Governance tools

Managing the board’s business, activities and relationships

Directors meet regularly in order to review the company’s progress during the year so that they are in a position to report to shareholders at the end of it. A meeting is the only method by which their collective skills and experience can be brought to bear on their responsibilities as a board of directors. A board (and in particular the chairman) can enhance its efficiency and effectiveness by managing its own business, activities and relationships in the following key areas:

• setting of meeting agendas, including order of business, and agreeing expectations about boardroom behaviours, (for example, decision items first, followed by discussion items and information items). CSA has a half-day training program Meetings, Minutes and Resolutions that examines the legal requirements and core functions of various types of meetings and the issues encountered in recording minutes. 
• formatting of board papers — the benefits of standard formats
• identify what the board is being asked to do/agree to
• timeliness of distribution of board papers
• running of board meetings (and subcommittee meetings, as appropriate) — allow the board enough time to consider issues properly, but make sure the business of the organisation is not held up
• discuss and agree that board members are expected to have read board papers prior to the meeting; that for information papers a board member will seek clarification prior to the meeting, and that there is little discussion on such papers (unless there is a significant issue identified by members)
• the recording of meetings (minutes) and the timeliness of distribution of minutes after the meeting. CSA has a half-day training program Meetings, Minutes and Resolutions that examines the legal requirements and core functions of various types of meetings and the issues encountered in recording minutes. 
• access to information outside of formal meetings
• contact with staff other than the CEO
• library of board papers for directors.

A company secretary will assist the board with all of the issues listed above.

Managing the board itself

A board, led by the chair, should manage itself across a number of areas:

Size

• Is the board too small or too large?

Composition 

• who should be on the board, and why (both at an individual board member level and for the board as a whole)
• backgrounds/skills/styles of members
• diversity, but taking into account intellectual diversity as well as demographic diversity
• should the CEO be a board member?
• separation of the chairman and the CEO positions
• executive directors versus non-executive directors
• succession planning and implementation
• term limits for directors.

Induction

• getting value from new directors as soon as possible
• setting in place formal procedures
• ensuring the new directors have information about the organisation, the board, the director’s appointment and whether there will be briefings from senior management and site visits
• ensuring the organisation has information about the director, for its own purposes, such as being able to contact the director, or keep track of any conflicts of interest, as well as for fulfilling statutory obligations

Reviewing the performance of the board

The introduction of the first edition of the ASX Corporate Governance Council’s guidelines in 2003 had a marked effect on the practice of reviewing the performance of the board. Prior to the guidelines, it is thought that only about one-third of listed companies had ever conducted a review, and for many it was very informal. Within two years, surveys suggested that the proportion of listed companies conducting a review had risen to over 90 per cent. Furthermore, other types or organisations that are not affected by the ASX, including government enterprises, not-for-profits, charities and private companies, now engage in board reviews. A board review can be thought of as a review of the governance of the organisation.

A board must see the benefit of reviewing the company’s governance from time to time with a desired outcome of ensuring better governance. There are many areas that can be the focus of the review, including the following:

How to conduct the review of the board

• alternative approaches
• self-review versus using an external party
• review of the board as a whole and individual members
• self-assessment versus peer assessment versus external assessment
• survey-based versus more informal
• desirability of establishing a board-endorsed process.

CSA has a half-day training program Assessing Board Performance that demystifies the board evaluation process. 

Committees

The committee’s roles, composition and existence should also be periodically reviewed.