If you consider the talent sitting on the boards of the major international financial institutions that have become the central players in the global financial crisis and rescue package dramas, the obvious question is why they didn’t do more to oversee risk, considering that that is one of the primary functions of a board of directors.
Board responsibilities are likely to become more onerous as the response to the current financial crisis begins to filter through. Changes are likely to dramatically increase the workload and the personal accountability of JSE Securities Exchange listed company directors, with the possibility that potential outside directors may become reluctant to join boards.
“Independence” is likely to become a necessity rather than a trendy phrase in the structure of boards and here is a broad example of what type of skills there probably should be on every board to ensure the success of an organisation:
- The Technician - Provides the relevant background that is valuable to technologically focused organisations
- The Auditor - Who adds extensive auditing experience to the boardroom mix
- The Moral Compass - An expert on governance issues, someone known for both his high level of integrity as well as a commitment to enhancing shareholder value
- The Financial Specialist - Who brings financial accountability to the organisation
- The Image Maker - A marketing genius who can give the organisation a facelift and transform the image
- The Human Resources specialist - Who can provide guidance and leadership in developing Human Resource strategy
This means that the recruitment process for Non-Executive Directors needs to be a well thought out, structured and focused search to find individuals with specific skill sets or technical backgrounds, as opposed to general leadership skills and experience, who will rise to the challenges as organisations work through the problems created by the 2008/9 Economic Crisis.
What to do
When you are offered a Non-Executive Director role complete your due diligence of the organisation.
Understand the business model and the challenges that management is currently facing
Analyse your own skills and personal qualities to determine whether you will be a good fit with the organisation.
Finally evaluate these questions before accepting the offer:
- Do I have the time to devote myself to this position?
- Am I willing to assume the inevitable legal and personal exposure that comes with a board seat?
- Will I enjoy working behind the scenes as opposed to working in a more public position?
- Am I confident enough to ask tough questions and play an active role in board meetings?
- Do I know how to build good relationships with management, offering constructive criticism when necessary?
Take the time to meet with the management team and learn about the business so that you can make a valuable contribution at Board meetings. You will have to take it upon yourself to keep abreast of the business going forward.
What not to do
Successful board directors understand the difference between monitoring and micromanaging and will ensure that their advising efforts consistently fall into the former category, ensuring that there’s substance and process behind management claims, but otherwise allowing management the freedom to do its job.
Providing constructive criticism is part of the board director’s job description and Boards tend to function best in an environment of mutual respect. Using the management team as a punchbag will obviously create hostility and make it much more difficult for them to be open and transparent.
Further reading
Non Executive Chairman & Directors
What's in it for you to become a Non-Executive Director
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