The board your firm needs to maintain a competitive edge
Former Chief Justice Benjamin Odoki addresses outgoing (R) and incoming members of the National Citizenship and Immigration Board last year. PHOTO BY RACHEL MABALA
What you need to know:
About a board. A board of directors, also referred to as board of governors or board of trustees, is a body of elected or appointed members who jointly oversee the activities of a company or organisation.
Corporate challenges continue to evolve, giving rise to the need for new blood and fresh approaches.
While the concept of “refreshment” is more readily applied to employees and management, there’s a growing trend among investors and academics to apply it to boards as well. The following areas provide context to the issues that surround corporate governance today.
Board composition, evaluation
Today’s corporate boards need to be one step further from the days when boards were often formed under the auspices of longstanding friendships or business favours and stayed that way.
While it sometimes makes sense for boards to ask experienced directors to remain on the board longer, they must also ensure they have the diversity of skill sets that are important in today’s business world to define a forward-looking strategy and vision and manage key risks. Industry and leadership experience are obviously important factors and most boards have added a financial expert thanks to the changing regulatory demands, but does your board have IT expertise or Social media savvy personnel? How about someone with an international perspective?
Another important function is for boards to undertake a healthy self-evaluation to ensure all sitting members are contributing something unique and relevant to the whole.
Managing risk
Of paramount importance year after year is the board’s responsibility to oversee risk across the enterprise. New strategic objectives should be reviewed by the full board to ensure they align with the company’s risk appetite.
As such, the board needs to receive timely management reports with more key highlights but fewer details to enable them digest the information within those reports and be in position to ask the right questions of senior management.
The ability to delegate risk to a separate committee that could keep closer tabs would be advantageous, however, this does not absolve the full board of their responsibility regarding risk oversight. Every board member should understand and accept that corporate risk oversight is his or her special responsibility that requires every board member to know and understand company strategy and the risks that go with it.
Choosing company leaders
Boards continue to grapple with CEO succession planning because they sincerely want to “get it right”. Interestingly, its long-term succession that they lack confidence in and not short-term.
To gain insights into whether an internal candidate is capable of moving into the role, boards need to embrace an assessment process that is fact-based, rigorous, and forward looking. It’s also important to not to lose sight of how an organisation’s internal talent compares to the best-in-class talent externally. This process is critical to give the board a good sense of the relative strength of the internal candidates, as measured against the outside talent pool that would likely be considered for the role.”
Thinking strategically and looking ahead
Board members must keep profitability and increasing shareholder value in their cross-hairs. Without meeting these goals, all the others hold little value. Therefore, the board’s role in shepherding strategic planning for future growth is imperative, particularly in an environment where competitive change happens quickly.
Above all, directors should be laser focused on ways they can help their company grow and prosper in the future. As such, they need to be cognisant of the current and future market dynamics within which their businesses operate to better understand the battery of risk elements, opportunities and trends therein.
The writer is a manager, Risk Advisory Services at Deloitte East Africa
Duties of board
• Governing the organisation by establishing broad policies and objectives;
• Selecting, appointing, supporting and reviewing the performance of the chief executive;
• Ensuring the availability of adequate financial resources;
• Approving annual budgets;
• Accounting to the stakeholders for the organization’s performance;
• Setting the salaries and compensation of company management.
