Headline Verdana Bold Build your own board potential What it means to be a board April 2018
Introduction The need for boards to demonstrate that they are effective has never been higher Business landscape Various codes Failures lack of trust The performance of any Board is a function of the character of the individuals that comprise the Board. No structural remedy can overcome poor judgment or apathy. Context Daily and Dalton (2003) Evolving role of the board Increased scrutiny Governance reform 2
The evolving role of the board Traditional Board Typically focuses on the following: Setting strategy Risk management Legal and regulatory compliance Overseeing performance Spends a significant amount of time monitoring past performance and reviewing quarterly reports, budgets, audit and compliance. Emerging best practice Considers matters that are critical to the future success and strategic direction of the business, such as: Continuous focus on strategy Culture and reward Innovation Talent and capabilities Succession planning New risk responsibilities Backward looking Focus on fiduciary duties Forward looking Emphasis on impact 3
Directors duties under the Companies Act 2014 There is no legal distinction between executive and non-executive directors. As a consequence, NEDs have the same legal duties, responsibilities and potential liabilities as their executive counterparts. Act in good faith and in the interest of the Company Act honestly and responsibly Not benefit from or use the company s property, information or opportunities, unless permitted Not agree to restrict the director s power to exercise an independent judgment Act in accordance with the constitution and as allowed by law Avoid conflicts Exercise care, skill and diligence 4
The role of Non-Executive Directors Essentially the non-executive director's (NED) role is to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors. - Institute of Directors Key functions NEDs are appointed to bring: Independence Impartiality Wide experience Special knowledge Personal qualities The key responsibilities of NEDs include: Providing strategic direction Monitoring performance Determining remuneration Audit Responsibilities Providing networks and connections Shaping culture and talent Taking into account stakeholder views 5
Discharging non-executive responsibilities in practice Participate in committees Attend scheduled Board meetings Site visits Challenges Key challenges NEDs face in discharging their duties include: Assigned a strategic initiative NED activities Self-testing / deep dives Time commitment Number of directorships Straying into exec territory Meetings with management & shareholders Request an Internal Audit 1 st, 2 nd & 3 rd order challenge Seek external advice Understanding the business and key risks Keeping up to date with regulatory changes Greater accountability 6
Skills and experience required The perceived professional and social capital directors can bring to the Board is usually considered when looking at the skills and experience of the Board - what is often absent is behavioural attributes Professional capital Social capital Functional and technical skills Sector experience Governance knowledge Professional connections Relationships Networking skills Behavioural capital Diversity Communication, listening, emotional intelligence etc. Understanding of Board culture 7
What makes a good Board member? Good Board members Focus on the bigger picture Bring different perspectives to the table Show strong command of issues relevant to the business Take collective ownership for decisions Are disciplined, committed and dedicated Exercise independent and objective judgement Challenge constructively, probing and bringing secondary challenge Show openness, tact and the ability to listen Offer support to management 8
Practical tips Things to look out for Ensure that you have a comprehensive and tailored induction Partner with an executive director Visit operations and talk with senior and middle managers in these areas and talk with non-managerial members of the workforce Make sufficient time available to discharge your responsibilities effectively Devote time to developing and refreshing your knowledge and skills, including softer skills Insist on receiving high-quality information sufficiently in advance Seek clarification or amplification where they consider the information provided is inadequate or lacks clarity 9
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 10
Further information Contact details Colm McDonnell Partner Risk Advisory +353 (0) 1 417 2529 davkinsella@deloitte.ie Melissa Scully Senior Manager Centre for Corporate Governance +353 (0) 1 417 8656 mscully@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 - http://www2.deloitte.com/ie/en/pages/gove rnance-risk-andcompliance/solutions/center-corporategovernance.html 11
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