International Directors Programme (IDP)

Improving the Competences of Directors

Contacts: ludo.van-der-heyden@insead.edu
tim.rowley@insead.edu
sylvie.bergeron@insead.edu
Outline

• A few stories: What it is and why it is important?

• Institutional context: INSEAD Corporate Governance Initiative
(ICGI) launched in 2009 www.insead.edu/governance
• International Directors Programme (IDP): launched in Jan
2011 - first module July 2011

2
What have we seen over the last decade?

• The great financial scandals: Enron, Parmalat, Tyco

• Corporate governance reform in US: SOX - failure?
• Toxic assets, Toxic Madoff, financial meltdown
• Coming to Europe: UBS, Fortis, RBS
• Nationalization & governance reform in the UK (& US)
• Norway (& France) requires that 40% Board members
be women - lowering stock prices in Norway
• China moving from US Treasury bonds to foreign
investments in commodities and treasuries
• Europe: the great governance experiment
• Most other Asian countries “flexibily” watching
• Japan continuing as before - and receding further
Implications

• Society wants to see more responsibility at the top

• Directors are increasingly personally liable (out of proportion to
personal decision-making authority)
• Investors want less conflict of interest - more supervision and, of
course, sustainability
• Society and regulators also want more diversity
• Business complexity has never been greater
• Nor has environmental complexity
Yet :
• Board competences remain unchecked
• Boards remain largely national
• When boards are effective, it is rarely known
A story: LVMH vs Hermès
LVMH :
• Very profitable organization in luxury sector
• History of aggressive (family) shareholder moves (Boussac, Yquem)
• Takes 17% shareholding of Hermès through derivative swaps
• Tells P. Thomas, Hermès Chairman, the day of the announcement
• B. Arnault states he will not interfere with Hermès, but can add a lot of value to
the firm (stop selling in duty free and apply LV exclusivity)
• Just fired Galliano from Dior for Nazi rant
Hermès :
• CEO immediately rejects offer
• Family unites w/o discussion against “hostile and illegal move”
• Galliano dismissal comforts the family in their views
• B. Arnault will wait “one or two centuries if necessary”
• Hermès makes more profit than LVMH
K. Lagerfeld:
• “If you don’t want to be taken over, don’t put your business in the public
market”
What is governance ?
Roles :
• Taking Responsibility (shareholders, employees, society, personal …)
• Preserving and Creating Value
• Direction Setting for the Future
• Controlling Execution
• Monitoring Financials and Rewarding Shareholders
• Integrating Risk - What could go wrong?

Ambiguities :
• Whole vs the units
• Profit vs growth
• Short vs Long run
• For Family Business: Family vs Business

Challenges :
• Manage ambiguities
• Time
• Information
INSEAD Corporate Governance Initiative - ICGI

Shaping INSEAD’s contribution to corporate governance :

- International reach: “The Business School for the World”
- Broad scope :
Private and publicly listed and government firms
For-profit firms as well as not-for-profit
Entrepreneurial, family, public, institutional investors,
partnerships
- Three synergistic dimensions :
Research, Teaching, Institutional Service

7
INSEAD’s Governance Initiative (ctd)
Why valuable for INSEAD?

Broaden our Reach: Connecting at chair and board level

Complete our Mission : Training directors (after MBAs,

Execs, PhDs)

Improve our Competences : Understanding governance is an

integral part of understanding business

Deepen our Pedagogy : ASK more than TELL; filling the time
and information gap

Make an Institutional Commitment : Governance is multi-

disciplinary and needs to be institutionalized at ‘The Business
School for the World’
8
ICGI RESEARCH : Ongoing (or « en vogue »)

Business performance through governance :

from compliance and control to
competitiveness and mutual engagement

Building the
Team at the Economic Effective Engaging all
Top Profit and Goal Setting Stakeholders Governing
Strategy Dealing with the Family
Creating value Finance at
formulation and governments, Business
as a supervisory Board Level process, regulators,
board, Audit committee’s Family-owned
Building shared Defining social
Chairman-CEO role, versus public
understanding, responsibility
relationship, Profit allocation, firms,
Dealing with and values,
Appointments, Risk assessment, Learning from
activist Managing
Independent Reporting and family boards,
shareholders reputation, ethics
directors, disclosure, Board and institutional and media
CEO succession responsibility investors pressure
evaluation,
compensation

9
IGI TEACHING: Existing & Under Development
Existing:
• MBA Mini-electives (2) on Corporate Governance :
Urs Peyer: Financial & economic aspects
Ludo Van der Heyden: Board & organizational apsects
• Governance modules in e-MBA and EDP (AMP, IEP)
• Family Enterprise Challenge (FAME - Short week)

Under Development:
• International Directors Programme : main point for rest of today
• Topical Modules (3 to 4 days) on special topics:
Finance for Directors
Competitive Strategy for Directors
M&A for Directors
Advanced Risk Management for Directors
10
INSTITUTIONAL SERVICE: Dissemination

• INSEAD web site: www.insead.edu/governance

• Contributions to governance debate : Articles, conferences,
events
e.g. INSEAD Governance Meetings :
- London, ABI, June 2010: “CEO Compensation”
- Abu Dhabi, INSEAD, Nov 2010: “In search of common
practices”
• Initiatives enhancing practice of governance and our
position in that space
E.g. governance certification programme, awards etc.

11
 Faculty with interests in governance (incomplete)
Economics Finance
• Ilian Milhov • Jean Dermine
At Large • Bernard Dumas
• Craig Smith • Harald Hau
• Gabriel Hawawini
Strategy and leadership • Pierre Hillion
• Fares Boulos • Kevin Kaiser
• Laurence Capron • Massimo Massa
• Guoli Chen • Urs Peyer
• Yves Doz • Theo Vermaelen
• Javier Gimeno
• Jean-François Manzoni Entrepreneurship and Family Enterprise
• Subramanian Rangan • Morten Bennedsen
• Randel Carlock
Accounting • Henrich Greve
• Steve Monahan • Ludo Van der Heyden (Academic Director)
• Gilles Hilary
• David Young
12
International Programme for Directors (IDP)
Goals of the Programme:
• Review and improve Director Responsibilities, Skills and Competences
(in contrast to Executive skills)
• Accompany Change in Mindset: from execution to supervision
• Contribute to the Internationalization of Boards (and of companies at the
top)
• Establish the Competence Set of Directors - and of the Top of the
Organization
• Provide a moment for individual reflection and self-assessment: What is
my Role? What director can I be? What are my challenges/gaps?
• Develop a credential : INSEAD Certificate in Corporate Governance for
those attending all modules, and sit an oral examination demonstrating
mastery of board skills
• Complete INSEAD’s offering in business

13
International Programme for Directors (IDP)
Target participant profile:
• Chairs and Non-Executive Directors of listed corporations and
companies of reasonable size
• CEOs, COOs, CFOs and other C-suite Executives
• Family members and controlling shareholders of larger family
and private boards
• Government and non-profit organisations and agencies
• Sr professionals from the institutional investment community
• Sr partners of professional firms who serve boards and their
committees
• Sufficient business, board, and/or investment experience - a
matter of credibility
14
International Programme for Directors (IDP):
Content
Module 1: Creating & Safeguarding Value (July 7-9 2011 / Jan 19-21 2012)
The Governance Challenge
Evaluating the Growth Strategy
Evaluating Sources of Financial Value Creation
Understanding and Managing Investors and Shareholders
Fairness in the Boardroom
Difficult Conversations

Module 2: Implementing Effective Board Processes (Sept 15-17 2011/April 12-14 2012)
CEO Oversight: Selection, Evaluation, Succession
Compensation at the Top: C-Suite and Board
Multi-cultural Board Dynamics and Conflicts
Effective Audit Committees
Red Flags in Financial Reporting

15
International Programme for Directors (IDP):
Content (2)

Module 3: Managing Critical Events (Nov 24-26 2011 / June 14-16 2012)
Interpersonal Dynamics in the Board Room
CEO-Board Dynamics and Conflicts
Effective Communication and Information Processes in the Boardroom
Crisis Management
Family Governance
Role of the Director - a final Self-Assessment: What kind of director do I aim
to be and can I be?

16
 INSEAD International Directors Programme (IDP) - Actual schedule
Cycle1/Module 3: Managing Critical Events
Thursday Nov 25: Friday Nov 26: Saturday Nov 27:
Setting Direction Setting Direction Setting Direction
Module 3 Setting Boundaries Setting Boundaries Setting Boundaries
Board Effectiveness Board Effectiveness Board Effectiveness

Interpersonal Dynamics in the Decision-Making Feedback to Directors on

Board Room in the Boardroom basis of behaviour during
Morning simulation - and of other
The Nardelli Case Biases, rules, experts, material
process, validation
CEO-Board Dynamics Effective Communication
& Conflict Director Agenda Setting :
in Board Room
Afternoon
My self-assessment and
CEO presents ERP investment improvement agenda
Simulating a Board
(video clips)
Meeting
DIRECTORS LIVE:
Simulation ctd
Conflict on the (Family) Board Graduation
Evening Session with first discussion over & Closing Dinner
(or lunch as appropriate) A real story dinner about directors’ (partners invited)
agenda

Led by
Led by Faculty
Practitioner/Guest
International Programme for Directors (IDP)
Some frameworks fundamental for Directors and Boards :
• Managing my TELL vs ASK
• Difference between (single) business and multi-business
corporation
• Fundamentals of value creation in companies
• Symptoms vs Problems: Poor results often are a symptom, the real
problems being poor process and/or poor behaviour
• Effective communication and feedback (incl. difficult
conversations)
• High performance team ingredients: GVR.RP.I
• Solidarity Platform - GVR : Goals, Values, Rules of the Game
• Performance Component - RP : Roles, Processes
• Vital Ingredient - I : Individual Commitment

18
International Programme for Directors (IDP)
Other Characteristics :
• 3 Partners : ILA (Luxemburg Institute of Directors), Russell Reynolds
Associates, PwC
• Substantial input from practice and senior directors: Testimonies,
Experts, Resident Directors, …
• Directors (first 2 cycles): Tim Rowley (Visiting Prof at INSEAD,
Director of National Governance Programmes at Univ of Toronto), Ludo
Van der Heyden (Mubadala Prof of Corp Gov, Director INSEAD
Corporate Governance Initiative)
• Tuition Fee: 12,000 Euros
• Follow-up Modules (tbc in Fall 2011): Finance for Directors,
Competitive and Industrial Strategy, M&A and Partnerships, Advanced
Risk Management etc.

19
International Programme for Directors (IDP)
Going to Market :
• INSEAD High Level Networks: Board, International
Council, ICGI high-level list
• Board Chairman and Chairs of Nominating Committees
(personalized mailing): Screening through Board-Ex
• Alumni (mailing): MBA, AMP, IEP, Avira
• Websites: INSEAD, insead/governance.edu, Executive
Education, (cross-referencing such as proposed by Deloitte)

20
International Programme for Directors (IDP)
Items for discussion ?
• Questions on the programme. Your insights.

What do you like about the offer ? (that we absolutely ought to
keep in future versions)

What would you emphasize more or add (that is currently
missing) ?

• Horror stories: Forward your favorite “board horror

story” to ludo.van-der-heyden@insead.edu

• Candidates: Willing to enrol? Send applications to

murielle.picard@insead.edu romuald.gallet@insead.edu

21
 Thank you !!!

We want your active support!

22