8. Board Effectiveness

Question 1

What is the purpose of the 2018 FRC Guidance for Board Effectiveness?

Answer 1

Stimulate boards’ thinking on how they can carry out their role and encourage them to focus on continually improving their effectiveness. The guidance is not intended to be prescriptive – it contains suggestions of good practice to support directors and their advisors in applying the Code.

Question 2

Name some recommendations specific from the FRC Guidance on Board Effectiveness

Answer 2

• Regular meetings (para 28)
• Decision-making processes (para 27 to 32)
• Supply of information
o CEO should ensure that management fulfil its obligation to provide the board with accurate, timely and clear information (para 73)
o NEDs should insist on receiving high-quality information and should seek clarification from management where they consider the information is inadequate or lacks clarity (para 77)
o Under the direction of the chair, the co-sec’s responsibilities include ensuring good information flows (para 81)

• Board packs
• Board portals, electronic board papers and virtual meetings – Diligent, Board Intelligence etc
• Use of social media by boards – WhatsApp groups between NEDs to discuss information which they would not want to share with the company or other directors

Question 3

What is the role of a co-sec in building an ethical culture?

Answer 3

• Suggesting discussions on corporate culture are included on the board’s agenda
• Suggesting that culture indicators are selected based on the expectation of the organisation’s key stakeholders
• Developing a dashboard for the culture indicators that should be reviewed from time to time by the board
• Ensuring that information is drawn from a variety of sources to support and monitor perceptions of performance for the selected indicators
• Organising site visits to that members of the board can meet employees and assess culture themselves
• Assisting in developing the reporting to stakeholders on the organisation’s culture