CFC’s Webinar Series for...

CFC’s Webinar Series for Directors

Three Key Financial Issues for Directors

Financial Webinar Series

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CFC’s Webinar Series for Directors

Three Key Financial Issues for Directors


“Students who took all or part of their

class online performed better, on

average, than those taking the same

course through traditional face-to-face

instruction.”

U. S. Department of Education: 2009


E-learning Tips

• Be anti-social: at least for now.• Turn off your cell phone or phone.• If it helps, take notes during the session.• Write down the questions you want to

ask.

• Accept different opinions, but don’t hesitate to question them.


When did the first distance learning program with formal accreditation take place?

• 1999

• 1728

• 1858

• 1969

Polling Question


Today’s speakers include:

The Audit Committee Fred Anderson: CEO/President, NH Electric Co-op

Equity Management Rod Crile: CFC Regional Vice President

CEO Succession

Planning

Caroline J. Fisher, PhD: Principal, Fisher Consulting Group,

LLC


Fred Anderson CEO/President, NH Electric Co-op

The Audit Committee


Audit Committee

• The Role and Responsibility of the Audit Committee.

• Benefits of an Audit Committee to the

Co-op Director’s and the Members.

• Best Practices of Audit Committees.


What is the purpose of the

external audit?

• Detect Fraud.

• Prepare the Financial Statements.

• Check that staff is doing its job accurately.

• Express an opinion on the financial statements.


Rod Crile

CFC

Regional Vice President

Equity Management


What was the average equity level

50 years ago?

• Less than 10%

• About 15%

• About 22%

• Greater than 30%

Polling Question


Equity Level History

1961 median equity level = 22%


Equity Levels 2009 KRTA Data

0

5

10

15

20

25

30

35

40

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Equity Level

Fre

qu

ency

(Nu

mb

er o

f Co

op

erat

ives

)

Median The 2009 median equity level is 41.26%

Upper Quartile (25% of all distribution systems have equity levels 52% or higher)

Lower Quartile (25% of all distribution systems have equity levels lower than 34%)


Equity Management

• What has the greatest impact on equity

– Margins

– Capital Credits

– Growth

• How to manage equity

– Financial policy statement


What Causes Equity to Change

Total Assets10%

MarginsCapital CreditsGrowth

40%

60%

40%

60%


Equity Management

• Create a financial plan

–Available on CFC website

– Financial metrics

• Coverage ratio

• Equity ratio

• LT debt

• Director responsibilities

• Management responsibilities


Caroline J. Fisher, PhD

Principal, Fisher Consulting

Group, LLC

CEO Succession

Planning


THE ROLE OF THE BOARD OF DIRECTORS: Ultimately,

what is the Board’s responsibility when it comes to CEO succession?

It is the Board’s responsibility to:

•Ensure there is a proactive and future focused plan for CEO replacement in the event of an unplanned departure, a retirement or other circumstance that results in a vacancy at the CEO level.

• Ensure that the organization continues to function operationallyand move forward over the course of time – and that it ultimately maintains strength, sustainability and performance for the shortand long term.


CEO SUCCESSION PLANNING: The big challenge; the

big opportunity

• “One of the most important decisions that a board of directors must make is the selection of the CEO of the company.” (Rock Center for Corporate Governance – Stanford Graduate School of Business, 2010)

• 44% of companies do not have a formal CEO succession plan in place. (National Association of Corporate Directors, 2009)

• 39% of corporate directors are not satisfied with their company’s succession plans. 53% believe their company should dedicate more time to this topic. (NACD Public Company Governance Survey, 2009)


CEO SUCCESSION PLANNING: The big challenge; the big opportunity

• “One of the most uneasy discussions that boards and (CEO’s) have is the issue of succession planning. The reason boards and (CEO’s) avoid this discussion is because they really don’t know what to say or do.” (Succession Planning: The Elephant in the Room, Community Driven Institute, 2006)

• “Our CEO succession is the biggest opportunity before us.” (CEO –San Francisco based technology company, 2011)


THE BIG PICTURE: Three Tiers to Effective CEO Succession Planning

CRISIS SITUATION (1 – 3 months): (Immediate appointment

to the CEO role in the event of an unplanned CEO

departure)

TRANSITION SITUATION (4 – 6 months): (Appointment of a

transitional leader/manager that will fill the CEO role while a permanent CEO, internal or external, is chosen)

PERMANENT CEO APPOINTMENT (Preferably 5 years or

longer): (Selection of a leader/manager that will

permanently hold the CEO role and move the organization

into its next chapter and phase of evolution)


CEO SUCCESSION PLANNING: So what’s the problem?

• “The problem with most succession planning in companies is either: 1) A plan simply doesn’t exist; or 2) The plan is based strictly on the past, not on the future. With the industry and marketplace changing at lightening speed, how can we presume that yesterday’s leadership criteria will truly move us forward?” (Albert Thomson, CEO - Midwest Manufacturing, 2010)

• “Proactive, future focused succession planning – from the CEO level to the front line management positions – will determine our ability to move into the future… or will ensure we don’t exist five years from now.” (CEO – San Francisco based technology company, 2011)


• “Past paradigms for success in the business world will have little or nothing to do with future success. We must have the courage anddiscipline ourselves to look forward – not back – when thinking about tomorrow’s leaders.” (Joel Barker, Futurist - 2006)

• Until recently, the most overlooked pre-requisite for CEO candidates was an understanding of culture and leadership development.

CEO SUCCESSION PLANNING: So what’s the problem?


QUITE A STATEMENT...

Davos, Switzerland

Reshaping and guiding corporate culture

and employee behavior is the second most

important CEO priority, second ONLY to

setting corporate vision and strategy.- Annual Meeting of the World Economic Forum, 802

CEO’s participating from North America, Europe, Asia and Latin America

Source: PricewaterhouseCoopers

DENISON’S CULTURAL MODELA Model of High Performance & Sustainable Success

CULTURE MATTERS: Linking culture to performance & results

Innovation &Customer Satisfaction

StablePerformanceOver TimeProfitability ROI, ROE

Operating PerformanceQuality

Employee Satisfaction

GrowthMarket Share

© Denison Consulting, LLC. All Rights Reserved


An important perspective…

From the CEO of IBM…

“I came to see, in my decade at

IBM, that culture isn’t just one aspect of the game - it is the game.”

- Louis Gerstner, “Who Says Elephants Can’t Dance”


SO WHAT’S A BOARD TO “DO”?

When it comes to CEO succession

planning, the Board should:

• Learn about culture

• Initiate discussion

• Identify criteria for great CEO leadership

• Create a three-tiered plan

• Hold accountable

• Be brave


• Leave culture out of the conversation

• Micro-manage – PART 1

• Micro manage – PART 2

• Leave it to chance

SO WHAT’S A BOARD TO AVOID DOING?

When it comes to CEO succession

planning, the Board should NOT:


Now…let’s turn it over to our audience!


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