Making Alignment Real in Joint Ventures: Board Concurrence, Minutes, and the Post-Meeting Memo

By James Bamford | Tuesday, February 12, 2019

IT MAY BE AS DRY AS unbuttered toast but chew on this: Experienced JV CEOs use a variety of seemingly mundane pre-, post-, and within-Board meeting techniques to drive real, rather than perceived, alignment across their ventures. Our research has consistently shown that misalignment – whether among the owners, between the owners and management, or even within one owner company – is the single largest challenge facing joint ventures.

Every year, Water Street Partners hosts a JV CEO Roundtable in Washington DC. In our most recent roundtable, the discussion turned to how JV CEOs structure and manage Board conversations to foster alignment. That conversation unearthed three subtle practices that hold potentially broad relevance: the use of Board concurrence rather than approval, post-meeting memos, and the restructuring of JV Board agendas to drive alignment.

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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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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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Operationalizing Joint Venture Governance

By James Bamford | Tuesday, January 9, 2018

JOINT VENTURE governance is fractionally defined at deal conception – and rarely recovers from this state of incompleteness. Our research and client work has consistently shown that poor governance is a major cause of JV underperformance, and that JVs with weak governance policies and practices have materially lower performance over the medium term (Exhibit 1).1

Yes, venture legal agreements provide important guidance on governance matters such as voting rights, board size, quorum requirements, and other legalistic and administrative procedures. And yes, most joint ventures do manage, over time, to establish committee charters and a few other governance policies. 

But in most cases, these governance documents contain critical gaps, lack strategic orientation, are disconnected from each other, and are not well understood by those involved. The result: Those who oversee and run joint ventures often lack an adequately defined and shared view of how the governance is suppose to work at a practical level. This breeds misalignment, shareholder over-reach, blind spots in oversight, reporting inefficiencies, legal exposures, and other maladies. The fish stinks from the head down, as they say.

It doesn’t have to be this way

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Raising the Bar on Non-Operated Joint Venture Influencing

By Joshua Kwicinski | Tuesday, December 12, 2017

HOW DO YOU GET senior executives from five of the six largest international oil companies, a slate of mid-tier independent producers, a handful of the world’s largest chemical companies, and one of the world’s largest mining companies – representing a portfolio of over 1,000 non-controlled JVs – into a room together in London? A global conference on sustainable development or a parliamentary inquiry would not be bad guesses. But last month it was for a different occasion: Water Street Partners’ annual roundtable on joint venture portfolio governance.

This year’s agenda was structured around three topics: HSE risk management in non-operated joint ventures, defining and tracking performance as a non-operator, and conducting strategic reviews of non-operated assets.

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Director Assessments – Common Sense but Not Common Practice

By David Ernst and Molly Farber | Tuesday, November 28, 2017

CORPORATE governance has been in the spotlight. Boards have been busy addressing issues related to executive compensation, cyber threats, enterprise risk management, and in general, seeking to keep the raiders and activists at bay through diligent work. As they do this important work, virtually all corporate Boards conduct some type of annual assessment of the Board as a whole.

You would think that individual Directors – the stuff of which good Boards are made – would be subject to a similar, institutionalized process of recurring assessment and feedback, right?

You would be wrong.

Only about one-third of public company Boards report a recurring, formal process for individual Director assessments and feedback (Exhibit 1). Moreover, few Directors believe their Boards are effective at providing feedback to individual Directors . Annual Director elections –used by 92% of S&P 500 Boards – are one “market signal” – but these elections are not a substitute for recurring feedback on individual Directors.

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