The QCA Corporate Governance Code states that the board of a company is responsible for setting the vision and strategy for the company to deliver value to its shareholders. But how do small and mid-sized companies and their advisors think boards and directors are performing in relation to this in the real world?
A recent QCA/YouGov Small & Mid-Cap Sentiment Index presented an opportunity to explore the role of NEDs and examine board effectiveness from the viewpoint of small and mid-size companies and advisory firms, which was written up into a recent paper Boardroom behaviour and the QCA Corporate Governance Code from NEDA and the QCA.
The 2018 release of the updated QCA Corporate Governance Code positions NEDs as one of the cornerstones of good governance and expectations have become both higher and wider. The question is have we reached a crossroads where we have good people trying to do an impossible task which is doomed to fail?
The problem that NEDs often find is that each organisation has its own characteristics, the dynamics will vary and much will depend on the man or woman running the board – the Chair’s role is critical. As the leader of the board, the tone is very much set from the top. NEDs need to balance their own personal input with the collective view, as the board should work very much as a well-functioning team. Consequently, they must be an effective group. The mix of people, potentially with different views, and their own personal traits, preferences and behaviours, can in itself be a cocktail that may need to be slowly stirred and not shaken.
Against this backdrop it is a good time to reflect on how the NED community is evolving, both from their own perspective, and also from those who see them in action – advisors to the company. The concept of the ‘effective board’ is a more recognised feature and feedback has been captured on how this is developing, especially understanding the broader skills and experience at board-level.
Five questions for NEDs to ask themselves:
Can you explain to an investor:
- Your company’s strategy and business model in 60 seconds?
- The skills, experience and insight that you bring to your company’s board
- How you are sufficiently independent from company management?
- How your company conducts board performance evaluations and links that to board succession planning?
- How you dedicate sufficient time to the company given your other commitments?
To read the paper from NEDA and The QCA click here.
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