In a world of constant change, a company’s board plays an important role in helping move it forward amid rising complexity, innovation and periodic crises while remaining true to its purpose and values.
Knowing that the business operating environments and stakeholder priorities will continually change in subtle or seismic ways, boards must help steer companies in the right direction. Boards can execute this critical responsibility by adopting proven approaches to drive, measure and achieve their own effectiveness to better oversee their companies’ strategic success and drive long-term value.
Meanwhile, board effectiveness relates to the performance of the directors individually and collectively relating to their roles and responsibilities.
PwC stated that “in an era when trust in business is at a premium, and scrutiny from stakeholders is ever wider and more intense, it has never been more important for organisations to behave in accordance with their core purpose and principles in order to protect reputation and trust.”
Speaking on the company’s culture of strong governance, the chairman of Dangote Cement Plc, Aliko Dangote said, “Our board of directors has established a Corporate Governance Framework over the years, which addresses, among others, the board’s mission, its structure and committees, the responsibilities and remuneration of directors, the role and appraisal of the group managing director and the strategy for board and executive succession.
“In addition, the board reviews development in corporate governance and updates the Corporate Governance Framework in line with best practices.”
He stated that “the board of directors is at the heart of our corporate governance framework. It serves as the ultimate decision-making body outside matters statutorily reserved for the shareholders.
“The roles and responsibilities of the board and its committees are documented in the Board and Committee Charters. The board is responsible for the activities of the company, its strategy, risk management and financial performance alongside the corporate governance framework.”
United Capital Plc stated that “we are committed to adherence to ethical standards and integrity in all our operations. We have a highly- effective board, with directors who are independent and have the necessary depth of knowledge to oversee the Group’s operations. We also have an effective system of checks and balances to ensure that decisions are made in the best interests of the Group at all times.”
Improving Board Effectiveness
The board performing to the best of its ability is essential to the success of the organisation. These steps will help to increase the effectiveness of the board and help them lead the business towards its goals.
Clearly Define Roles And Responsibilities
The succession policy should allow the company to select and prepare candidates who can fill the skill gaps on the board and ensure that the whole delivers more value than the sum of its parts.
Examine Board Structure
Getting the structure of the board correct is a difficult balancing act, but it is essential for board effectiveness. There is no ideal board size that suits every company because it depends on your specific circumstances.
Revise Formal Operating Procedures
Another example of improving effectiveness by not being afraid to challenge traditions comes in the formal operating procedures of the board.
Keep Track Of Decisions And Actions
There should be a frictionless procedure that translates decisions made into actions carried out afterwards. Sometimes this is not the case, and there is a disjointed approach. Ensure that the chair communicates the action points that arise from decisions on key issues and that the directors responsible for those actions understand their obligations.
Evaluate Board Composition
There are a number of different considerations to make with regard to board composition. You need a balance of skills, experience, outlooks and attitudes. In addition, gaining better board diversity in terms of gender, race and other considerations helps you to avoid groupthink that fails to fulfil the potential of the business.
Understand Board Culture
The culture of the board has a bearing on its effectiveness. Are the meetings too formal or too informal? This is an element of board culture that could determine how effective those meetings are.
Engage Board Members
The chair or CEO can improve the effectiveness of the board by making efforts to engage board members. This could include reaching out between meetings to develop personal connections, organising informal meet-ups to encourage team building, making time to celebrate wins and other such exercises.
