The recovery of the UK economy into sustained growth will be driven by the fitness of company boards, and their ability to provide clear direction for the enterprising talent within the commercial sector, says the Chairman of the Institute of Directors (IoD), Dr Neville Bain.
Bain’s statement, which follows recent concerns from the Bank of England about a possible slowdown in the speed of recovery, is a timely reflection on the need for strong leadership at the helm of British businesses.
It is a theme which permeates new guidance from the IoD, published in The Effective Board, which has been co-authored by Bain and the IoD’s Head of Corporate Governance, Dr Roger Barker. The Effective Board reflects on the lessons learned during the tumultuous time of the credit crunch, drawing the focus away from regulation and legislation (of which there has been much of late). Instead, it explores the characteristics and make up of successful boards which are well placed to support the economic recovery.
“Many of the official responses to the financial crisis, such as the Walker Report and the latest edition of the UK Corporate Governance Code, have recognised that legislation, regulation and codes of best practice can only go so far in shaping behaviour inside the boardroom. They become nothing more than a quality control check,” says Bain.
“Of greater importance is the presence on boards of able and motivated directors with a detailed understanding of their distinctive role. No matter how well a board is performing currently it can, and really must, do better.”
Dr Bain highlights effectiveness and risk management as two key areas where boards have been “challenged to up their game” in recent years.
“Risk management should not be an annual and financial exercise: it needs to be integral to operational life. Effective boards are not constitutionally risk-averse, but they’re not reckless either.”
The Effective Board highlights the defining characteristics of successful boards as those with the right strategy, the right people with the right skills and motivation. They have clear values well communicated and practised throughout. Leadership of the organisation comes from the board or equivalent body and it is the board that sets the organisation’s vision, purpose and values.
The book provides a ‘tool-kit’ for directors who want to address areas of underperformance, with a focus on practical examples of areas where boards can improve their own performance. The philosophy it espouses is one of good governance, which Dr Barker, the book’s co-author, is keen to emphasize.
“Good governance is a key source of added value and competitive advantage,” he says.
Barker continues: “The challenge for the board is to supply a governance framework that will deliver long-term success for the organisation in terms of its specific mission and objectives. Governance should never be regarded as a mere compliance activity.”
And as to the guiding principles for a successful board, Bain articulates it thus: “The key components for a successful board are: balance to ensure that there will be excellent challenge and debate with better decision-making as a result; annual meetings between the Chairman and their non-executive directors along with annual board appraisals; and a sound system of risk management and internal control to safeguard shareholders’ interests and the company’s assets.”
The Effective Board will be published on 15 September 2010. Review copies of are available from Leader Communications.
Hi-resolution jpg images of the front cover are also available on request.
Gerry Vincent or Lydia Berry
Tel. +44 (0)1564 796219
Mob. + 44 (0) 7879 600788
Notes to editors
Neville Bain Biography
• Neville was born in New Zealand. His 27 years at Cadbury Schweppes culminated in him being appointed Deputy Group CEO and Finance Director.
• He then joined Coats Viyella, an international textile, clothing and fashion company as CEO, where he stayed for five and a half years.
• Previous posts have included directorships with The Royal Mail Group (chairman), Hogg Robinson Group (Chairman), and Scottish & Newcastle.
• Current roles are chairman of the IoD, chairman of trustees of the Scottish & Newcastle Pension Fund, and of the Hogg Robinson Pension Fund, Non-executive director of Biocon (an Indian based company engaged in producing pharmaceutical products and drug discovery), and a small Aim listed company in UK, Provexis
• The IoD (Institute of Directors) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with upwards of 45,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
• The IoD offers a wide range of business services which include business centre facilities (including ten UK regional centres [three in London, Reading, Birmingham, Cardiff, Manchester, Nottingham, Edinburgh and Belfast] and one each in Paris and Brussels), conferences, networking events, issues-led guides and literature, as well as free access to business information and advisory services and a comprehensive Information Centre. The IoD places great emphasis on director development and has established a certified qualification for directors - Chartered Director - as well as running specific board-level and director-level training and individual career mentoring programmes.
• In addition, the IoD provides an effective voice to represent the interests of its members to government and key opinion-formers at the highest levels. These include ministers, constituency MPs, Select Committee members and senior civil servants. IoD policies and views are actively promoted to the national, regional and trade media.
• For further information, visit the IoD’s website: www.iod.com
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