FT NED CLUB MEETING “THE EFFECTIVE NED ON A BOARD OF A FSA REGULATED COMPANY” MANNIE SHER Director, Bvalco Ltd Director, Group Relations Programme, Tavistock Institute of Human Relations Tuesday 16th November 2010
From the Walker Review … • “Improvement in corporate governance will require behavioural change …” • “Needed behavioural changes are unlikely to be fostered by regulation fiat … “ “Principal deficiencies in BOFI boards are much more to do with patterns of behaviour than to organisation.”
The Walker Review … • “Governance practices are organic, dynamic and behavioural rather than akin to black letter regulation.”
The Walker Review … • The principal emphasis is on behaviour and culture. We wish to avoid proposals that attract a box-ticking conformity as a distraction to much more important substantive behavioural change.
Walker Review … • Wider analysis of the behaviour of groups and subgroups is plainly relevant to the functioning of committees of boards. • … but which sub-groups?
FRC Combined Code: Main conclusions • “There is a recognition that the quality of corporate governance ultimately depends on behaviour, not process, with the result that there is a limit to the extent to which any regulatory framework can deliver good governance.” • “The FRC has therefore sought to change the tone of the Code to signal the importance of board behaviour.”
FRC Combined Code: Main conclusions • “There is concern that the code is too often viewed as a compliance exercise rather than the means of promoting appropriate behaviour by boards and good communication between boards and shareholders.”
Research: Prof A Kakabadse • 80% of Board members do not know what their role is • 70% of Board members do not know how to raise difficult issues • Unable to say is: "I don't know" • Dynamics, insight and awareness are the deepest of problems on boards • 30% of Board members actually do not commit to the shared vision – they support the vision in public, but in the Board they consistently undermine it
Role unique combination of: • responsibilities of the job • the individual application of ideas, attitudes, aptitudes, strengths to do the job. • What is the role of NEDs?
Stewardship … • “Stewardship” refers to a responsibility to take care of something owned by someone else. • Stewardship is an ethic that embodies cooperative planning and management of resources to actively engage in the prevention of loss and facilitate long-term sustainability
Task … the single most important thing a group/organisation has to do in order to stay in business
Boundary … a semi-permeable line, but more usually a region that distinguishes between the inside and outside of an entity, across which only certain items that support the entity's task, are permitted to cross.
Authority … the degree of sanction given to an individual or group to act in a role.