welcome to top level board performance

Boardroom Dynamics 023 8074 4450 1

Welcome to Top Level Board

Performance

Presented by Leslie Spiers MA MBA DMS CertEd

Boardroom Dynamics Limited


Corporate Problems

What’s this got to do with companies outsidethe FTSE 350?

More regulation?


Corporate Governance as Business Improvement

Internal Improvements• Systems• Roles• Processes

External Improvements• Compliance• Reputation


The Role of the Board in SME’s

2007 Research into SME’s

• Boards were often a legal formality• Boards appear to contribute little of significance

to business development• Boards dealt with operational matters as

opposed to strategic issues• Boards dealt with short term goals (survival)


Strategic versus Operational Planning


Board Structures and Processes

• Lack of formal committees• Few non-executive directors• Lack of risk management systems• Less advice from auditors as threshold for

independent audit increases


Governance and Business Improvement

• Risk reduction through identification and management

• Wider experience in decision-making

• Stakeholder engagement through identification and management


Further Considerations

• Reputation management

• Greening of business (the business case for social responsibility and integrity)


Corporate governance is about changing organisational cultures rather than

regulations


What is a Company?

• It is a separate Legal Entity

• It is recognised as a legal “person”

• It has personality & can act as a person

• It has long life potential

• It can claim under Human Rights Act


What is the purpose of a Company?

• Designed to make profits to distribute

• To limit liability of investors

• Companies Ltd by Guarantee can use surplus to the benefit of the company


What are the features of a Company?

• It is separate from individuals in it

• It creates a separate person

• It has its own life and responsibilities

• It has members who subscribe capital

• It is set up by shareholders to protect themselves

• It is registered with Companies House

• It has Regulations and officers to run its affairs


Directors’ legal requirements Now codified in Companies Act 2006

Act within your powers

1. Promote the success of the company for members

2. Exercise independent judgment

3. Exercise reasonable care, skill and diligence

4. A general duty to avoid conflict of interest

5. Duty not to accept benefits from 3rd parties

6. Duty to declare an interest in proposed transactions


Factors not to be ignored• “Enlightened shareholder Interest” – future and potential

• Likely long term consequences of a decision

• Interests of employees

• Need to foster relationships with suppliers & customers

• Impact of the business in the community & environment

• Maintaining high standards of business conduct

• Need to act fairly between members


The Company and its Directors

• Co has a decapitated head – the Board

• Board is the “Thinking Mind

• Rail Track, Herald of Free Enterprise, Lyme

Regis


Other Interested Parties

Internal Organisation And Management

Subsidiary Boards

The ‘external’ parties

The ‘internal’ partiesEUCommission

Government

Consumerists

Employees

Trade Unions

CustomersGoodPractice

Trade Associations

Local Communities

Suppliers

BusinessPartnersThe

FinancialWorld

TheMedia

Environment-alist

Lenders OfMoney

Source:- Sheridan and Kendall, 1995


"The job of the Board is all to do with creating momentum, movement,

improvement and direction.

If the Board is not taking the company purposefully into the future,

who is?"

Sir John Harvey-Jones

What is the Board for ?


The Board's Key Purpose

Seek to ensure the company's prosperity by collectively directing its affairs and meeting the legitimate interestsof its shareholders and relevant stakeholders


The Board's Main Functions

• Policy Formulation

• Accountabilty

• Strategy and Leadership

• Supervision of Management

• Providing Clarity – no mixed messages


The Board

AccountabilityTo the companyTo OwnersTo regulators and legislatorsTo StakeholdersEnsuring Directorial Audit

Policy Formulation

Stating Purpose

Creating Vision and Values

Developing corporate climate

Monitoring the external environment

Strategic Thinking

Market Positioning

Setting corporate direction

Reviewing resources

Setting implementation processes

Supervising Management

Performance ManagementBudgetary ControlReview of key business resultsOrganisational capability

SHORT TERM LONG TERMOperations Review Cycle

INTERNAL

EXTERNAL

Governance Review Cycle Strategy Review Cycle

Responsibilities of the Board


Accountability

To ensure that the Company complies with laws & regulations and that

management & employees comply withcarrying out the Board's decisions

Very onerous duties- different from management


Governance

• The Board is the 'Mind & Will' of the Company

• In law - all directors are jointly responsible

• All directors are equal (technically)

• Executive powers are vested in the Board

• Board is always responsible for the Company's affairs

• Directors’ duties are owed to the Company

• Board must have regard for the shareholders and other interested parties


Strategy

• Board needs to set tone, standards, values

• Board needs to agree common vision

• A Board Charter clarifies ToR

• Directors accept & utilise their differences

• Reward contribution towards achieving the overall vision

• Selecting the MD/CEO - personifies the Board's leadership


DirectionFormulation of strategy

Acquisition & allocation of overall resourcesSetting policies

Establishing directionEmphasises the mission - the shared vision

Direction and Management


Management:

Running the business

Shorter term operational matters

Financial, production, market management

Direction and Management


MANAGEMENT

Power & Responsibility

SHAREHOLDERS

BOARD

POWER

RESPONSIBILITY


Board Composition & Organisation

"A Board may be composed of brilliant individuals and yet be ineffective.

It can only fulfill its true potential as a Board if it is properly selected,

organized and led."Good Practice for Directors - Standards for the Board


Board Meetings

• Directors powers are collective

• Need a quorum to convene a board meeting

• No director must be excluded

• Right to inspect accounts and minutes

• Time based and controlled agenda

• Board Pack

• Board minutes must be kept


In SummaryTop Performing Board's…

Establish clarity of Mission, Vision and Values to lead the broad direction of the company

Decide upon the Strategies and Structure to ensure the company's survival & prosperity

Delegate to Management and involve staff to effect implementation of strategy, policies & plans

Exercise responsibility to shareholders and other interested parties

to promote & meet their legitimate interests