A time for board introspection

As shareholder and public scrutiny transcend to the point of being invasive, Boards are increasingly being paralysed by indecision and risk aversion.

If 2020 has taught the world anything, it is that agility in the face of adversity will determine our future. Similarly, the Board of Directors no longer have a choice but to be agile in order for businesses to move beyond mere survival.

The answer to Board efficacy is simple – introspection. Unfiltered, unabated and honest introspection. Investors, regulators and other stakeholders are seeking greater board effectiveness and accountability and are increasingly interested in board evaluation processes and results.

Well-performing Boards share a key characteristic, and that is that the Board’s tone of leadership inspires and requires active, candid, and relevant participation from all members, as well as healthy debate and independent, yet collaborative decision-making.
Where the Board culture and dynamic is healthy, Board members should see Board assessments as important and beneficial guidance in becoming more effective. The Mazars approach to Board introspection focuses beyond compliance to fit-for-purpose governance, and involves delving deeper into some of the following areas:

Board Composition – How often do Boards introspectively look at how they are composite? Does your Board have the appropriate number and balance in skills, expertise and knowledge to carry out their fiduciary duties? Boards should regularly review their composition or risk being inefficient or missing out on fresh and new perspectives.

Board Meetings – Board to constantly review if Board meetings are effectively facilitated, discussions are robust, and if Boards are having the right discussions without encroaching on management responsibilities.

Stakeholder Inclusivity - Are Boards ensuring a stakeholder inclusive approach in decision making, are Boards aware of all key stakeholders and their expectations and are Boards providing stakeholders the necessary information to make informed decisions.

Ethical Leadership – In South Africa we have seen how unethical behaviour damages not only an organization’s health but also public perception.

As the ultimate guardians of the organization`s financial, human, and reputational capital, corporate Boards need to set their bar higher and replace reactive approaches to misbehaviour with a proactive approach to succeeding with integrity.

Sustainability – Sustainability is now central to an organization's continued ability to operate. As such Boards are required to review measures around financial matters, environmental footprints and social initiatives.

Board Relationship with Management – The relations between the Board and management is critical to an organisation’s long-term success. To be effective, Boards and management, in particular the CEO, have to work as a team. As such it is in the best interest of the organization that there is constant review of information provided by the executive, lines of communication and reporting structures to promote a one-team approach.

While Board assessments can be uncomfortable to perform and receive, it has become apparent to Mazars that conducting a Board Assessment promotes Good Governance within the organisation. We have witnessed this transformation first hand at some of our clients, and have developed a forward-thinking board assessment methodology encompassing a host of material topics, in addition to the ones outlined, in line with best practice developments.

Authored by: 

Abdurrahman Motara

Public Sector Consultant, Corporate Governance & Consulting