Corporate Governance

Creating valuable-enhancing boards

07 April 2016

Human Capital Alliance managing director Edwin Sim looks at optimizing Board of Directors strategies.

Assembling a Board of Directors that can optimize value-creation is a critical sustainability element for all Thai companies.

A recent McKinsey Global Boards survey indicated that most respondents believed their impact was high or very high.

Spending more time

McKinsey’s Global survey also showed across-the-board increases in the time that directors spent on board work (averaging 33 days).

In many cases, board members are spending 50 days or more per year on board work, either due to regulatory pressure or because the time required to do a good job is usually more than they initially expected.

Time spend on strategy rising

Most board members said their biggest contributions and most time spent was on evaluating company strategies.

Directors spent an average of nine days per year on strategy, the greatest amount of time across the numerous areas tested.

“Indeed, directors are almost twice as likely to say their boards are more effective at strategy than any other area of their work; they report the least effectiveness at organizational health and talent management.”

Average boards only spent about three days a year considering organizational health and talent management.

Actions, dynamics and self-perception important

Top performing or striving board of directors stood out in many ways.

They reported exceptionally strong cultures of trust and respect, wherein Board members and management constructively challenge each other.

Continuous feedback mechanisms were also critical.

Top performing boards also regularly conducted evaluations, and asked for additional inputs after each meeting.

Identifying patterns

To gain a deeper understanding of how boards create value, the study identified patterns between directors’ assessments of the board’s overall impact, effectiveness at executing specific tasks, and the way the board works.

Most successful boards must be effective at individual tasks, maintain trust-based challenging board cultures that embrace feedback, and aim to improve continuously.

Healthy boardrooms

Effective and well-rounded boards must have strong board dynamics. Trust and respect cultures are vital to healthy boardrooms.

An effective chairperson, that runs meetings well, establishes a culture of trust and constructive discourse, and invests in training, development, and feedback is also an important board dynamics ingredient.

Good leadership, the survey said sets the tone for the board as a whole and can set the stage for a more effective, value-enhancing boards.

Ineffective boards

Less than half of the ineffective boards studied, reported cultures of trust and respect in the boardroom. Moreover, many directors said they were forced to seek information on their own and fewer than one per cent received sufficient induction training.

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