capitaregistrars.com | 3
THOUGHT LEADER
TIME TO GET SERIOUS ABOUT GOVERNANCE
Governance has never been such big news, and it’s time to take it seriously, argues Charles Cryer
issue that every company secretary should be addressing this year.
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The bottom line is that the culture and structure of governance need to benefit the company and its stakeholders. If you’re not sure that your current arrangements fit the bill, then you need to take a long, hard look at how to fix it.
Of course, it is not always so easy to know if your board is effective in its governance role. The only way to really know is to carry out a proper board evaluation – and that doesn’t mean a simple box-ticking exercise. That means asking a lot of tough questions – and following up if the answers aren’t satisfactory. Are you having meaningful debates about the right issues? Are people on the board challenging others’ thinking? Do the non-executive directors (NEDs) have the management information they need? Is the chairman truly independent of the management team?
Culture of debate Any board with a domineering chairman who stifles debate will be unable to carry out its responsibilities, even if it has all the other elements in place. A good chairman will be actively seeking out the opinions of his or her directors – and good directors should be sufficiently familiar with the issues to offer an appropriate challenge. That’s why it’s essential that you evaluate the board in action: a quick look round the table should give you a pretty good idea of who’s adding value to the company in their role as a NED.
010 will be the year of governance: the aftermath of the banking crisis and the introduction of the new UK Code are shining an unrelenting spotlight on an
Some people are recommending that each board member should be up for re-election every year – that encourages a short-termist approach in my view and I believe a three- year rolling programme of elections will still suit most companies best. Of course, that doesn’t mean you have to wait three years to get rid of an ineffectual NED. The governance structure should allow for the replacement of underperforming directors as soon as it is apparent that they aren’t up to the job.
CHARLES CRYER
Chief Executive of Capita Registrars
It is also crucial that NEDs devote the necessary time to the board. The sheer volume of management information that NEDs need to get to grips with requires that they make a solid commitment to the role. That amount of time will vary from company to company but if you’re not giving your NEDs enough time to prepare then there might as well be an empty chair at the boardroom table.
That’s why it’s essential that you evaluate the board in action: a quick look round the table should give you a pretty good idea of who’s adding value to the company
Who to turn to? With no established market
practice in place, a move toward a tougher, more comprehensive type of board evaluation throws up its own questions. What standards do you set for your board evaluation and who should carry it out? That’s why we’ve brought in governance expert Mark Wearden to provide our clients with exactly those answers. I think Mark’s going to be a busy man in 2010 and beyond so please feel free to get in touch with him to see how he can help you.
Charles Cryer is Chief Executive of Capita Registrars.
mark.wearden@capita.co.uk.
SPRING 2010
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