SESSION TITLE
Boards of Directors & Corporate Governance Track – Leadership & Governance Issues Presented by: Rick Carlson Plastic Products Company Lindstrom, MN 651.257.5980
David Diehl Prairie Capital Advisors Oakbrook Terrace, IL 630.413.5577 [email protected] [email protected]
1
Kevin Weise Bremer Investment Mgmt. & Trust St. Paul, MN 651.726.6029 [email protected]
Agenda •
PPC Overview
•
What is Corporate Governance?
•
PPC’s Journey to Improved Governance • Where we started • Where we are today • Lessons learned
2
PPC Overview • • • • • • •
Provides custom design, engineering and plastic injection molding for customer products 2 generations of family involvement 11 facilities 250+ molding machines Over 650 full time employees 30% ESOP transaction in 1989 100% ESOP in 2013 Timeline 1962: Plastic Products Company established
3
1989: PPC becomes 30% employee owned
1975: Marlene Messin-Smith becomes President
2013: PPC becomes 100% employee owned
Corporate Governance Defined •
Corporate governance is about promoting fairness, transparency and accountability
•
Four key concepts: • Fiduciary responsibility-represent and protect shareholder/plan participant interests • Duty of care-act carefully in fulfilling important tasks of
monitoring and directing corporate management • Duty of loyalty-place personal interests behind the
interests of the company • Disclosure and transparency-reveal important matters fully
and honestly to the shareholders/plan participants 4
What is the Board A Board of Directors is a body of elected or appointed members who jointly oversee the activities of a company. It is often simply referred to as "the Board". • The bylaws usually detail the number of members, how they are to be chosen and how often they are to meet. •
5
Terminology • • • •
•
6
Director - a person appointed to serve on the Board of an organization. Inside Director - a director who, in addition to serving on the Board, has a meaningful connection to the organization. Outside Director - a director who, other than serving on the Board, has no meaningful connections to the organization. Executive Director - an inside director who is also an executive with the organization. The term is also used, in a completely different sense, to refer to a CEO. Non-executive Director - a director who is not an executive with the organization.
What is the Purpose of the Board •
The Full Board’s Responsibilities: • Establish corporate policies • Hire and evaluate the CEO • Secure adequate funding for the organization • Monitor finances • Create and update a long-range plan for the organization • Evaluate mergers/acquisitions • Set compensation policies • Approve contracts as appropriate • Appoint the ESOP trustee • Appoint committee members, i.e., an ESOP Committee,
Compensation Committee, etc.
7
Position Descriptions •
The position description should include: • A statement of the purpose of the Board • Board term limits • Roles and responsibilities • A requirement to sign a conflict of interest
statement
8
Position Descriptions •
Individual Board Member’s Duties: • Attend Board meetings regularly • Become knowledgeable about the organization • Come to Board meetings prepared and informed
about agenda issues • Contribute to meetings by expressing a point of view • Consider other points of view, make constructive suggestions and help the Board make decisions that benefit the organization’s constituencies
9
Position Descriptions •
10
Individual Board Member’s Duties (continued): • Represent the organization to individuals, the public and other organizations in a positive and professional manner • Support the organization through attendance at special events and activities • Assume Board leadership roles when asked • Keep the executive director informed of relevant concerns • Maintain confidentiality of Board discussion
PPC’s Journey Board Pre-2013
• • •
5 Directors All family members Majority women • Woman’s Business
Current Board
•
• 2 inside directors • 3 outside directors
•
•
11
No substantive meetings Decisions made largely by majority shareholder
Rotating inside director • One year term
Enterprise
•
5 Directors
• Controller, Director of
HR, Plant Manager • •
Detailed and documented meetings Meet quarterly
PPC’s Journey • •
Why were changes in the board composition made? How were the Board Members selected • Diversity • Experience • Independence • Cultural ties
•
12
How has governance changed with the new structure? • Interaction with the CEO • Transparency • Accountability to shareholder and participants
PPC’s Journey •
13
Individual Board Member’s Duties to date: • CEO assessment and compensation • Evaluation of strategic initiatives • SAR program and employee incentives • ESOP committee and communications • Opining on potential conflicts of interest • Financial review • Review and discussion of ESOP valuation and policies
PPC’s Journey •
14
Integration of Board Members and Management: • Participation in annual management meeting • Social events and activities involving members of the board as well as with management • Management participation in board meetings • Successor management involvement in board meetings • Trustee monitoring of board meetings
PPC’s Journey
15
•
Performance of PPC post 100% ESOP transition • Establishment of stronger governance • Increased accountability • Strong operational performance • Significant expansion of share price • Documentation of decision making process
•
But what if future performance is not as strong?
Questions?
Thank you!
16
David Diehl Prairie Capital Advisors Oakbrook Terrace, IL 630.413.5577 [email protected] [email protected]
1
Kevin Weise Bremer Investment Mgmt. & Trust St. Paul, MN 651.726.6029 [email protected]
Agenda •
PPC Overview
•
What is Corporate Governance?
•
PPC’s Journey to Improved Governance • Where we started • Where we are today • Lessons learned
2
PPC Overview • • • • • • •
Provides custom design, engineering and plastic injection molding for customer products 2 generations of family involvement 11 facilities 250+ molding machines Over 650 full time employees 30% ESOP transaction in 1989 100% ESOP in 2013 Timeline 1962: Plastic Products Company established
3
1989: PPC becomes 30% employee owned
1975: Marlene Messin-Smith becomes President
2013: PPC becomes 100% employee owned
Corporate Governance Defined •
Corporate governance is about promoting fairness, transparency and accountability
•
Four key concepts: • Fiduciary responsibility-represent and protect shareholder/plan participant interests • Duty of care-act carefully in fulfilling important tasks of
monitoring and directing corporate management • Duty of loyalty-place personal interests behind the
interests of the company • Disclosure and transparency-reveal important matters fully
and honestly to the shareholders/plan participants 4
What is the Board A Board of Directors is a body of elected or appointed members who jointly oversee the activities of a company. It is often simply referred to as "the Board". • The bylaws usually detail the number of members, how they are to be chosen and how often they are to meet. •
5
Terminology • • • •
•
6
Director - a person appointed to serve on the Board of an organization. Inside Director - a director who, in addition to serving on the Board, has a meaningful connection to the organization. Outside Director - a director who, other than serving on the Board, has no meaningful connections to the organization. Executive Director - an inside director who is also an executive with the organization. The term is also used, in a completely different sense, to refer to a CEO. Non-executive Director - a director who is not an executive with the organization.
What is the Purpose of the Board •
The Full Board’s Responsibilities: • Establish corporate policies • Hire and evaluate the CEO • Secure adequate funding for the organization • Monitor finances • Create and update a long-range plan for the organization • Evaluate mergers/acquisitions • Set compensation policies • Approve contracts as appropriate • Appoint the ESOP trustee • Appoint committee members, i.e., an ESOP Committee,
Compensation Committee, etc.
7
Position Descriptions •
The position description should include: • A statement of the purpose of the Board • Board term limits • Roles and responsibilities • A requirement to sign a conflict of interest
statement
8
Position Descriptions •
Individual Board Member’s Duties: • Attend Board meetings regularly • Become knowledgeable about the organization • Come to Board meetings prepared and informed
about agenda issues • Contribute to meetings by expressing a point of view • Consider other points of view, make constructive suggestions and help the Board make decisions that benefit the organization’s constituencies
9
Position Descriptions •
10
Individual Board Member’s Duties (continued): • Represent the organization to individuals, the public and other organizations in a positive and professional manner • Support the organization through attendance at special events and activities • Assume Board leadership roles when asked • Keep the executive director informed of relevant concerns • Maintain confidentiality of Board discussion
PPC’s Journey Board Pre-2013
• • •
5 Directors All family members Majority women • Woman’s Business
Current Board
•
• 2 inside directors • 3 outside directors
•
•
11
No substantive meetings Decisions made largely by majority shareholder
Rotating inside director • One year term
Enterprise
•
5 Directors
• Controller, Director of
HR, Plant Manager • •
Detailed and documented meetings Meet quarterly
PPC’s Journey • •
Why were changes in the board composition made? How were the Board Members selected • Diversity • Experience • Independence • Cultural ties
•
12
How has governance changed with the new structure? • Interaction with the CEO • Transparency • Accountability to shareholder and participants
PPC’s Journey •
13
Individual Board Member’s Duties to date: • CEO assessment and compensation • Evaluation of strategic initiatives • SAR program and employee incentives • ESOP committee and communications • Opining on potential conflicts of interest • Financial review • Review and discussion of ESOP valuation and policies
PPC’s Journey •
14
Integration of Board Members and Management: • Participation in annual management meeting • Social events and activities involving members of the board as well as with management • Management participation in board meetings • Successor management involvement in board meetings • Trustee monitoring of board meetings
PPC’s Journey
15
•
Performance of PPC post 100% ESOP transition • Establishment of stronger governance • Increased accountability • Strong operational performance • Significant expansion of share price • Documentation of decision making process
•
But what if future performance is not as strong?
Questions?
Thank you!
16
