Some time ago a colleague was leading a course for company secretaries. Among the attendees was a woman approaching retirement who, it turned out, had almost 40 years’ experience of taking the minutes in board meetings. Why, he asked, as she was so close to retirement, did she feel the need to attend a course? ‘Simply,’ she replied, ‘to check if I’ve been doing it properly.’
While it’s an amusing anecdote, it also hides a far more serious point. Company directors have a wide range of responsibilities, but their primary role is to ensure the effective governance of their organisation. Transparency, accountability, legal, regulatory and compliance issues are all an essential part of their remit. They have to develop the strategy the business is taking, and both determine and assess any risks the business might face in working to achieve those strategic objectives. The training they need to help them handle these often deeply complex issues shouldn’t be left until they reach retirement.
Non-executive directors (NEDs) have a critical responsibility to constructively challenge proposals from management and to scrutinise their performance, and, among other roles, to develop the company policy on remuneration and fix the remuneration packages of individual executive directors. In recent months this is a responsibility which has seen many boards at odds with their own shareholders. Such issues are not going to fade away quietly.
Equally, events like the near collapse of HBOS have focused attention on transparency. The enquiry into HBOS was highly critical of the way minutes were taken at board meetings. It’s not just a question of how those minutes appear to the board, but also to shareholders and, in a worst case scenario, to a regulator. It is the board that is responsible for the accuracy and transparency of the minutes, not the company secretary. Nevertheless, ICSA is currently consulting with both the public and private sectors about the important practice of minuting meetings and revised guidance on good practice will be published in due course.
Like the company secretary in the anecdote, board members will be highly experienced individuals, often having worked across a range of senior roles. They may have served in several very different business sectors over the years. They will be part of a mix of individuals with a broad range of complementary skills – but this doesn’t automatically mean they are completely up to date with the governance and regulatory issues they are now required to deal with at board level. This also applies to the NEDs, who carry the extra responsibility of ensuring that their skills, experience and knowledge of the company ensures they are able to discharge their duties and responsibilities effectively.
While it is a requirement of the UK Corporate Governance Code that directors regularly update and refresh their skills and knowledge, it also makes a great deal of sense to ensure that, in a rapidly changing business environment, this happens as a matter of course. So training, to ensure that board members are refreshing their skills and knowledge, is an essential which no company (or for that matter charity or any other public body) should be without.
While there are open courses you can attend, there are a lot of benefits to be said for in-house training. Not only can the training be tailored to fit the specific needs of a particular organisation, but it can also address individual needs in areas such as, for example, investor relations. A bespoke course can be created to address a specific range of issues which impact on a business. Where necessary specialists can be brought in to address these very individual concerns, such as corporate and social responsibility or culture and behaviour. Above all, an in-house course, unlike a more public training course, remains private. It’s an opportunity to address issues with complete confidentiality and even to develop action plans for how these issues could be handled by the board in future.
Taking on the role of director puts one in a highly visible, but also vulnerable, position. It’s one which can lead to an enhanced reputation or a ruined one, both for individuals and the companies they serve. With directors legally liable if things go wrong, it is even more essential that they have the right training to enable them not only to guide their companies to success, but also to be fully aware of the liabilities they might face in the performance of their duties. Training helps them to do that by equipping them with the right knowledge and skills to face up to those issues and potential liabilities with confidence.
So please, do make sure you train your board. All I ask is that you don’t leave it until they’re about to retire.
Chris Glennie is commercial director at ICSA: The Governance Institute, which is required by Royal Charter to lead ‘effective governance and efficient administration of commerce, industry and public affairs’.