Board Effectiveness and Culture

Transcription

1 Board Effectiveness and Culture Melissa Scully; Ian Curtin Deloitte, Earlsfort Terrace February 2018

2 Agenda Topic Presenter Timing Introduction Ruairí Cosgrove 8.00am 8.05am Board effectiveness Melissa Scully 8.05am 8.30 am Culture Ian Curtin 8.30am 8.55am Close Ruairí Cosgrove 8.55am 9.00am Networking ICSA CPD event Board Effectiveness and Culture 2

3 Board effectiveness 3

4 Introduction The need for boards to demonstrate that they are effective has never been higher Business landscape Evolving role of the board Various codes Context Failures lack of trust Increased scrutiny The rationale for Board and director evaluation has emerged from the wider debate concerning higher standards of corporate governance by stakeholders, better Board performance and greater professionalism. Governan ce reform Ingley and Van der Walt, 2002 ICSA CPD event Board Effectiveness and Culture 4

5 Board impact can be described as the effect of the governance structure and processes, and contribution from Board members, which helps shape different and more positive outcomes ICSA CPD event board effectiveness and culture 5

6 Board impact Qualities of high impact boards The diagram on the right provides a framework to consider the outcomes and supporting enablers of Board effectiveness. High impact boards demonstrate a number of qualities, to include: Outcomes focused Diverse skills and experience Highly engaged Forward-looking agenda Insightful information Healthy dynamics Strong chair Continuous reflection and learning For board member s perspectives see: ICSA CPD event Board Effectiveness and Culture 6

7 Board effectiveness reviews Trends in processes Timing Objectives Scope Approach Disclosure Code requirements Regulator request Compliance Enhance performance Board and committees Structures and processes Backward-looking Survey Interviews Report / action plan Basic Process focused Board changes Governance issue Stakeholder pressure Gain insight Increase impact Tackle issues Individual directors Responsibilities Behaviours and culture Forward-looking Observation Benchmarking Case studies External perspectives Workshops/labs More detailed Outcomes focused Regulator dialogue ICSA CPD event Board Effectiveness and Culture 7

8 Board effectiveness reviews Common themes emerging Lack of understanding regarding the Board s responsibilities Ensuring the right balance of time with agenda Increased expectations on NEDs Getting the right skills and experience Lack of engagement with key stakeholder groups Committees not being utilised efficiently Sub-optimal Board dynamics and relationships Poor reporting - information overload Insufficient constructive challenge ICSA CPD event Board Effectiveness and Culture 8

9 Practical tips and guidance The role of the Company Secretary 1 Understand barriers to an effective review timing, staleness, groupthink, lack of trust, conflicting expectations, uncooperative individuals. 2 Determine the scope and approach - challenge if it is sufficiently robust and rigorous. Select provider (if external). Considerations 3 4 Brief Board members and help achieve buy in, as well as brief other stakeholders involved in the review. Lead and manage the process, supporting the Chair and Nomination Committee. Ensure regular updates. 5 Analyse the results, triangulate information, and report the key themes to the Board highlighting areas for improvement 6 Drive the action plan and support continuous improvement. Link outputs to wider Board governance processes skills matrix, succession plan, training program etc. ICSA CPD event Board Effectiveness and Culture 9

10 Practical tips and guidance Framework for assessing board effectiveness Key Question Areas to Consider 1. What are our objectives? We want to ensure our governance is continually improving We want to ensure our governance is best practice Review problems in the dynamics of the Boardroom or between the Board and management We want to provide the Directors with guidance for their learning and development 2. Who will be evaluated? Board Committees Individual Directors Key governance personnel - Chair, SID, Committee Chairs, CEO and Company Secretary 3. Who will be asked? Board Members Senior executives/management Employees External stakeholders e.g. shareholders, regulators, funders 4. What will be evaluated? Board Functions Strategy; risk; compliance; shareholder communications; appointment of CEO etc. Structures Board and Committee structure and composition; Board and Committee Terms of Reference; matters reserved for the Board; delegated authorities etc. Processes Meetings; agendas; Board and Committee papers; management information; annual calendars etc. People Roles and responsibilities of individual Directors; value and contribution; relationships and dynamics; level of challenge etc. Continuous Improvement Evaluation; Director selection and induction; training and development etc. Impact/outcomes tangible examples of positive impact resulting from Board input 5. What techniques will be used? Document analysis Online questionnaire Interviews (individual / group) Observation Case Studies 6. What will we do with the results? Report Discussion of findings Implementation / action plan ICSA CPD event Board Effectiveness and Culture 10

11 Culture 11

12 What is culture? Culture is a system of behaviours, values, and beliefs that influence how work gets done in organisations Culture is an enabler of your strategy and a means of sustaining high performance. Culture needs to align with and support the organisation strategy Culture is shaped by leaders actions and decisions Culture is sustained by employee behaviours Culture is reinforced by business and organisational systems Culture must start with leaders and stick with all employees ICSA CPD event Board Effectiveness and Culture 12

13 The board s perspective Consensus now is that responsibility for culture resides with the board including active oversight UK Code of Corporate Governance Proposed revisions Principle A The board should establish the company s purpose, strategy and values, and satisfy itself that these and its culture are aligned Area of regulatory focus - CBI thematic reviews Provision 2 Directors should embody and promote the desired culture of the company. The board should monitor and assess the culture to satisfy itself that behaviour throughout the business is aligned with the company s values. Where it finds misalignment it should take corrective action Investor expectations ICSA CPD event Board Effectiveness and Culture 13

14 Business drivers Factors and challenges that will accelerate culture change Aggressive growth targets Cost pressures and reduction Increasing and evolving regulation Increased competition / new market entrants Continued focus on M&A Talent optimization Brand and reputation management More educated and savvy consumers Heightened emphasis on quality Business demand for strong, aligned culture Enhanced workplace flexibility Diverse and inclusive environment Leadership and courage Agility and ability to adapt to change Commitment and engagement Focus on results and achievement Greater risk intelligence and compliance External and customer orientation The macro business issues facing organizations today have clear cultural implications that can help or hinder strategic objectives ICSA CPD event Board Effectiveness and Culture 14

15 Assessing and measuring culture Considerations and watch outs Organisations typically comprise many subcultures. Culture is shaped by a number of factors Organisations may not examine culture using the right lense. Culture assessment can look like a mosaic, rather than a single clear picture Tone at the top often very different from the rest of the organisation Not all of these factors can be controlled by the organisation Or even seen, in some cases; e.g. individual values and attitudes Too narrow a view, e.g. a focus on risk only, may miss critical information or hinder broader strategy Too broad a view risks defining a culture that is bland and not meaningful ICSA CPD event Board Effectiveness and Culture 15

16 Starting the conversation Bringing culture into the discussion with the board What culture indicators are available to us? Business Performance KPIs Unexpected variances Sales and Product performances HR Statistics and Analytics Turnover and absenteeism Large extended leave cohort Internal Feedback Internal auditors Employee surveys External Audit Audit or legal advisors Culture audit Customer Surveys Customer service & sentiment Whistleblower Programmes Visibility & utilisation Specific outputs Risk and compliance Breaches Incidents, near misses etc. Where is the Board expected to play a role? Culture governance Devote time, as changing circumstances demand Assign ownership - committee Assessing and monitoring Culture Review quantity & quality of information available Consider impact of decisions Public commitment Internal & external disclosures Consistency of words & actions with stated values Compensation practices Inadvertent incentivisation Understanding overall compensation structure Leadership behaviours Set the right tone at the top Hold management to account Taking action to get started Develop and agree Work with CEO to define values and culture Align with mission & purpose Enforce State expectations in e.g. a code of conduct but clearly tackle noncompliance Sustain Recognise culture is an on-going topic for attention & action Review Seek regular information on culture Ensure it remains fit-for-purpose as the organisation evolves Advantage Do our leadership, talent, organisation & culture allow us to execute our strategy and win? ICSA CPD event Board Effectiveness and Culture 16

17 Practical tips and guidance The role of the Company Secretary 1 Educate the Board and executives on the role and responsibilities of the Board and Audit Committee. 2 Identify existing indicators in Board information and consider others that could be included. Promoting culture 3 4 Work with the Chair to ensure that culture features on the Board agenda. Prepare Board members for discussions on culture with stakeholders such as investors. 5 Encourage the Board to think about the impact Board decisions will have on organisation culture and that they are consistent with the values set. 6 Use your interpersonal skills to help manage personalities in the boardroom and foster a collegiate culture in the Board. ICSA CPD event Board Effectiveness and Culture 17

18 Close Thank you 18

19 Further information Contact details Melissa Scully, Senior Manager Centre for Corporate Governance +353 (0) mscully@deloitte.ie Ian Curtin, Senior Manager Human Capital +353 (0) icurtin@deloitte.ie Centre for Corporate Governance Our Centre for Corporate Governance is designed to provide boards and senior management with a single point of access to current developments, Deloitte perspectives, learning materials and other useful information related to corporate governance. See our website for further details - -risk-and-compliance/solutions/center-corporategovernance.html ICSA CPD event Board Effectiveness and Culture 19

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