Government organizations do not have either a Board of Directors or a Board of Trustees. Privately held corporations do not usually have a Board of Directors per se although many management experts recommend their use. Some examples of such recommendations are found in the resources listed below. You may find them interesting and relevant to this question. Each is optional; you do not have to read it. Why Have an Independent Board of Directors in a Privately Held Corporation? What Is a Board's Role in a Family Business? The Role Of Boards Of Directors In Small Companies A privately held corporation is one which does not publicly trade stock on public stock exchanges for purchase by the public-at-large. All stock is privately held. Three of the largest privately held corporations in the United States are: Cargill Koch Industries Mars Six of the largest health-related privately held corporations in the United States are: Medline HCR ManorCare Steward Health Care Life Care Centers of America Golden Living JM Smith Corporation One of the most famous cases of the failure of corporate governance in a privately held corporation is Theranos which is chronicled in the book entitled Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou. For those organizations with a Board of Directors/Trustees, an effective Board is essential for effective governance. The National Association of Corporate Directors (NACD) is a membership association for Board Members aimed at increasing Board of Directors/Trustees effectiveness. It has 19,000 members from almost 1,000 organizations. Note [FUN]: The video for Topic 5 - The Board's Role in Value Creation - is a YouTube video produced by the National Association of Corporate Directors (NACD). The video addresses the ways a Board can assess performance using financial and non-financial metrics. This section discusses: Public, For-Profit Board of Directors Non-Profit Board of Directors/Trustees Public, For-Profit Board of Directors The Business Dictionary defines a public, for-profit Board of Directors as follows: "Governing body (called the board) of an incorporated firm. Its members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at an annual general meeting or AGM) to govern the firm and look after the subscribers' interests. The board has the ultimate decision-making authority and, in general, is empowered to (1) set the company's policy, objectives, and overall direction, (2) adopt bylaws, (3) name members of the advisory, executive, finance, and other committees, (4) hire, monitor, evaluate, and fire the managing director and senior executives, (5) determine and pay the dividend, and (6) issue additional shares. Though all its members might not be engaged in the company's day-to-day operations, the entire board is held liable (under the doctrine of collective responsibility) for the consequences of the firm's policies, actions, and failures to act. Members of the board usually include senior-most executives (called 'inside directors' or 'executive directors') as well as experts or respected persons chosen from the wider community (called 'outside directors' or 'non-executive directors')." An effective public, for-profit Board of Directors is essential for effective corporate governance. There are many resources available describing the characteristics of an effective Board of Directors. Overall, the common elements in these resources are that an effective Board of Directors is one that is engaged in organizational strategic planning, holds itself and organizational leadership accountable, and is dynamic (e.g., actively recruits new members, members actively participate in meetings and organizational activities). Some resources which examine the characteristics of an effective public, for-profit Board of Directors in more detail are listed below. You may find them interesting and relevant to this question. Each is optional; you do not have to read it. What Makes Great Boards Great A More Effective Board of Directors For-Profit (Corporate) Boards The CEO Guide to Boards Three of the largest public, for-profit corporations in the United States are: Walmart (NYSE: WMT): Also of interest is the Investors website and the Corporate Governance website Exxon Mobil (NYSE: XOM): Also of interest is the Investors website and the Corporate Governance website Apple (NYSE: APPL): Also of interest is the Investor Relations website and the Leadership and Governance website Three of the largest health-related public, for-profit corporations in the United States are: United Health Group (NYSE: UNH): Also of interest is the Investor Information website and the Corporate Governance website Medtronic (NYSE: MDT): Also of interest is the Investor Information website and the Corporate Governance website Abbott Laboratories (NYSE: ABT): Also of interest is the Investors website and Governance website One of the most famous cases of the failure of corporate governance in a public, for-profit corporation is Enron which is chronicled in the book entitled The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkind. Non-Profit Board of Directors/Trustees The Business Dictionary defines a non-profit Board of Trustees as follows: "Board of directors of a non-profit organization (NPO) such as a charity, trust, or university. Members of the board are appointed (not elected) to set the policies of the organization, and appoint (and fire) senior management personnel. Under the doctrine of collective responsibility, the entire board is liable for the financial and other consequences of the organization's activities." An effective non-profit Board of Directors/Trustees is essential for effective corporate governance. There are many resources available describing the characteristics of an effective non-profit Board of Directors/Trustees. Overall, the common elements in these resources are the same as those for a public, for-profit Board of Directors (i.e., engaged in organizational strategic planning, holds itself and organizational leadership accountable, and is dynamic (e.g., actively recruits new members, members actively participate in meetings and organizational activities). However, there is usually one additional important characteristic for a non-profit Board of Directors/Trustees - members actively engage in revenue-generation for the non-profit organization. This characteristic is often summarized by the phrase "Get it, give it, or get off. " meaning that a non-profit Board members should get money for the organization (fundraise), give a personal donation, or get off the Board. There is much discussion and re-thinking about whether this characteristic is a good one. Some resources which examine this issue as well as other characteristics of an effective non-profit Board of Directors/Trustees in more detail are listed below. You may them interesting and relevant to this question. Each is optional; you do not have to read it. Should Board Members Be Required to Give? Myth: Good Board Members “Give, Get, or Get Off.” How to Be a Better Nonprofit Board Member Board Roles and Responsibilities How to Succeed on a Nonprofit Board Three of the largest non-profit corporations in the United States are: United Way Worldwide: Also of interest is the Leadership Team website Feeding America: Also of interest is the Leadership website Salvation Army: Also of interest is the Who We Are website Three of the largest health-related non-profit corporations in the United States are: Task Force for Global Health: Also of interest is the Leadership website St. Jude Children's Research Hospital: Also of interest is the Leadership at St. Jude website Direct Relief: Also of interest is the People website One of the most famous cases of the failure of corporate governance in a non-profit corporation is the Federal Employment & Guidance Service (FEGS) which is addressed in two reports: 1) New York Nonprofits in the Aftermath of FEGS: A Call to Action; and 2) Risk Management Report for NonProfits.


3.11 (R) [INFO] Topic 5. Governance and a Board of Directors

Topic 5. What is the relationship between governance and an effective Board of Directors? Organizational governance structures/frameworks are related to the organization's Board of Directors. Not all business structures, however, have a Board of Directors. The Board of Directors is a required governance structure for public for-profit corporations and non-profit corporations. In a non-profit organization, however, the Board of Directors is often called the Board of Trustees. Note [FUN]: Links within this section lead to external [FUN] readings not needed for the certificate work. You do not have to visit these external links. Do so only if you have the interest and the time. Note [CERT]: Pay attention to the text in bold. It just may be included on the [CERT] Lesson Three Quiz. Government organizations do not have either a Board of Directors or a Board of Trustees. Privately held corporations do not usually have a Board of Directors per se although many management experts recommend their use. Some examples of such recommendations are found in the resources listed below. You may find them interesting and relevant to this question. Each is optional; you do not have to read it. Why Have an Independent Board of Directors in a Privately Held Corporation? What Is a Board's Role in a Family Business? The Role Of Boards Of Directors In Small Companies A privately held corporation is one which does not publicly trade stock on public stock exchanges for purchase by the public-at-large. All stock is privately held. Three of the largest privately held corporations in the United States are: Cargill Koch Industries Mars Six of the largest health-related privately held corporations in the United States are: Medline HCR ManorCare Steward Health Care Life Care Centers of America Golden Living JM Smith Corporation One of the most famous cases of the failure of corporate governance in a privately held corporation is Theranos which is chronicled in the book entitled Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou. For those organizations with a Board of Directors/Trustees, an effective Board is essential for effective governance. The National Association of Corporate Directors (NACD) is a membership association for Board Members aimed at increasing Board of Directors/Trustees effectiveness. It has 19,000 members from almost 1,000 organizations. Note [FUN]: The video for Topic 5 - The Board's Role in Value Creation - is a YouTube video produced by the National Association of Corporate Directors (NACD). The video addresses the ways a Board can assess performance using financial and non-financial metrics. This section discusses: Public, For-Profit Board of Directors Non-Profit Board of Directors/Trustees Public, For-Profit Board of Directors The Business Dictionary defines a public, for-profit Board of Directors as follows: "Governing body (called the board) of an incorporated firm. Its members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at an annual general meeting or AGM) to govern the firm and look after the subscribers' interests. The board has the ultimate decision-making authority and, in general, is empowered to (1) set the company's policy, objectives, and overall direction, (2) adopt bylaws, (3) name members of the advisory, executive, finance, and other committees, (4) hire, monitor, evaluate, and fire the managing director and senior executives, (5) determine and pay the dividend, and (6) issue additional shares. Though all its members might not be engaged in the company's day-to-day operations, the entire board is held liable (under the doctrine of collective responsibility) for the consequences of the firm's policies, actions, and failures to act. Members of the board usually include senior-most executives (called 'inside directors' or 'executive directors') as well as experts or respected persons chosen from the wider community (called 'outside directors' or 'non-executive directors')." An effective public, for-profit Board of Directors is essential for effective corporate governance. There are many resources available describing the characteristics of an effective Board of Directors. Overall, the common elements in these resources are that an effective Board of Directors is one that is engaged in organizational strategic planning, holds itself and organizational leadership accountable, and is dynamic (e.g., actively recruits new members, members actively participate in meetings and organizational activities). Some resources which examine the characteristics of an effective public, for-profit Board of Directors in more detail are listed below. You may find them interesting and relevant to this question. Each is optional; you do not have to read it. What Makes Great Boards Great A More Effective Board of Directors For-Profit (Corporate) Boards The CEO Guide to Boards Three of the largest public, for-profit corporations in the United States are: Walmart (NYSE: WMT): Also of interest is the Investors website and the Corporate Governance website Exxon Mobil (NYSE: XOM): Also of interest is the Investors website and the Corporate Governance website Apple (NYSE: APPL): Also of interest is the Investor Relations website and the Leadership and Governance website Three of the largest health-related public, for-profit corporations in the United States are: United Health Group (NYSE: UNH): Also of interest is the Investor Information website and the Corporate Governance website Medtronic (NYSE: MDT): Also of interest is the Investor Information website and the Corporate Governance website Abbott Laboratories (NYSE: ABT): Also of interest is the Investors website and Governance website One of the most famous cases of the failure of corporate governance in a public, for-profit corporation is Enron which is chronicled in the book entitled The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkind. Non-Profit Board of Directors/Trustees The Business Dictionary defines a non-profit Board of Trustees as follows: "Board of directors of a non-profit organization (NPO) such as a charity, trust, or university. Members of the board are appointed (not elected) to set the policies of the organization, and appoint (and fire) senior management personnel. Under the doctrine of collective responsibility, the entire board is liable for the financial and other consequences of the organization's activities." An effective non-profit Board of Directors/Trustees is essential for effective corporate governance. There are many resources available describing the characteristics of an effective non-profit Board of Directors/Trustees. Overall, the common elements in these resources are the same as those for a public, for-profit Board of Directors (i.e., engaged in organizational strategic planning, holds itself and organizational leadership accountable, and is dynamic (e.g., actively recruits new members, members actively participate in meetings and organizational activities). However, there is usually one additional important characteristic for a non-profit Board of Directors/Trustees - members actively engage in revenue-generation for the non-profit organization. This characteristic is often summarized by the phrase "Get it, give it, or get off. " meaning that a non-profit Board members should get money for the organization (fundraise), give a personal donation, or get off the Board. There is much discussion and re-thinking about whether this characteristic is a good one. Some resources which examine this issue as well as other characteristics of an effective non-profit Board of Directors/Trustees in more detail are listed below. You may them interesting and relevant to this question. Each is optional; you do not have to read it. Should Board Members Be Required to Give? Myth: Good Board Members “Give, Get, or Get Off.” How to Be a Better Nonprofit Board Member Board Roles and Responsibilities How to Succeed on a Nonprofit Board Three of the largest non-profit corporations in the United States are: United Way Worldwide: Also of interest is the Leadership Team website Feeding America: Also of interest is the Leadership website Salvation Army: Also of interest is the Who We Are website Three of the largest health-related non-profit corporations in the United States are: Task Force for Global Health: Also of interest is the Leadership website St. Jude Children's Research Hospital: Also of interest is the Leadership at St. Jude website Direct Relief: Also of interest is the People website One of the most famous cases of the failure of corporate governance in a non-profit corporation is the Federal Employment & Guidance Service (FEGS) which is addressed in two reports: 1) New York Nonprofits in the Aftermath of FEGS: A Call to Action; and 2) Risk Management Report for NonProfits.