Making JV Governance Sing: How to Use a Shareholders' Committee

By James Bamford | Tuesday, October 16, 2018

ONE OF THE ENDURING tenets of good joint venture governance is the central importance of getting true decision makers from each shareholder in the same room, talking directly to each other. In many JVs, however, the actual decision makers are too senior, too busy, or otherwise unwilling to serve on the JV Board or equivalent body. As one European aerospace executive put it: “I don’t have the time – or the interest – to fly halfway around the world once per quarter to attend a day-long Board meeting spent reviewing budgets, plans, and operational performance.” 

It’s a fair point.

But when the true decisions makers operate outside the governance structure, bad things can happen. Decisions are delayed. Misalignments fester. Issues are not raised, and management is surprised. And Board members feel disempowered and not accountable for outcomes. One JV Director summed up his governance context this way: “We operate
in an Oz-like environment, where our business unit president is the Wizard, making all our decisions from behind a curtain.”

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Alternative Energy: Forces and Consequences

By Lois D'Costa | Tuesday, October 9, 2018

ONE OF THESE DAYS we are not going to need fossil fuels.” Not a routine utterance by an environmental analyst concerned about climate change, but the stunning public admission by Ali al-Naimi that alternative forms of energy are finally going mainstream.  Why does Ali al-Naimi’s prognosis of the future matter? He is the Petroleum Minister of Saudi Arabia – a nation whose wealth, power, and size are predicated on its vast reserves of oil, and also a nation that recently announced a more than $100 BN commitment to alternative energy1.  

Saudi Arabia is but a recent contributor to the global surge in alternative energy investments, which have increased by nearly 500% over the past decade2  and are expected to maintain an upward trajectory. Motivated by the multiple sources of value possible through partnerships, we estimate that companies will fulfill at least 40-60% of these investments through joint ventures and other strategic alliances3.  Consider a set of recent ventures across wind, bioenergy, solar, geothermal and other alternative energy sub-sectors (Exhibit 1).

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Joint Venture Board Attendance: Two’s Company, Thirty’s a Crowd

By Joshua Kwicinski | Tuesday, September 25, 2018

JV BOARD1 MEETINGS are the beating heart of joint venture governance. A mélange of disparate JV owner and, management wants and needs are cast into a quarterly session that shapes the future direction of the business. Structured well, a board meeting promotes candor among Directors, enables discussions on challenging strategic issues, and allows for collective decision-making in a timely fashion.

Now imagine walking into the Board meeting and seeing not only your fellow JV Directors and the JV CEO, but also the rest of the JV management team plus a dozen other faces from across the owner organization. What was expected to be an intimate session to tackle sensitive topics suddenly takes on a very different atmosphere. Candor is replaced by caution, real discussions are hard to hold, and conversations veer from strategic to tactical as the additional shareholder participants pepper JV Management with comments and questions to resolve their own issues. Decision-making and good governance suffer accordingly.

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Small Joint Venture Portfolios, Big Consequences

By James Bamford | Tuesday, September 18, 2018

HUNDREDS OF companies across scores of countries have formed three or more new joint ventures in the last decade (Exhibit 1).  The JV portfolios of some of these companies like ExxonMobil, DowDupont, and Vodafone – are enormous, representing a material portion of the company’s assets, revenue, or income. But in other companies such as Renault, Alcatel-Lucent, and Amyris, the portfolios are much smaller, often containing no more than 3 to 15 JVs. Not only are these portfolios small, but they are often a motley lot – with individual ventures scattered around the world, scoped and structured in very different ways, and governed on a one-off basis by local business unit leaders (Exhibit 2).

How should such a company think about small JV portfolio governance? 

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When a JV Must Do an (Uneven) Deal with its Parent Companies

By James Bamford | Tuesday, August 28, 2018

BECAUSE MANY JVs are closely related to – or even directly connected with – parent company businesses, opportunities often emerge for the JV to create value by working with the parents in new and uneven ways. This might mean developing new products, functionality, or technologies favored by one parent. It might mean allowing the JV to enter markets where one parent company already has a competitive presence. It might mean having the JV consolidate certain functions or
assets with one parent company in order to reduce costs or avoid future capital investments (Exhibit 1).

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Board Ballet: Choreographing the Joint Venture Board Agenda

By James Bamford | Tuesday, August 21, 2018

FOR BETTER OR WORSE, the vast majority of time and attention that JV Board Directors spend thinking about the business or asset happens within the narrow confines of Board and committee meetings. As a result, orchestrating the Board’s annual agenda is a critical tool for JV Chairs and CEOs to engage, energize, and get value out of the Board.

But this valuable time isn’t always optimized. Many Board members tell us that their meetings suffer from disorganization that seriously limits the effectiveness of their time (Exhibit 1). What’s worse is that all too often, near-term items like performance reporting, operations, budget, and other routine matters take up close to 50% of the average JV Board meeting, crowding out important issues like strategy, talent, and self-governance – if they’re even addressed at all (Exhibit 2). Similarly, not enough thought is given to the mix of time – the amount of time spent in full-Board meetings vs. breakouts, and the split between decision vs. discussion time, or formal vs. informal interactions.  

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