Welcome to Top Level Board Performance

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Welcome to Top Level Board Performance

  1. 1. Welcome to Top Level Board Performance Presented by Leslie Spiers MA MBA DMS CertEd Boardroom Dynamics Limited
  2. 3. Corporate Problems <ul><li>What’s this got to do with companies outside </li></ul><ul><li>the FTSE 350? </li></ul><ul><li>More regulation? </li></ul>
  3. 4. Corporate Governance as Business Improvement <ul><li>Internal Improvements </li></ul><ul><li>Systems </li></ul><ul><li>Roles </li></ul><ul><li>Processes </li></ul><ul><li>External Improvements </li></ul><ul><li>Compliance </li></ul><ul><li>Reputation </li></ul>
  4. 5. The Role of the Board in SME’s <ul><li>2007 Research into SME’s </li></ul><ul><li>Boards were often a legal formality </li></ul><ul><li>Boards appear to contribute little of significance to business development </li></ul><ul><li>Boards dealt with operational matters as opposed to strategic issues </li></ul><ul><li>Boards dealt with short term goals (survival) </li></ul>
  5. 6. Strategic versus Operational Planning
  6. 7. Board Structures and Processes <ul><li>Lack of formal committees </li></ul><ul><li>Few non-executive directors </li></ul><ul><li>Lack of risk management systems </li></ul><ul><li>Less advice from auditors as threshold for independent audit increases </li></ul>
  7. 8. Governance and Business Improvement <ul><li>Risk reduction through identification and management </li></ul><ul><li>Wider experience in decision-making </li></ul><ul><li>Stakeholder engagement through identification and management </li></ul>
  8. 9. Further Considerations <ul><li>Reputation management </li></ul><ul><li>Greening of business (the business case for social responsibility and integrity) </li></ul>
  9. 10. <ul><li>Corporate governance is about changing </li></ul><ul><li>organisational cultures rather than </li></ul><ul><li>regulations </li></ul>
  10. 11. What is a Company? <ul><li>It is a separate Legal Entity </li></ul><ul><li>It is recognised as a legal “person” </li></ul><ul><li>It has personality & can act as a person </li></ul><ul><li>It has long life potential </li></ul><ul><li>It can claim under Human Rights Act </li></ul>
  11. 12. What is the purpose of a Company? <ul><li>Designed to make profits to distribute </li></ul><ul><li>To limit liability of investors </li></ul><ul><li>Companies Ltd by Guarantee can use surplus to the benefit of the company </li></ul>
  12. 13. What are the features of a Company? <ul><li>It is separate from individuals in it </li></ul><ul><li>It creates a separate person </li></ul><ul><li>It has its own life and responsibilities </li></ul><ul><li>It has members who subscribe capital </li></ul><ul><li>It is set up by shareholders to protect themselves </li></ul><ul><li>It is registered with Companies House </li></ul><ul><li>It has Regulations and officers to run its affairs </li></ul>
  13. 14. Directors’ legal requirements <ul><li>Now codified in Companies Act 2006 </li></ul><ul><li>Act within your powers </li></ul><ul><li>Promote the success of the company for members </li></ul><ul><li>Exercise independent judgment </li></ul><ul><li>Exercise reasonable care, skill and diligence </li></ul><ul><li>A general duty to avoid conflict of interest </li></ul><ul><li>Duty not to accept benefits from 3 rd parties </li></ul><ul><li>Duty to declare an interest in proposed transactions </li></ul>
  14. 15. Factors not to be ignored <ul><li>“ Enlightened shareholder Interest” – future and potential </li></ul><ul><li>Likely long term consequences of a decision </li></ul><ul><li>Interests of employees </li></ul><ul><li>Need to foster relationships with suppliers & customers </li></ul><ul><li>Impact of the business in the community & environment </li></ul><ul><li>Maintaining high standards of business conduct </li></ul><ul><li>Need to act fairly between members </li></ul>
  15. 16. The Company and its Directors <ul><li>Co has a decapitated head – the Board </li></ul><ul><li>Board is the “Thinking Mind </li></ul><ul><li>Rail Track, Herald of Free Enterprise, Lyme Regis </li></ul>
  16. 17. Other Interested Parties Source:- Sheridan and Kendall, 1995 Internal Organisation And Management Subsidiary Boards The ‘external’ parties The ‘internal’ parties EU Commission Government Consumerists Employees Trade Unions Customers Good Practice Trade Associations Local Communities Suppliers Business Partners The Financial World The Media Environment- alist Lenders Of Money
  17. 18. &quot;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?&quot; Sir John Harvey-Jones <ul><li>What is the Board for ? </li></ul>
  18. 19. The Board's Key Purpose <ul><li>Seek to ensure the company's prosperity </li></ul><ul><li>by collectively directing its affairs </li></ul><ul><li>and meeting the legitimate interests </li></ul><ul><li>of its shareholders and relevant </li></ul><ul><li>stakeholders </li></ul>
  19. 20. The Board's Main Functions <ul><li>Policy Formulation </li></ul><ul><li>Accountabilty </li></ul><ul><li>Strategy and Leadership </li></ul><ul><li>Supervision of Management </li></ul><ul><li>Providing Clarity – no mixed messages </li></ul>
  20. 22. The Board Accountability To the company To Owners To regulators and legislators To Stakeholders Ensuring 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 Management Budgetary Control Review of key business results Organisational capability SHORT TERM LONG TERM Operations Review Cycle INTERNAL EXTERNAL Governance Review Cycle Strategy Review Cycle Responsibilities of the Board
  21. 23. Accountability <ul><li>To ensure that the Company complies with laws & regulations and that management & employees comply with carrying out the Board's decisions </li></ul>Very onerous duties - different from management
  22. 24. Governance <ul><li>The Board is the 'Mind & Will' of the Company </li></ul><ul><li>In law - all directors are jointly responsible </li></ul><ul><li>All directors are equal (technically) </li></ul><ul><li>Executive powers are vested in the Board </li></ul><ul><li>Board is always responsible for the Company's affairs </li></ul><ul><li>Directors’ duties are owed to the Company </li></ul><ul><li>Board must have regard for the shareholders and other interested parties </li></ul>
  23. 25. Strategy <ul><li>Board needs to set tone, standards, values </li></ul><ul><li>Board needs to agree common vision </li></ul><ul><li>A Board Charter clarifies ToR </li></ul><ul><li>Directors accept & utilise their differences </li></ul><ul><li>R eward contribution towards achieving the overall vision </li></ul><ul><li>Selecting the MD/CEO - personifies the Board's leadership </li></ul>
  24. 26. Direction Formulation of strategy Acquisition & allocation of overall resources Setting policies Establishing direction Emphasises the mission - the shared vision <ul><li>Direction and Management </li></ul>
  25. 27. Management: Running the business Shorter term operational matters Financial, production, market management <ul><li>Direction and Management </li></ul>
  26. 28. Power & Responsibility <ul><li>SHAREHOLDERS </li></ul>MANAGEMENT BOARD P O W E R R E S P O N S I B I L I T Y
  27. 29. Board Composition & Organisation <ul><li>&quot;A Board may be composed of brilliant </li></ul><ul><li>individuals and yet be ineffective. </li></ul><ul><li>It can only fulfill its true potential as a Board if it is properly selected, </li></ul><ul><li>organized and led.&quot; </li></ul><ul><li>Good Practice for Directors - Standards for the Board </li></ul>
  28. 30. Board Meetings <ul><li>Directors powers are collective </li></ul><ul><li>Need a quorum to convene a board meeting </li></ul><ul><li>No director must be excluded </li></ul><ul><li>Right to inspect accounts and minutes </li></ul><ul><li>Time based and controlled agenda </li></ul><ul><li>Board Pack </li></ul><ul><li>Board minutes must be kept </li></ul>
  29. 31. In Summary Top Performing Board's … <ul><li>Establish clarity of Mission , Vision and Values to lead the broad direction of the company </li></ul><ul><li>Decid e upon the Strategies and Structure to ensure the company's survival & prosperity </li></ul><ul><li>Delegat e to Management and involve staff </li></ul><ul><li>to effect implementation of strategy, policies & plans </li></ul><ul><li>Exerci se responsibility to shareholders and other </li></ul><ul><li>interested parties to promote & meet their legitimate interests </li></ul>

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