Headline Verdana BoldBuild your own board potentialWhat it means to be a boardApril 2018

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The need for boards to demonstrate that they are effective has never been higher

Introduction

Context

Various codes

Failures –lack of trust

Increased scrutiny

Governance

reform

Evolving role of the

board

Business landscape

“The performance of any Board is a function of the character of the individuals that comprise the Board. No structural remedy can overcome poor judgment or apathy.”

Daily and Dalton (2003)

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The evolving role of the board

Traditional Board

Typically focuses on the following:

• Setting strategy

• Risk management

• Legal and regulatory compliance

• Overseeing performance

Spends a significant amount of time monitoring past performance and reviewing quarterly reports, budgets, audit and compliance.

Emerging best practice

Considers matters that are critical to the future success and strategic direction of the business, such as:

• Continuous focus on strategy

• Culture and reward

• Innovation

• Talent and capabilities

• Succession planning

• New risk responsibilities

Backward lookingFocus on fiduciary duties

Forward lookingEmphasis on impact

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Directors duties under the Companies Act 2014

There is no legal distinction between executive and non-executive directors. As a consequence, NEDs have the same legal duties, responsibilities and potential liabilities as their executive counterparts.

Act in good faith and in the interest of the Company

Act honestly and responsibly

Act in accordance with the constitution and as allowed by law

Not benefit from or use the company’s property, information or

opportunities, unless permitted

Not agree to restrict the director’s power to exercise an independent

judgment

Avoid conflicts

Exercise care, skill and diligence

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The role of Non-Executive Directors

“Essentially the non-executive director's (NED) role is to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors.”

- Institute of Directors

NEDs are appointed to bring:

• Independence

• Impartiality

• Wide experience

• Special knowledge

• Personal qualities

Key functions

The key responsibilities of NEDs include:

• Providing strategic direction

• Monitoring performance

• Determining remuneration

• Audit

• Providing networks and connections

• Shaping culture and talent

• Taking into account stakeholder views

Responsibilities

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Discharging non-executive responsibilities in practice

NED

activities

Attend

scheduled

Board

meetings

Site visits

Self-testing

/ deep dives

Seek

external

advice

1st, 2nd & 3rd

order

challenge

Request an

Internal

Audit

Meetings with

management &

shareholders

Assigned a

strategic

initiative

Participate

in

committees

Challenges

Key challenges NEDs face in

discharging their duties

include:

• Time commitment

• Number of directorships

• Straying into exec territory

• Understanding the business and key risks

• Keeping up to date with regulatory changes

• Greater accountability

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Professional capital

Social capital

Behavioural capital

• Functional and technical skills

• Sector experience

• Governance knowledge

• Professional connections

• Relationships

• Networking skills

• Diversity

• Communication, listening, emotional intelligence etc.

• Understanding of Board culture

The perceived professional and social capital directors can bring to the Board is usually considered when looking at the skills and experience of the Board -what is often absent is behavioural attributes

Skills and experience required

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Good Board members…

What makes a good Board member?

Focus on the bigger

picture

Bring different

perspectives to the

table

Take collective

ownership for

decisions

Are disciplined,

committed and

dedicated

Show strong

command of issues

relevant to the

business

Exercise independent and objective judgement

Challenge constructively, probing

and bringing secondary challenge

Show openness, tact

and the ability to

listen

Offer support to

management

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Things to look out for

Practical tips

Ensure that you have a comprehensive and tailored induction

Partner with an executive director

Visit operations and talk with senior and middle managers in these areas and talk with non-managerial members of the workforce

Make sufficient time available to discharge your responsibilities effectively

Devote time to developing and refreshing your knowledge and skills, including softer skills

Insist on receiving high-quality information sufficiently inadvance

Seek clarification or amplification where they consider theinformation provided is inadequate or lacks clarity

10

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Board impact can be described as the effect of the governance structure and processes, and contribution from Board members, which helps shape different and more positive outcomes

11© 2018 Deloitte. All rights reserved

Colm McDonnell

Partner – Risk Advisory

+353 (0) 1 417 2529

davkinsella@deloitte.ie

Melissa Scully

Senior Manager – Centre for Corporate Governance

+353 (0) 1 417 8656

mscully@deloitte.ie

Centre for Corporate Governance

Our Centre for Corporate Governance is designed to provide boards and senior management with a single point of access to current developments, Deloitte perspectives, learning materials and other useful information related to corporate governance.

See our website for further details -http://www2.deloitte.com/ie/en/pages/governance-risk-and-compliance/solutions/center-corporate-governance.html

Contact details

Further information

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