Board dynamics and culture

In gaining a grasp of people and behaviour, a director understands the importance of defining sound, purposeful organisational values and leading the development of organisational culture. People are integral to business; the awareness and analysis of board and director relationships, board composition, and boardroom ethics are all crucial to enabling the organisation to function cohesively.

Diversity

As the global demand for talent intensifies and technology reshapes the business landscape, it is critical that we attract, retain and develop both the best and the most diverse talent in senior management and on our boards. Read further the Oct/Nov 14 boardroom article on diversity: missing the beat.

Organisational diversity is a broad term and can refer to a mix of gender, skills, thought or culture to name a few. It is widely accepted that diversity has a positive impact upon decision making processes. But what does diversity mean for the director? And how can we improve diversity in the boardroom?

Whether in difficult or prosperous economic times, every business in New Zealand looks for a competitive edge. An outstanding competitive advantage is there for the taking – the talents and leadership abilities of women at board level. This is the conclusion of the Ministry of Women’s Affairs (MWA), who have produced the report, Women on Boards, with the support of Business New Zealand and the Institute of Directors in New Zealand. The evidence shows that women directors can help companies gain competitive advantage and increase profits, and that companies that have women on their boards outperform those that do not.

The IoD established the Mentoring for Diversity programme to link experienced women directors (mentees) with chairmen and senior directors (mentors) from NZX and large company boards. The aim of the programme is to connect board-ready women with a better understanding of how large company boards work and to assist in the process of seeking appointment.

It is worth noting that the NZX requires listed entities to disclose a quantitative breakdown, as to the gender composition of the Issuer’s Directors and Officers, as per listing rule 10.4.5 (j).

The MWA have also more recently produced the report Inspiring Action which provides an excellent summary of relevant research and action plans to assist organisations in attracting and retaining talented women.

A board composed of a variety of skills, knowledge, expertise, experience, personality, communication styles, and interpersonal skills may foster a broader range of perspectives, insights, and views in relation to issues affecting the organisation. This policy paper, composed by the Global Network of Director Institutes (GNDI), describes a global perspective in relation to board diversity. It explains the rationale, meaning and significance of board diversity, and outlines possible ways to improve board diversity.

There is an argument that there is a strong message sent from the board when diversity is evident in director appointments. The Institute of Business Ethics briefing, Business Ethics and Board Diversity, explores how boards should be approaching boardroom diversity in relation to ethical business practice and the principle of equal opportunity.

The UK Government pledged in the Coalition Government Agreement to “look to promote gender equality on the boards of listed companies”. The Business Minister and Lynne Featherstone, the Minister for Women, invited Lord Davies of Abersoch to undertake a review, exploring barriers preventing more women reaching the boardroom and to make recommendations regarding what government and business could do to increase the proportion of women on corporate boards.
Read the Initial 2011 report here
Read the 2014 progress report here
There is an ancillary document which has followed these reports, detailing a voluntary Code of Practice for Executive Search Firms.

Looking beyond the boardroom, Credit Suisse has identified and mapped 28,000 senior managers at over 3,000 companies in the Credit Suisse Gender 3000. This has enabled analysis of the impact of diversity at a day-to-day operational level which expands upon an important body of work regarding the impact of board diversity on company performance.

Catalyst is a non-profit organisation with offices in the US, Canada, Europe and India. Their mission is “to expand opportunities for women in business.” Dedicated to creating more inclusive workplaces, Catalyst offers a suite of research and useful tools centred on diversity.

Women looking for board positions should consider the Ministry of Women’s Affairs website regarding nominations to State Sector Boards and committees.

Unconscious bias

Directors are legally required to act in the best interests of the organisation they govern. But what are the limits of a director’s ability to operate without bias or self-interest? And in understanding how those biases influence on the way we make decisions (from Who should be selected for a board role or a promotion? to Which contractors should we engage with?), can we establish better frameworks of decision making to ensure the company is put first and unconscious bias doesn't lead us into bad decisions. A report from Anthony Page, Unconscious Bias and the Limits of Director Independence, explores this in detail.

Talent strategy

The importance placed on people and culture by boards is increasing alongside competition to acquire and retain quality staff. The April 2015 directorsbrief Does your board have a role in talent strategy?” aims to provide the reader with some useful background and guidance as to how a board can define and carry out the extent of its responsibilities with regard to human capital and talent strategy.

The Institute of Corporate Directors in Canada partnered with the Rotman School of Management and Knightsbridge Human Capital Solutions in 2011 to research the role of boards of directors in relation to talent strategy. The report “Beyond the CEO” discusses how active and effective Canadian boards are in their oversight of human capital risks, where the gaps exist and what can be done to close them.

Deloitte also produced a paper entitled “The Talent Intelligent Board” in 2013. The report contains some interesting points regarding the definition and execution of oversight responsibilities regarding talent, and provides guidance around some questions to ask of management.

“Economies survive by continually responding to the world around them. This means harnessing new technologies or exploiting new international markets in pursuit of growth.” The ability to capitalise on those new opportunities is becoming more dependent on talent than ever. “Adapt to survive”, a report released  by PWC in 2014, discusses how better alignment between talent and opportunity can drive economic growth.

Deloitte argue in their report “Human Capital Trends 2015”, that the new world of work we navigate in business requires a dramatic change in strategies for leadership, talent and human resources. Over 3300 organisations from 106 countries contributed to this year’s survey assessing challenges associated with talent and the level of organisational readiness to effectively manage them.

The key  findings for New Zealand in PWC’s 17th Annual Global CEO Survey (2014) showed that 80% of CEOs are concerned about the availability of key skills. The section “Tomorrow’s workforce” discusses how organisations can engage with an increasingly diverse workforce while working arrangements are expected to be more flexible and technological developments reshape the business landscape.

The Deloitte Millennial Survey 2015, explores what tomorrow’s leaders think of business today. Having covered 7800 future leaders from 29 countries, the results indicate that organisations should “focus on people and purpose not just products and profits” in the 21st Century. Take a look at what millennials desire and expect from the future of the world of work.

Valerie Keller, speaking at the Oxford Said Business School in 2013, discussed harnessing talentism for innovation and growth. The term Talentism coined by Dr Klaus Schwab when he opened the World Economic Forum in Davos: “Talentism is the new Capitalism”.

CEO succession

Keith Meyer and Morten Nielsen, of CTPartners, provide a useful write-up of matters of importance in successful CEO transitions. It is featured as part of the NYSE Governance Series, here.

Director professional development

It is arguable that professionalism and continuing developmental activity has never been so critical both for the effectiveness and the reputation of company directors. Individually on boards, and collectively as a profession, directors are constantly under the scrutiny of shareholders, consumers, the media and the general public.

From better understanding the scope of the sector you operate within, to finding the connections that will lead you to your next directorship, there is much to be gained from learning the ins and outs of effective networking. Take a look at the IoD’s Ten Top Tips for Networking.

Board culture and behaviour

Boardroom Disputes: How to Manage the Good, Weather Bad, and Prevent the Ugly, published by International Finance Corporation and Centre for Effective Dispute Resolution, sets out steps boards can take to minimise the risk of disputes arising and mitigate the impact of disputes if they do arise.

Conflicts in the boardroom survey – results and analysis, published by International Finance Corporation and Centre for Effective Dispute Resolution in 2014, shows the effects that boardroom disputes can have on organisations and the challenges that directors encounter in attempting to resolve disputes.

This ICSA International Policy Report, Boardroom Behaviours argues that until recently the impact of boardroom behaviours on organisational outcomes, particularly in relation to the events of the 2008 global financial crisis have been under-observed. As such, little to no documented guidance has been available to directors in regards to what constitutes best-practice. The ICSA concludes with recommendation as to how best-practice might be defined and pursued, and also includes a set of starter-questions which a board might ask in relation to boardroom behaviour.

Australian Board of Directors Survey 2013 (Heidrick & Struggles), The board’s hardest task: how to tell under-performing directors “it’s time to go”, focuses on: the need for board renewal, the lack of effectiveness in exiting unwanted board members and the infrequency of change in board leadership.

Board Relationship with staff below the CEO – FAQ from Policy Governance website.

Ethics, Transparency and Corruption


Ethical Practice is fundamental to good governance. An ethical culture with consistent integrity and sound ethical values is simply good business sense. Ethics is a key area of knowledge and practice for a director and can be challenging. The following organisations and resources provide some foundational reading:

Transparency International New Zealand (TINZ) is the recognised New Zealand representative of Transparency International, the global civil society organisation against corruption. The TINZ website contains a range of reports relevant to their mission, here

The Institute of Business Ethics (IBE), based in London, promotes high standards of business practice based on ethical values. The IBE helps organisations to strengthen their ethics culture through the sharing of knowledge and good practice. Their website contains a range of resources and publications.

Of particular interest: In a Board Briefing entitled “Ethics, Risk and Governance”, the IBE sets out why directors need to be actively involved in setting and maintaining a company’s ethical values and suggests some ways to approach it. It aims to help directors define their contribution to the maintenance of sound values and culture. This report can be found in their list of publications, here.

The Deloitte Bribery and Corruption Survey 2015: In a first of its kind, Deloitte surveyed Australian and New Zealand organisations on offshore bribery and corruption risk in 2012. In late 2014, they launched a second survey. This new report provides an essential follow up on the significant risks presented by this complex issue. Deloitte focus on risks related to overseas investments and operations but, given recent high profile domestic corruption incidents in both Australia and New Zealand, also look at risks from a domestic perspective.

The Policy and Research division of Chartered Accountants Australia and New Zealand, Future Inc. released a report in 2014 entitled ‘Are Australia and New Zealand Corrupt?’. Despite positive survey rankings, Australia and New Zealand have been subject to harsh criticism in recent years for what is perceived to be a lackadaisical approach to corruption. This paper examines the perception that Australia and New Zealand are nations relatively free of corruption and what is in place to mitigate it.