Directors’ Duties

The reality of neutrality

The famous Scottish poet, Robbie Burns, once wrote “Oh would some power the gift give us, to see ourselves as others see us” and that’s pretty apt advice when it comes to impartiality – in all walks of life, including the boardroom.

We all like to think of ourselves as balanced, fair and neutral individuals and for the most part, most of us are. But there’s one area of governance where it gets tricky: our ability – or lack thereof – to look at something objectively when facing a decision that might negatively impact on us personally.

Going back a good few years, I was involved with an 11-member board and it soon became abundantly clear that the evidence suggesting a board should never exceed nine members was spot on.
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When abiding by the law alone is not enough

It should come as no surprise that one of the key attributes of a good and effective board member is an unswerving commitment to ethical and fair behaviour.

But that’s not as simple and as straightforward as it sounds, especially in a world where what’s lawful may be frowned upon by large sections of society and viewed in a particularly negative light.

It demands of the modern director to be attuned to what’s going on, both when making judgement calls as an individual and as a member of the collective – the board.
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Tri is the trick to articulation and persuasiveness

We’ve all come across them in our time, those individuals on boards who fail to be heard by their co-directors.

There are those who simply can’t be heard because they’re as quiet as proverbial mice, seldom saying anything.  Then there are those who are so damn garrulous that they find it impossible to pause even at hefty punctuation points, their voices so constant that they soon become little more than background drones.

In a word, both are dispensable – precisely because superior board members make an effective and positive contribution…and you can only do that when you’re articulate.  With articulation comes persuasiveness.
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Raise your glass to the cocktail of differing points of view!

International governance expert Dr John Carver is on record as having said that just because you establish a group of intelligent, competent and caring individuals does not mean that as a group they’ll make intelligent, competent and caring decisions.

He argues further that all too often it’s because we as human beings lack the courage to say what we really think, for a variety of reasons.

And yet, it’s the cocktail of differing points of view – in life as much as around the boardroom table – that invariably leads to healthy and robust discussion and debate…and generally speaking, great decision-making.

So what is it that prevents us from displaying this courage – and more importantly, how can we rediscover our mettle?
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Seven’s the magic number in achieving sound business judgement

A recent survey in Britain revealed that when it comes to numerology, the number seven takes the cake.

Perhaps it’s because the number appears regularly throughout cultures and history – there’s the seven ancient – and modern – wonders of the world, seven days of the week, seven circles of the universe, seven deadly sins and seven basic musical notes.

And so much more, like the ‘The Seven Fs – Tactics to Improve Board Decision-Making’ I’ve recently compiled!
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With a sharp mind, you’re a cut above in the director stakes

We all know that most board members are, more often than not, appointed on the basis of the specific skills or expertise they have in the sector in question, along with a strong reputation as a contributor at executive level.

And while that’s likely to ensure the board is populated with good and competent people, it doesn’t necessarily take it to rarified heights.

For that, you need directors with the aforementioned attributes plus a sharp, enquiring mind and an insatiable thirst for learning.

That’s when you get directors who are a cut above…and in turn, a board that’s incisive in every sense.
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You don’t have a choice when it comes to care and diligence

And another thing…..effective directors are careful and diligent.It may come as a bit of a shock and surprise to some of you, but being a diligent and conscientious board member is not a matter of personal choice. It’s a whole lot more serious than that…indeed, it is enshrined in our law. And another thing….effective directors are careful and diligent.

Legally, the duty of a director is to display care and diligence at all times, to the extent that they exercise thoughtfulness and attentiveness in their role and have a reasonable grasp of the organisation’s financial position – after all, they physically sign off on the financials – and its operational aspects.

Some may think that’s a rather ambiguous definition, one that’s open to interpretation, and there’s even an argument that we’re dealing in semantics here.

So perhaps it’s best to clear the air and delve into the legal definition of ‘care and diligence’.
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When you know your role, the good times roll….

Let’s get started on our Top 10 steps to being an effective director by tackling the first of these which, quite logically, is knowing what our role is and understanding what we’re there to do.

There are two components to this, the first one is knowing what we as individuals are to do and the second comprehending our role as part of the collective, as a cog in the greater wheel that is the board team.

The key to success, like many things, can be found in the detail – in other words, in the quality of the director role description provided.
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A 10-step guide to being an effective director

As I’m sure the vast majority of us wish to be the most effective board members we can be and make a positive and lasting contribution to the companies and organisations whose boards we serve on, I thought I’d share our findings on the characteristics needed to do just that.

But before I do, perhaps it’s opportune to have a look at what the celebrated professor of corporate governance at the Kellogg Graduate School of Management at Northwestern University in Illinois, Robert Neuschel, said about the issue.

More to the point, how his findings tally with those we’ve unearthed during our quarter century in the governance consulting arena – and hopefully allow us to arrive at a universal truth.
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If you need to ask the question, chances are there’s a conflict of interest

You might recall that in an earlier blog I mentioned how often I’d been approached for advice on how to go about getting on a board. There’s another question that’s equally ubiquitous, only it comes from those already on boards – and it has to do with conflicts of interest and what they should do about them.

My immediate response – and without knowing the full story – is always that if we have to ask the question, chances are there’s a conflict of interest. And wouldn’t it be better if we erred on the side of caution and did it properly?

So what is ‘properly’?
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