Board Leadership
Board Leadership
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UK Corporate Governance Code Leadership Definition
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LEADERSHIP
A.1 The Role of the Board
Main Principle
Every company should be headed by an effective board which is collectively responsible for the long-term success of the company.
A.2 Division of Responsibilities
Main Principle
There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one
individual should have unfettered powers of decision.
A.3 The Chairman
Main Principle
The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role.
This is a set of comprehensive high-level statements relevant for all companies, no matter what jurisdiction they operate within. The main principles are supported by the Code provisions.
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The leadership of a Board has an impact on many areas: its overall success, the effectiveness of the team, appropriate challenge, decision making, strategy, to name but a few. Without effective leadership the business is not running at optimum levels. Getting this right is sometimes the biggest challenge of all and requires diplomacy and often subtle external intervention.
Key roles of a chairman
- Ensuring that board agendas allow sufficient time and priority for issues of substance, with documentation and presentation designed to promote discussion of alternative approaches or outcomes as distinct from what may often be an undue pre-emption of board time on process matters. Board discussion and decision-taking on substance is crucial.
- Ensuring NEDs have opportunity to discuss matters without the presence of the executives, so that they can share their thinking and develop alternative views.
- Maintaining balance between the need for constructive challenge and the need for the whole board to work co-operatively in arriving at and endorsing the strategy for the company.
- Ensuring a healthy relationship between chairman and CEO based on mutual understanding and respect, and mutually supportive, whilst allowing constructive challenge.
- Involvement in determining the risk strategy of the institution
- Appropriate engagement with major shareholders on a regular basis.
So, a chairman has to be adept at time management, strategy, leadership, chairing a meeting, managing other directors, communication with the Board, stakeholders, media and disseminating information to the company itself. No mean feat. For someone new to the role of chairman, who has perhaps served on a Board, but never been a leader or who by default now assumes the mantle of chairman these can be a tough series of challenges to face and maintain fairness. Contact us now to discuss more effective leadership.
Summary of Qualities
The two “desirable conditions” for a successful chairman are abilities to lead the board and to draw on substantial relevant financial industry experience, preferably from an earlier senior management role.
The chairman needs to have the capability to be able to stand back and allow board discussion to flow but then to bring it to clear conclusion, to be accommodating and encouraging of the views
of others, both executives and NEDs, but when necessary to be robustly decisive. This is, however, close to perfection, and this ideal combination will not be dependably available to a board when seeking to find a new chairman. It will be for the board, in appropriate consultation with the regulators and, where possible, on the basis of confidential soundings with major shareholders, to exercise judgement in weighting the two “desirable conditions” in the light of the situation of the board and entity at the time and the available shortlist of potential candidates.
Development and Training
A new chairman of plainly considerable ability but with less than the desired financial industry experience can be assisted through a rigorous tailored induction and training programme to move up the industry learning curve relatively quickly. At CTP Global we can tailor this programme to your requirements.
A chairman cannot afford to rely on a process of “learning leadership on the job” and should have held the role of senior independent director on the Board or have demonstrated sound leadership of other boards. Where there are known areas of weakness we design individual programmes for existing or the new chairman and our qualified consultants can work on a one-to-one basis with the chairman-designate to further develop and bring the desired qualities to the fore.
Contact us now in confidence to discuss your leadership requirements...
CTP Global – Good Governance: Great Performance
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