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Blog

The Impact of Corporate Governance

Posted on 18/07/2019 by Rob Hayter

Corporate governance

At the recent ICSA (The Governance Institute) Annual Conference, the Department of Business, Energy and Industrial Strategy reiterated a very basic reason to diversify corporate boards: there is a direct link between a diverse (inclusive) board and an increase in bottom line profitability. And whilst we can’t point to a specific strategy necessarily, the recent England cricket world cup success was achieved by a very diverse group of players.

For “Profit” read “Impact”. It is the absolute focus of the charity non-executive and any action that can be taken to increase it must be taken. Diversity is clearly not just a tick box exercise.

Having Board members with different thinking and different experiences, from varied backgrounds and with varied outlooks is key to a happier beneficiary. It may be challenging to try and build a group like this, and indeed there will be more inherent conflict than in homogenous teams, but if Boards review strategy through the lens of public benefit then ensuring Board recruitment is part of the plan should merely be par for the course.

Chairs often ask me to provide “a diverse longlist” and further, to prove how we do that; a glib response is that by outsourcing to a Search firm they are guaranteeing a more diverse list than one they would have built via a job board (or worse, by current trustees asking their friends). Clearly, advertising the same vacancy in the same way and in the same places is very likely to lead to the same result.

Are there barriers to your Board?

Some obvious challenges to diversifying away from a stereotypical board membership range from the time that meetings commence, length and frequency of meetings (the majority of boards meet 4-6 times per year), to location, and perhaps beneficiary type, but assuming these are managed then the next part is to embed these new thinkers; building a high-performing team of equals from different, disparate individuals is critical.

At a recent ICSA seminar entitled “Effective Preparation for Board Meetings” one interesting idea was to draw up a table plan to ensure equity around the table. If all speakers sit together and present their papers from one side of the room it can stifle discussion as others feel they are not empowered to question. Similarly, if new recruits are sat together they are less likely to engage, and a Chair positioned somewhere on a long side of the table will not even be able to see 30% of attendees!

Are there barriers to inclusivity?

Good practice basics regarding board papers include giving clear reasons as to why the paper is coming to Board and what outcome is being sought. Executive summaries at the top of the paper are valuable, and omitting jargon or acronyms is desirable, in particular for newer board members who often spend several months in a haze attempting to understand organisational intricacies, causal specifics and governance requirements.

The ICSA’s report “A View at the Top” studied boardroom trends at Britain’s Top 100 Companies. Re-running a study from 1996 to compile a list of the “UK’s Most Admired Companies”, three trends were highlighted. One was that the boards had a greater percentage of female members and one was they had a lower percentage of members with an accounting background. Whilst there were no doubt broad reasons to these answers, both points show that the more diverse groups were admired more highly.

Are there barriers between Board and executive?

The third trend highlighted that corporate boards with a greater involvement of the executive were more admired. Whilst this is clearly from research of firms who have paid executives officially on their Board, this could also extend to non-profits and how their executives are asked to input to Board. The Chair CEO relationship is key but more work building relationships between the SMT and Trustees could reap rewards.

Inclusivity requires proactivity whether inter- or intra-team and so it does for diversity too. (Note Uber are linking diversity targets to senior management’s annual bonuses.) Looking outside your normal pool, your usual network, the “sector job-boards” is essential and whilst TPP is very well-placed to assist, there are lots of other places to consider; an excellent guide that we contributed to is hosted on the Getting on Board site.

If the OCS was as blunt as the profit-promoting BEIS, imagine the Impact.

To find out more about TPP's Board recruitment services contact our Leadership & Governance team on 020 7198 6060 or email executive@tpp.co.uk