Investment in Charity Governance is not an optional extra

We have carried out numerous board evaluations of organisations in many different sectors, including, commercial organisations, hospitals, membership bodies, statutory organisations and regulatory bodies to name but a few.

One of the common threads across all sectors is the lack of investment in board development and senior leadership in the organisation. The same applies to charities.

Charities are by their nature frugal with expenditure that does not contribute directly to their mission and that is understandable.

However, investment in the development of a charity’s board and leadership should be viewed as a necessary investment rather than a cost and one which increases an organisation’s effectiveness by strengthening its skills, capacity and knowledge base.

The Australian Charities and Not-for Profits Commission (ACNC) supports charities’ efforts to invest the appropriate time and resources in the development of their boards and leaders.  The ACNC also sets out to ‘support and sustain a robust, vibrant, independent and innovative not-for profit sector’.

The Italians say that a fish rots from the head, so if the investment is not made in the board, how can one expect the organisation not to be affected by a poor board and leadership

Undertaking meaningful investment in a charity’s board and leadership is a vital component of sound charity governance that helps to improve skills and foster trust and confidence in the sector. 

There is drive towards creating the conditions to develop charities of scale, which should enable them to be more sustainable. To facilitate this, prudent investment by charity’s is required in the development of its board and leaders.  In my view this is not an optional extra but should be an ongoing activity to increase the ability of the organisation to govern and lead.

This is a defendable cost, which many charity boards may be reluctant to commit to for perhaps fear over adverse public reaction that often accompanies these types of investments.

A charity that does not meaningfully invest in the development of its boards and leaders is unlikely to be particularly robust, sustainable or innovative. The foundation of public confidence in charities is based on evidence of sound values, a credible purpose, good internal processes and skilled staff and board members.

The governance training carried out by The Carmichael Centre, Charities Institute Ireland and The Wheel is commendable. But more investment is required by the sector to ensure all charities, their boards and leadership can avail of ongoing and meaningful development.

Lack of investment in boards and the leadership will eventually lead to dysfunctional organisations and possible extinction.

Charites need to be able to provide the evidence to the public at large, donors and funders that they are investing in governance and not merely engaging in a box ticking exercise.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

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David W Duffy – is the author of “A Practical Guide for Company Directors” published by Chartered Accountants Ireland 

Mind the Competency Gap – NED vs Executive Director

Deciding to become a non-executive director should not be done on a whim.  It’s a serious statutory role with specific legal and regulatory responsibilities.

While there may be a certain attraction about serving on a board, it’s not hard to understand why. This could include the perceived status, sitting around the board room table with ambitious like-minded peers, new professional relationships, the development opportunities it offers, access to leaders etc. If you are providing your talents to a charity or indeed an unpaid post on a state board, the satisfaction and perhaps the glow of giving back can be very rewarding.

However, before you get carried away and say yes, take a step back and consider the following.

The skills and experience required of a NED director are very different from being an executive director.  Don’t underestimate the gulf between the two.

A phrase to bear in mind on the role of a NED is “Nose in but fingers out”.  That is NED’s should not get involved in the day to day operations of the business unless there is some issue that is putting the business at risk.  If you are joining a board with only executive experience and you have not been a NED before, you may find it difficult to contribute at the right level, as the operations may currently be your comfort zone.

A NED is there to look at the big picture, the macro economic environment, company policy, strategy and setting the tone from the top in terms of ethics and values.  Executive directors are there to manage the business, implement strategy and focus on the operational.

So, if you are asked to become a non-executive director, you must be comfortable that you are bringing some unique value in terms of skills and experience to the Board and can step up to the NED plate.  Maybe that is why you were asked. If you have skill deficiencies in specific areas, do something about it beforehand, enroll for a course and get the required knowledge.

Next step is to be sure that you believe in the mission and vision of the organisation.  If so great, if not bail out now.

Don’t forget to check out the values, governance and strategy of the company, talk to the Chair, current and former directors, the CEO and take a view. Make sure you respect the other directors and would feel comfortable working with them.

Lastly conduct due diligence on the company, its financials, its D & O, and if it is looking hunky dory, press the GREEN button, but if not, press the PAUSE button and think ……is this for you. If you have any doubt, say NO.

 At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and practical for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

The Board’s Has A Critical Role In Shaping Culture

Culture eats strategy for breakfast – this phrase is an absolutely reality. Actually, culture eats strategy for all meals – breakfast, lunch and dinner. Culture is a critical enabler of strategy and can make or break an organisation, so culture can’t be simply ignored. Several scandals have hit the corporate sectors in the last few years and is a testimony to the fact that corporate culture has to be taken seriously and should be placed high on board agenda. 

Director’s responsibilities include giving the organisation a strategic direction, protecting its reputation, engagement with wider stakeholder community, ensuring compliance and fit for purpose governance to name a few. 

For the majority of Non-Executive directors, is hard for them to get a real sense of the organisation’s culture. Most of the directors are dependent on management for inputs into culture. In this blog we will highlight some diagnostic tools which will help directors to analyse and improve culture at an organisation level.

Culture is highly topical and the board’s oversight in this area is absolutely critical for corporate governance. Culture is the root cause of most corporates’ failures. Boards need to set the tone from the top to create a culture that’s is aligned with the purpose, values, behaviors and strategy of the organisation. 

Culture is seen as a nebulous concept by many, yet it is arguably the most important factor to drive board effectiveness and overall company’s success. Board will have to create or support a culture that is aligned to the strategy of the organisation with a tone that is set from the top.

The focus on culture in an organisation will largely depend on the quality of board and management team. Putting in place the processes to enable the board to understand and monitor culture is key to achieving this. A well-managed, fit-for-purpose organisational culture aligned to a clear vision and strategy, can make the difference between growth and stagnation in an increasingly connected and competitive marketplace.

Last year we worked with one our clients to contribute towards the developments of a guide – A FIVE-STEP APPROACH TO CONSIDERING ORGANISATIONAL CULTURE. This HOW TO guide highlights the steps which directors can use as a starting point to understand their board and organisation’s culture. 

The Five-Steps to analyse and improve organisational culture are:

  • Assess the Current Culture
  • Evaluate its Effectiveness
  • Define the Target Culture
  • Identify Gaps 
  • Close Gaps 

The organisation’s Mission, Vision and Values will be at the centre of the spectrum while considering the steps.

The guide provides five lenses through which directors can get a sense of the organisation’s culture internally. 

The five lenses are 

  • You (an individual in your organisation, most likely a board member or a management team representative, who will view and assess its culture through a personal lens)
  • Board
  • Management
  • Operations 
  • External Shareholders 

The focus by lens and the tools that can be used are as follows:

You 

  • Personality Types –  Myers–Briggs Type Indicator tests personality assessments through individual feedback from colleagues and friends
  • Question your Assumptions – Ask yourself tough questions. Anticipate and face challenges you will encounter during your assessment.

Board

  • Review of strategic planning process to ensure cultural alignment is core
  • Board evaluations and related reports 
  • Social media reports on the organisation and the board 
  • 360˚ individual board member evaluation feedback 
  • Board focus group on organisational culture 
  • Review of board policies and minutes 
  • Review board competency and skills matrix

Management 

  • Senior management team behavioural survey 
  • Listening to external stakeholders – customer, supplier, regulator, and investor feedback. 
  • Commission a culture audit of the organisation 
  • Review management performance appraisals 
  • Review exit interview reports 
  • Review the reward structure (does it reward behaviours and not just outcomes?) 
  • Assess the correlation between objective achievement and staff satisfaction
  • Review internal audit findings for instances of management override of internal controls or policies

Operations

  • Employee focus groups 
  • Employee trust or sentiment surveys 
  • Review exit interview reports 
  • Review dignity at work and speaking up reports (anonymised)
  • Review results of customer focus groups and other sources of customer feedback 
  • Review internal audit findings for instances of breakdown in operational internal controls or non-adherence to policies

External Stakeholders

  • Surveys of external stakeholders – customers, suppliers, regulators, investors and others 
  • Review media coverage about or including the organisation 
  • Review how the organisation is portrayed on social media 
  • Undertake external stakeholder focus groups or interviews 
  • Review customer complaints reports 
  • Carry out market research into the organisation’s profile and reputation
  • Review regulatory inspection reports

To learn more about the steps download the How To guide from Chartered Accountants Ireland Governance Resource Centre

One of the HBR articles has described Culture as –  Culture like the wind. It is invisible, yet its effect can be seen and felt. When it is blowing in your direction, it makes for smooth sailing. When it is blowing against you, everything is more difficult.

It is high time for directors and boards to understand their oversight duties in relation to culture and work in tandem with the management team to make the culture appropriate and aligned to the strategic objectives of the organisation. 

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and practical for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

The Hallmarks of an Effective Board

It can take a number of years to build a fit for purpose board that has the leadership and dynamism to support the Executive Team.

The most important element in any governance structure is the Nominations Committee or Talent Acquisition Committee.  The main objective of this committee is to ensure that the Board has the horsepower to set the future direction for the business and to help it make the right decisions.  If this committee does not do its job, then the board and the organisation risks stagnating or just slowly dying for want of new ideas, constructive and independent challenge of each other and the Executive.  

The appointment of new board members should increase the share price if the company was listed.  New appointments should be strategic and not tactical. By this I mean they must bring a particular skills and experience to the party that will have a real and tangible impact at Board level.  This could include the world of digital, geo-political insight, capital raising, or a knowledge of a particular sector such as offshore life assurance. Ad hoc board appointments at short notice is not a good sign of good corporate governance.

So, assuming the board is populated with the right talent, what other measures can it take to improve its effectiveness. Here are a few examples.

  1. Conduct regular external board evaluations to get an external perspective on how effective the Board as a collective is doing. 
  2. Conduct 360 reviews of the directors.  This can have a very positive benefit in that each director provides a view to all the other directors on what their strengths are and specifically where they can improve.  
  3. The Board should assess annually the information that it is being provided with by the executive to make sure it can do its job.  Few organisations do this in our experience.
  4. The Board should have an annual workplan for the board and it’s committees.  This will help in setting the agendas for the year, but also it should also aim to ensure the board spends enough time on the future by delegating as much as possible to its committees.  A rule of thumb is that Boards should aim to spend on average 40% of their time on the future
  5. A Board should hold an Awayday at least once a year to reflect on its strategy in some depth and to focus on specific issues such as looming regulation or competition issues. It also should be used to get to know the executive better and to build trust in their capability.  The Awayday also provides an opportunity for the directors to get to know each other better.
  6. Invest in the capability of the Board through a well thought through professional development programme.  The Board Evaluation may well indicate what the directors might like, but they should be asked as well. Topics will depend by company, but the programme could focus on new regulation and compliance requirements, sustainability, diversity and inclusion etc.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and practical for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

A systematic approach to governance narrows the scope for ambiguity.

Recent public commentary by the Government has highlighted the need for clarity on the governance structures of organisations funded by the taxpayer and in particular who’s in charge. 

If one decides to go on a board, then having clarity on the governance structures is critical to the effective functioning of a board and the role that one can play. The board members that I have come across join boards for differing reasons. They are dedicated and committed people, keen to do the best possible job, eager to serve on an effective, successful and respected board. But many join boards without knowing and having the appropriate clarity about their roles and the other various roles on a board. This can be detrimental to its functioning.

Like any organisation there should be a rule book that sets out precisely how the board should function.

It can be called a Governance Manual, Governance Handbook,  a Board Charter or Board Manual, or anything else that does what it says on the tin. This rule book must exist regardless of the legal status of the organisation.  Without some form of rulebook, board dysfunctionality will quickly arrive at the door.  

If this dysfunctionality is played out in the media, it will impact the integrity, brand and reputation of the organisation and that of the individual board members.

A well written rule book guarantees nothing.  It needs to be backed up by the right behaviors and values, but that’s a discussion for another day.

The objective of the rule book to provide clarity on the roles and responsibilities around the table and how the board should work. 

The Governance Handbook  – typical high-level contents include:

  1. Introduction
  2. Governance structure
  3. Board role and functions 
  4. Board committees and their charters
  5. Matters reserved for the board’s decision
  6. Chairperson’s, Non-Executive Directors and Executive Directors roles
  7. CEO’s role
  8. Board code of conduct
  9. Conflict of interest and disclosure policy
  10. Other key board level policies – e.g. Risk Management, Financial Management, Reserves, Crisis Management, etc.
  11. Board member induction and ongoing development
  12. Board renewal and rotation policy
  13. Attendance Policy 
  14. How the board works
  15. Strategy & Risk 

A good rule book assists good governance housekeeping and helps to avoid ambiguity. It’s not rocket science!

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and practical for those who need to know.

We offer the following services to help you in your governance journey:

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

Our Governance Predictions for 2020 and beyond!

Boards of the future will need to be learning boards that are highly adaptive and agile to steer their companies through uncertain times that are increasingly dominated by fast changing geo-political change, business models impacted by a tsunami new technologies.

Increased diversity and inclusion in the boardroom will continue to be a key trend markets across the globe, but needs to happen faster

The Hampton-Alexander targets 33% of women to be on the boards and leadership teams of FTSE 100 companies by 2020.  Ireland has 31% female representation on Board, as per a study conducted by EY Ireland. 

Female representation in the boardroom has been an area of focus across the globe, be it with regulators, institutional investors or governments. While increasing female representation in the boardroom is critical, diversity is more than gender. Boards should start looking at the broader side of diversity – diversity of skills and thinking to advance the company’s objective in uncertain times. 

Cyber risk will be an increasing area of risk for organisations as data becomes the new oil 

Boards need to understand the importance of cyber risk as an important oversight role. Directors need to keep themselves informed of the growing cyber security issues which can affect the entire organisation in the complex evolving world of technology and data. 

New business models driven by new technologies need to be front and centre on  the boardroom agenda to ensure business viability

Boards will need to understand the use of evolving technologies such as Artificial Intelligence, Machine Learning, Data Analytics and Blockchain for the greater good of business. The board’s knowledge in these areas will help them guide the management to consider the use of the new technologies in their business strategy. New technologies can also be leveraged by the boards to assess risk and develop a prudent risk management framework.

Climate change and sustainability are under the governance microscope like never before

Boards should include sustainability and climate change as an important item on boardroom agendas and their business strategies.  Several institutional investors like the Norwegian Sovereign Wealth Fund, BlackRock, Vanguard and Fidelity have changed their investment and voting policies in response to the changing public sector and private investor outlook in relation to this topic. 

There needs to be a sea change in boards approach to Continuing Professional Development (CPD) to ensure directors know what they need to know

Continuing Professional Development (CPD) will be a key tool to improve overall board effectiveness. Topics could include: regulation and compliance, updates on governance, risk management, diversity and inclusion and sector specific updates. 

Innovation is a top agenda item 

Innovations should be a top agenda item in the boardrooms as it is often seen as a key metric to measure organisation’s success. Boards should have a collective view on innovation and directors should be able to understand and deliver on areas of innovation. 

Company culture is a the glue that will make organisations more sustainable and attractive to work for

Culture is seen as a nebulous concept by many, yet it is arguably the most important factor to drive board effectiveness and overall company’s success. Board will have to create or support a culture that is aligned to the strategy of the organisation with a tone that is set from the top.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and practical for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

Disrupt or Oblivion – Challenges in the Digital Age?

The famous saying ‘Perform or Perish’ has made way to a new phrase ‘Disrupt or be Disrupted’. 

In today’s VUCA world, digital disruption has impacted nearly all sectors and markets. It will be interesting to understand how the boards tackle this technology conundrum.

Directors should look resort to look-in, look-out and look-forward approaches, to stay up to date on the latest developments related to emerging technologies and overall innovation.

A study of C-suite leadership in Europe and US has got an overwhelming consensus that a majority of Fortune 500 companies will be wiped out in the next 10 years or so if they don’t disrupt.  

In 1958, corporations listed in the S&P 500 had an average life of 61 years. By 1980, numbers from research firm Innosight reveal that the average stay had declined sharply to 25 years. In 2011, the average tenure dropped to 18 years. 

Research shows that since 2000, 52 percent of companies in the Fortune 500 have either gone bankrupt, been acquired, or ceased to exist as an outcome of digital disruption. At the present rate of churn, Innosight’s research estimates three-quarters of today’s S&P 500 will be replaced by 2027.

A relatively new study finds most leaders unprepared to meet the demands of digital disruption

The report, Redefining Leadership for a Digital Age, was issued by the  Global Center for Digital Business Transformation (DBT Center) an initiative led by one of the top global business schools IMD. 

The report identified four competencies and three behaviours that business leaders need in order to excel in the era of digital disruption based on findings from a global survey of more than 1,000 executives across 20 different sectors. 

In turbulent times, leaders are caught in a technology-change vortex that is drawing in whole industries and creating disruption on an unprecedented scale. An eye-watering 92% of leaders said they are feeling the effects of digital disruption, with one-third rating the impact of digital disruption on their companies as “very significant.” 

Despite the quickening pace of digital innovation, less than 15% of leaders said that they were “very prepared” to meet the demands of a digitally disrupted business environment. The majority of participants (almost 80%) indicated that they were “starting preparations” or were “fairly prepared” to tackle digital disruption. 

The research further reveals:

•    Less than 20% of respondents indicated that digital technologies such as analytics, mobile and social media are fully integrated into their organisations
•    30% of respondents either rarely or only occasionally use digital tools and technologies

In light of the clear understanding of the importance of digitisation, the report outlines the following “HAVE” competencies as the most important success criteria for leaders facing a landscape characterised by digital disruption:

•    Humble — In an age of rapid change, knowing what you don’t know can be as valuable in a business context as knowing what you do. Digital leaders need a measure of humility, and a willingness to seek diverse inputs both from within and outside their organisations
•    Adaptable — In a complex and changing environment, an ability to adapt is critical. The global reach of digital technologies has opened up new frontiers for organisations, shrinking once insurmountable continental divides and erasing traditional boundaries between territories. Dealing with the cultural and business impacts of this requires adaptability. 
•    Visionary — In times of profound disruption, clear-eyed and rational direction finding is needed. Having a clear vision, even in the absence of detailed plans, is a core competency for digital leaders.
•    Engaged — Painting visions for the future, successfully communicating these visions and being adaptable enough to change them, requires constant engagement with stakeholders. This broad-based desire to explore, discover, learn and discuss with others is as much a mind-set, as it is a definable set of business-focused activities or behaviors


These digitally-engaged executives are called “Agile Leaders” — those who have adapted and evolved their practice for an environment continuously disrupted by digital technologies and business models.

Nearly half (42%) of those identified as Agile Leaders said that they were making more informed business decisions as the result of well-directed data gathering, effective analysis, and good judgment. 

The report identified the following additional practices that Agile Leaders adopt in a digitally-disrupted business environment: 

•    26% of Agile Leaders use digital tools and technologies frequently, compared   with just 7% of non-Agile Leaders
•    32% of Agile Leaders seek disruptive approaches to deal with challenges (1% non-Agile Leaders)
•    76% of Agile Leaders encourage their team to challenge their observations and opinions (19.4% non-Agile Leaders) 
•    26% of Agile Leaders take risks to speed up execution (4% non-Agile Leaders) 

Based on the findings from this survey, if you are a Board member it is worth asking yourself the following questions:

  1. Are there competencies and behaviours relevant to my organisation?
  2. Do my fellow board members also see the relevance?
  3. If not, what do we need to do to convince them?
  4. Assuming we all agree that we need some / all these skills, how do we recruit new board members with these soft skills.
At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy

Sustainability was a focus at Davos, but Boardroom leadership is now required to have a real impact

Sustainability was a focus at Davos, but Boardroom leadership is now required to have a real impact

You don’t have to look too far to see that we have a real climate crisis in the world. The bush fires in Australia, the average rise in world temperatures, the Artic, constant flooding in the UK, more and more storms hitting the west coast of Ireland and so on. 

Former U.S. Vice President Al Gore when speaking at Davos “compared the climatic crisis to historic events like the 9/11 terrorist attacks”

He said the crisis was “way worse” than many realize and intensifying “way faster” than people appreciated and described it as a “challenge to our moral imagination.”

Indeed many of the Chairs and CEO’s who attended Davos 2020 have long held the notion that “the business of business is business”. The conversation this year focused on purpose beyond profit.  This notion had already been teed up by the US based Business Roundtable press release in August 2019, which proposed that a company has a broader responsibility to society, which can be better served if it considers all stakeholders in its business decisions not just the shareholders

This broader focus by Business Roundtable signatories recognises the belated reality that millennials amongst others, are more sophisticated in what they want from the world of work than many companies who want to employ them realise.

In recent a Gallup poll [Gallup Millennial Report], it finds that workers have 12 basic needs for workplace engagement. 

One of these is that “millennials don’t just work for a pay check — they want a purpose”. This is reflected in other studies as well.

This suggests that millennials and many others are more likely to work for organisations that actually care about the planet.  

On the positive side,  many of the CEO’s of the world’s largest companies at Davos expressed support for publishing a core set of metrics and disclosures in their annual reports on the non-financial aspects of business performance such as greenhouse gas emissions and strategies for, diversity, employee health and well-being and other factors that are generally framed as Environmental, Social and Government (ESG) topics.  But support needs to be converted into action.

This is a start but is not enough.  Any companies that haven’t already woken up and smelled the coffee at this stage are in for a shock, as customers, shareholders and stakeholders start to increasingly demand action on sustainability. And it needs to be visible and not tucked away in an annual report.

Many business leaders now accept that their companies activities are in large part the problem, and therefore they are part of the solution.

Unless and until sustainability is on the board room agenda and woven into a companies strategies, then many of us including the millennials will be sceptical.

At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and practical for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy  

E: dwduffy@governance-company.com

M: + 353 87 242 3046 

15 Corporate Governance Resolutions for 2020

15 Corporate Governance Resolutions for 2020 – Steps to becoming a Match-fit Director

  1. INSURANCE – Check your that your Directors and Officers Insurance cover is adequate and make sure it is in force
  2. SKILLS – Assess whether your skills, especially the technological skills are current to carry out your role and deliver on the strategy of the organisation? If not act to be relevant!
  3. STRATEGY – Ensure you understand the organisation’s strategy and assess if the board is overseeing its performance against the strategy on a regular basis. 
  4. ROLE – Discuss with your chair and ask what role he/ she wants you to play in the year ahead and how you can prepare for this.
  5. ADDING VALUE – Reflect on how you can add long term value to the Board, while at the same time ensuring that the shorter-term business goals are achieved.
  6. FIT FOR PURPOSE GOVERNANCE – Ensure you are happy with the governance arrangements of your organisation.  If not, request that an external evaluation is carried out without delay
  7. INFORMATION FLOWS – Satisfy yourself that the information being provided by the Executive enables you to assess the strategic and operational performance of your organisation
  8. DIVERSITY – Assess whether your board has the appropriate diversity to support the organisation’s strategic intent.
  9. CULTURE – Assess if the culture of the board is aligned with the culture and strategy of the organisation and whether the board sets the tone from the top or not.
  10. RISK – Ask yourself if you were responsible for risk at board level, does it get enough visibility and is front and centre in the minds of board members and board meetings?
  11. EVALUATION – If your performance has not been evaluated by the organisation in the last 12 months, ask the Chair for feedback?
  12. INDUCTION – Satisfy yourself if all new directors have a proper induction in place to understand the board and the organisation to carry out the duties.
  13. CONTINUING PROFESSIONAL DEVELOPMENT – Ensure that your board has a plan to provide you and your colleagues with continuous professional development to ensure that the board is up to date on all its regulatory, compliance and governance obligations.
  14. STRATEGY AWAY DAY – If this is not being done on a regular basis, suggest at your next board meeting that the organisation takes a day out to do this.  This will not only provide an opportunity to evaluate the strategy in some detail, but also to get to know the other board members and the executive a lot better.
  15. FUTURE CHALLENGES – Am I as a board member asking the right questions at Board meetings that ensure we are prepared for the future? Organisations will face several difficulties over the coming years with political, economic and regulatory challenges perpetually on the horizon. Consequently boards need to be match fit to tackle whatever comes their way. For example – What lies ahead?  How might we prepare for future challenges? What is the worst-case scenario for our organisation?
At The Governance Company our ambition is to make corporate governance a topic that is engaging, stimulating and fun for those who need to know.

We offer the following services to help you in your governance journey:

Join us for topical and practical articles and insights from the world of governance.

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David W Duffy

Size Matters!

Size Matters!

One of the most frequent questions we get asked by our clients is how large should a board be. We can safely say that there is no universal agreement on the optimum size of a board of directors. It depends……every Board in unique!

A large number of board members represents a real challenge in terms of using them effectively and having meaningful individual participation. A small number may be too few to carry out all the work that is required on the board.

So, some features that need to be considered in deciding what size the board should be are:

  • Stage of development of the company
  • Number of board committees required
  • Balance of skills and experience

So, let’s look at each of these in turn.

  1. Stage of development of the company

Small companies do not need large boards but having a board meeting is a good discipline even if all the members working in the company are executive directors and shareholders. 

As it grows, it may make sense to bring in certain skills and experience to support the ambition of the founders and to separate out the role of the board and the management team. This separation which needs to be real as it will build trust and confidence in the company with its bankers, shareholders, staff and donors if it is a charity.  This needs to be thought through very carefully particularly in family companies where succession planning will need very careful thought and planning.

  1. Number of board committees required

As a company develops and grows it will need to bring in greater structure and establish board committees.  Typical committees could be;

  • Audit
  • Compensation
  • Nomination
  • Risk

All board committees should be chaired by NEDs if possible.

The audit and compensation committees must be made up of independent members.  Assuming a minimum number for each committee is two or three depending on the size of the company, this means that a minimum of four to six board members are required for those committees so that no one is on more than one committee. It would not be good practice to have an overlap of independent members serving on both the audit and compensation committees, as it may lead to conflicts of interest. So, the more committees, a company has, the more board members and NEDs are required.  Doubling up will be OK as long as it does not lead to conflict or too much of a workload for a director

  1. Balance

We favour boards where the non-executives are in the majority, the Chair is not the CEO and terms do not exceed a nine years maximum. The board should consist of the right combination of skills and experience required to support the achievement of the strategy.

Key Takeaway

We believe boards that can accommodate the features above will succeed. We think any number beyond 10 will be hard to be justified in terms of the effort and cost to sustain them.  Beyond that we are dealing with crowd control!

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David W Duffy