Archive for the ‘boardroom’ Tag

The modern board meeting

My recent blog (30 July 2020), ‘New approaches to corporate governance communication’, brought the suggestion that more changes had occurred in board-level meetings than just the widespread use of virtual meetings, which I had discussed.

I must admit that in the fourth edition of my corporate governance textbook, I do parody the old-fashioned board meeting of the ‘country club’-style board, with its older, mainly Anglo-Saxon men meeting in their formal boardroom, with its pictures of past chairman on the walls; a room used only for the monthly board meeting and occasionally somewhere to put the auditors. The agenda for such board meetings seldom varied, starting with ‘apologies’ and ‘matters arising’ through to ‘any other business.’ The agenda, prepared by the company secretary and approved by the chairman, was sent to all directors shortly before the meeting, supported by a pack of printed board papers­—financial and other routine reports. Few companies with country-club boards have survived in today’s business climate. The traditional pack of board papers has been replaced by an electronic version. Software for such applications have been available for some years.[1] in these board rooms, it is quite normal for directors to have their laptops or tablets in front of them on the boardroom table. But the use of electronic communicating devices during board meetings goes much further today.

Multiple sources of information

As well as accessing the set of formal board papers, directors may use their devices to explore other sites relevant to the topic under discussion, obtaining, for example, economic, financial, or market data and charts, or ‘googling’ other websites.

In addition to the tablet or laptop, directors may also have their smart phones in front of them. Some chairs insist that such devices be turned off, or switched to silent, to avoid disruption. Directors can then communicate with the outside world, during the meeting, at the same time as participating in it. Directors in virtual meetings will also have access to communication devices, while they participate in the meeting.

Moreover, should the need arise for more information, an executive director might say, ‘I’ll have my staff produce that information in the next three or four minutes,’ rather than, ‘I’ll have a report ready for the next board meeting.’

Directors need multi-tasking skills

As a result, directors today need multi-tasking skills, able to listen and contribute to ongoing discussions, whilst reading from a screen and texting for data. This multi-tasking ability may well come more readily to younger board members: older members may not have acquired those skills.

Meetings with more fluid agendas

Standing agendas, which follow the same month-by month pattern, now seem to be a thing of the past. Meetings are more fluid, responsive to emerging issues, with directors raising matters of concern as the meeting progresses. While still receiving financial, marketing, personnel, and other progress reports, the chair might ask, ‘what must we cover in this meeting?’ This enables rapid responses to emerging situations. It also runs the risk of the board spending time ‘fire-fighting,’ rather than focusing on vital longer-term strategic matters.

Performance issues outweigh conformance

In conventional board meetings, a well-known danger is domination by short-term trouble-shooting matters, arising from the supervision of management. Discussion of strategic issues are postponed or, worse, overlooked. In other words, conformance and compliance issues crowd out strategic thinking and policy making. However, with multiple sources of information and more fluid agendas, that failing can be overcome. However, that also needs skilful leadership from the chair.

New challenges and opportunities for the board chair

More fluid, responsive meetings raise new challenges for the chair. They also create more opportunities for leadership. As a meeting progresses, the chair must decide whether to allow or postpone discussion on issues as they arise. No longer sticking doggedly to the agenda, the chair must determine the best use of board time.

In the modern board meeting, the chair needs to ask:

  • Am I spending board time effectively?
  • Is the balance between performance and conformance issues appropriate?
  • Should more time or specific meetings be allocated to discuss longer-term strategic issues?
  • Do we need to review board policies?
  • Do I give every director, including the outside directors, the opportunity to raise matters for discussion before or during meetings?
  • are all board members able to multi-task in the way now needed? If not, what should be done about it?
  • In recent board meetings, what have we not addressed that we should have covered?
  • Does the board need to meet so often or so formally?

In the modern board meeting, directors have access to various devices to obtain information. Consequently, they need multi-tasking skills. Agendas have become more fluid, as issues emerge and are discussed. Strategic and policy matters need no longer be dominated by short-term issues, with the emphasis on performance not conformance and compliance. But these developments present new challenges and opportunities to the board chair.

Bob Tricker

September 2020


[1] for example see https://www.decisiontime.co.uk/board-software/, https://info.ibabs.eu/board-portal/, htps://www.boardtimeintelligence.com

Ethnic Diversity on UK Boards

There has been much emphasis on the importance and value of board diversity. However the focus has generally tended to be on gender diversity, for example, in the UK the Davies Report (2011) recommended that representation of women on FTSE 100 boards be increased to at least 25% by 2015. By 2015 this 25% target had been exceeded with FTSE 100 boards having 26.1% of women on the board.

Various corporate governance codes and guidelines have stated that firms should have a ‘balanced board’. In 2014, when updating the UK Corporate Governance Code, the Financial Reporting Council pointed out that constructive and challenging debate on the board can be encouraged ‘through having sufficient diversity on the board. This includes, but is not limited to, gender and race. Diverse board composition in these respects is not on its own a guarantee. Diversity is as much about differences of approach and experience, and it is very important in ensuring effective engagement with key stakeholders and in order to deliver the business strategy’.

‘A Report into the Ethnic Diversity of UK Boards: Beyond One by ’21’

Earlier this month The Parker Review Committee, chaired by Sir John Parker, issued ‘A Report into the Ethnic Diversity of UK Boards: Beyond One by ’21’.

Starting from the premise that UK boardrooms, including those of leading public companies, do not reflect the UK’s ethnic diversity nor the stakeholders that companies engage with (customers, employees, etc.), the Parker Report states that ‘ethnic minority representation in the Boardrooms across the FTSE 100 is disproportionately low, especially when looking at the number of UK citizen directors of colour’. For example, the Report highlights that of 1087 director positions in the FTSE 100, UK citizen directors of colour represent only about 1.5% of the total director population with 90 individual directors of colour (four hold two Board positions) whilst total directors of colour represent about 8% of the total (compared to 14% of the UK population). Some 53 FTSE 100 companies do not have any directors of colour. Seven companies account for over 40% of the directors of colour, interestingly five out of the seven companies have headquarters historically located outside the UK. In terms of the key board roles of Chair and CEO, only nine people of colour hold the position of Chair or CEO.

The Parker Report’s recommendations can be found at http://www.ey.com/Publication/vwLUAssets/A_Report_into_the_Ethnic_Diversity_of_UK_Boards/$FILE/Beyond%20One%20by%2021%20PDF%20Report.pdf and are as follows:

 

 

  1. Increase the Ethnic Diversity of UK Boards

1.1. Each FTSE 100 Board should have at least one director of colour by 2021; and each FTSE 250 Board should have at least one director of colour by 2024.

1.2. Nomination committees of all FTSE 100 and FTSE 250 companies should require their internal human resources teams or search firms (as applicable) to identify and present qualified people of colour to be considered for Board appointment when vacancies occur.

1.3. Given the impact of the ‘Standard Voluntary Code of Conduct’ for executive search firms in the context of gender-based recruitment, we recommend that the relevant principles of that code be extended on a similar basis to apply to the recruitment of minority ethnic candidates as Board directors of FTSE 100 and FTSE 250 companies.

  1. Develop Candidates for the Pipeline & Plan for Succession

2.1. Members of the FTSE 100 and FTSE 250 should develop mechanisms to identify, develop and promote people of colour within their organisations in order to ensure over time that there is a pipeline of Board capable candidates and their managerial and executive ranks appropriately reflect the importance of diversity to their organisation.

2.2. Led by Board Chairs, existing Board directors of the FTSE 100 and FTSE 250 should mentor and/or sponsor people of colour within their own companies to ensure their readiness to assume senior managerial or executive positions internally, or non-executive Board positions externally.

2.3. Companies should encourage and support candidates drawn from diverse backgrounds, including people of colour, to take on Board roles internally (e.g., subsidiaries) where appropriate, as well as Board and trustee roles with external organisations (e.g., educational trusts, charities and other not-for-profit roles). These opportunities will give experience and develop oversight, leadership and stewardship skills.

  1. Enhance Transparency & Disclosure

3.1. A description of the Board’s policy on diversity be set out in a company’s annual report, and this should include a description of the company’s efforts to increase, amongst other things, ethnic diversity within its organisation, including at Board level.

3.2. Companies that do not meet Board composition recommendations by the relevant date should disclose in their annual report why they have not been able to achieve compliance.

 

Chris Mallin

November 2016