Part Three of Three Board Attributes
Article Six of a total of seven Attributes Articles
In our previous weeks’ article series, Genius addressed “Board Structure” and “Board Demographics” and their influences on Board effectiveness.
This miniseries, Genius is addressing the three “Board Attributes” topics of Competence, Commitment, and Character.
To keep reading easy, Character has been split into two Articles of six Character Traits each.
Board Attributes addresses, within the physical people appointed to the Board, their collective personalities and how these factors impact on Board effectiveness.
Character addresses the person, their beliefs and behaviours, how they integrate within the team or lead the Board.
A number of these points have been addressed under Competence or Commitment as the beginning of the Board Attributes series, therefore, this section being a summary of such information.
A Director’s ethics are the moral principles that govern their behaviour or the conducting of an activity.
The South African King IV Governance Code states – “role of the governing body in ensuring that the ethical culture within the organisation is aligned to the tone set by the governing body”.
The UK Corporate Governance Code states – “The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.”
The UK Code has avoided using the word ethics but rather explained the expectations in more detail.
A Chairman with a good ethic and appropriate view on “right and wrong” ways of doing things, who sets the tone and is aligned to the purpose will support an effective Board. The other side of the coin would be the kind of ethics seen in many businesses and, infamously, in certain parts of the financial services sector, where the bottom lines drive and personal incentive drives deliver inappropriate ethical behaviours.
In the interview stage, through the headhunting selection process, it is important for character assessments to be carried out to determine if there is a fit with the new Board or a clash. These would apply to several character facets.
Integrity is the practice of being honest and showing a consistent and uncompromising adherence to strong moral and ethical principles and values.
A person with integrity will consistently behave in a given way under a given circumstance and will not be swayed by external influences.
It is through this adherence to their principles and values that develop relationships of trust and of standing out as a leader.
Integrity is a solid foundation for effective board behaviour.
Some Directors can easily focus on the strategic points of importance, other Directors will desire to delve into the detail. Detail is needed at times in Committee work.
Directors should be focused on what is important for the business, it is like being on the bridge of a ship, looking at the bigger picture while the ship is being run. The Board when focused can be likened to an early warning system.
Directors should be fully focused during the meeting, well prepared, listen to the conversation and determine if they have value add to contribute. A Chairman is challenged when Directors are distracted to the other roles or interests during meetings which, now given the COVID-19 crisis, have moved from in-person to online, voice or video meetings.
The one value of paper – In the old days you could easily identify lack of focus, whereas today with the online portals, it can be difficult to determine if a Director is aligned to the conversation and the paper or has gone “off-piste”.
In the words of Neil Diamond, “she had a sunny disposition… a sunny way of talking …. she’d always smile”
What a wonderful disposition to have on the Board, better than “He had a cloud that never went away”
For a Chairman to keep conversations constructive, positive and moving forward, focused and strategic and having a disposition mix on the Board conducive to this desired outcome is much easier than having to work harder with some individuals to travel the journey needed.
In assessing Board prospects, the knowledge of the diversity of current dispositions is critical to ensure an elevation of the balance, so that the Board is more effective in terms of being in a state of readiness to act.
5. Respect & Trust
Without respect and trust, you will have dysfunctionality. We have seen how quickly a lack of trust in a Chairman manifests into a lack of respect, and effectiveness and decision making are impacted.
If a Chairman or CEO respectively do not trust one another or respect one another, it should be a matter for the Nominations Committee to deal with urgently. This is one of the reasons we do recommend that the Nominations Committee is not chaired by the Board Chairman.
Another key relationship of trust and respect is that of the Chairman and the SID or Deputy Chairman. It is important for the Chairman to have a trusted Board Director with whom they can share ideas and thoughts.
It is incredibly challenging as a “diversity” Director of the Board, to be respected for your diversity and trusted to bring value at other levels and conversations. It is typical that new Board Directors are “pigeon-holed” into the competence box and not trusted to be able to deliver value in other areas.
A Chairman should counsel all Directors to respect one another’s differences. This will build trust in the team of each other.
6. Doubt, Judgemental & Personal
A character trait of doubting consistently, adds time to conversations, becomes “boring” to all when it happens frequently and risks then, when a genuine doubt is raised, that it will not be recognised.
Judgemental behaviour is, for example, where a non-executive Director approaches a challenge from a point of importance, belittling in tone, of judging the answer before it is offered. This will not result in conversations that provide assurance. This requires chairmanship to work with the Director to change their stance to one that is supportive and non-point scoring and to support the Executive to trust that the Director will learn this change.
The need to challenge by the Board is a fundamental part of our Board governance, yet no-one likes being challenged or criticised. If the challenge is then personal in its nature, accusing the individual, the response of the executive is highly likely to be very defensive, breaking down the conversation completely. Again, the non-executive should work to land challenge such that it is supportive of the common goal; the long term sustainable future of the company.
When these behaviours appear, it is important, potentially through the Company Secretary, to arrange for one on one meetings to address each Director’s behaviour. Therefore with the Company Secretary for independent guidance, with the Chairman to explain that this is not collegiate behaviour and rather what is expected and with the executive to support them finding a working path together that does not encourage such breakdowns in working together.