Board Director Demographics and Attributes Flashcards
BOARD DEMOGRAPHICS
What do board demographics comprise of?
What are the 3 Cs that broadly capture board demographics?
comprise the basic facts and information about individual
directors = the more visible, public and often formal artefacts of effective directorship that pertain to an individual director’s past and current qualifications and performance = what a director looks like ‘on paper’
(1) Capacity (fit/proper, external commitment)
(2) Capability (independence, professional capital, financial, technical expertise, diversity)
(3) Connections (professional, alumni, social)
BOARD DEMOGRAPHICS - CAPACITY
What question can be associated to ‘capacity’?
What is the fit and proper test?
What else is the capacity of a board director often predicated on?
Should the individual be allowed to be a board director?
Fit and proper test = a measure of whether a director is legally allowed to function on a board, whether they are of good mental and physical health, and whether they actually have the appropriate qualifications necessary to function in their board role
predicated on the number of other board-level commitments that they currently maintain (e.g., chair, NED, ED on other boards)
BOARD DEMOGRAPHICS - CAPACITY - EXTERNAL COMMITMENTS
What did research by the Henley Business School conclude on the maximum number of board-level positions?
What is the average amount of time required for part-time directors to fulfil their board duties appropriately?
The number of directorships and increasing time expected has led to the issue of what?
The 2003 Higgs Review offered a solution through what?
the maximum number of board-level positions should be no
more than 4 = this is the maximum capacity one person can manage in terms of the time required to consider and attend to complex issues appropriately
ranges from 100 hours up to 320 hours per year
‘overboarding’, where directors are too stretched in their boardroom commitments
a sample retainer letter for NEDs = the number of days per month of work required is stipulated, and asks for directors to confirm they can meet such requirements before undertaking the role
BOARD DEMOGRAPHICS - CAPABILITY
What question can be associated to ‘capability’?
What are the 5 things that the capability of a director can be predicted on?
All directors must have some good grasp of what?
For directors to be useful, they must have what?
The capability of a director to represent the board’s various stakeholder groups is dictated by what?
A director will be seen as more capable, and therefore more valuable, the more what?
Is the individual capable of being a director on this specific board?
- Independence
- Professional capital
- Financial expertise = all directors must have some good grasp of finance for them to fulfil their monitoring role of executive management appropriately
- Technical expertise = for directors to be useful, they must have some specific technical expertise relevant to the current organisational strategy e.g., ESG issue expertise
- Diversity = the capability of a director to represent the board’s various stakeholder groups is dictated by the diversity that each director brings to the board
A director will be seen as more capable, and therefore more valuable, the more types of stakeholders that they are able to represent in the boardroom
BOARD DEMOGRAPHICS - CAPABILITY - INDEPENDENCE
A key tenet of agency theory is what?
What are the 7 circumstances which are likely to impair, or could appear to impair, a non-executive director’s independence? (Provision 10)
Is there any evidence that director independence leads to positive board outcomes?
is that NEDs remain independent during their tenure so that they best represent shareholders’ interests
Whether NED:
1. has been an employee within the last 5 years
2. in the last 3 years has had a material business relationship with the company;
3. has received or receives additional remuneration, participates in a share option or a performance-related pay scheme, or is a member of the company’s pension scheme
4. has close family ties with the company
5. holds cross-directorships
6. represents a significant shareholder
7. has served on the board for 9+ years from the date of their first election
No!
BOARD DEMOGRAPHICS - CAPABILITY - PROFESSIONAL CAPITAL
What is professional capital?
What are some of the aspects that have been used to approximate professional capital? (5)
Professional capital is a concept that captures all those attributes that point towards a director’s work-related credibility (functional, industry and executive management experience)
Specific demographic factors, such as:
(1) years of industry experience
(2) number of boards served on
(3) current leadership roles
(4) cumulative number of years on board
(5) highest level of education achieved
BOARD DEMOGRAPHICS - CONNECTIONS
What question can be associated to ‘connections’?
What is social capital?
When is social capital of particular interest?
What social capital does the director bring?
Social capital = a director’s personal connections = professional network, their potential alumni network, and the networks
associated with their social class or family
when viewing a director’s contribution through the lens of their role as an external resource (often important in early stage start-ups, for example)
BOARD ATTRIBUTES
What does behavioural capital consist of? (3)
What are the 3 Cs that broadly capture board attributes?
What are the 5 sub-headings in the board attributes quadrant of the 11 Cs model?
behavioural capital = consists of an individual director’s (1) behavioural competencies (including those specific to their role, general leadership competences and 21st century leadership competencies), (2) psychological commitments, and (3) ethical character
Competence, commitment, and character
(1) Role competence (Chairman, CEO, NED, ED, SID, CoSec) = Does each director have specific board role competence?
(2) General (Emotional Intelligence, style) = Does each director have general leadership competence?
(3) 21st century (resilience, agility, cultural IQ, digital IQ) = Does each director have 21st-century leadership competencies?’
(4) Commitment (personality, mindset, motivation, derailers) = Does each director have the right disposition and motivation?
(5) Character (ethics) = Does each director have sufficient ethical
character?
BOARD ATTRIBUTES - COMPETENCE - GENERAL LEADERSHIP COMPETENCE
What 2 things make up general leadership competence?
What is emotional intelligence?
Why is it important?
The best leadership styles for sustained strategic leadership are what?
emotional intelligence and appropriate leadership style
EMOTIONAL INTELLIGENCE
the ability to identify and manage one’s own emotions, as well as the emotions of others
the particular emotional intelligence characteristic of empathy has been found to be key to high-performing teams
LEADERSHIP STYLE
are those that are the least ‘ego-based’ and most ‘other-referenced’
BOARD ATTRIBUTES - COMPETENCE - LEADERSHIP STYLE
How is a Level 5 leader categorised according to Collins?
How does this compare to Goleman’s research?
These more mature leaders are what?
Level 5 leader = characterised by a tenacious attitude combined with humility and a lack of ego not found in Level 4 leaders
the two most effective leadership styles are described as ‘visionary’ and ‘coaching’, as opposed to the more Level
4-like ‘directing’ (‘do as I say’ leadership), and pacesetting (‘do as I do’ leadership) styles
are systems thinkers and have a more highly evolved ‘strategic action logic’ (how individuals interpret their surroundings
and react when their power or safety is challenged)
BOARD ATTRIBUTES - 21ST CENTURY LEADERSHIP COMPETENCE
What are the 4 21st-century leadership competencies?
Why are they important?
RESILIENCE
What is resilience?
The requirement for greater levels of individual resilience is related to what?
(1) Resilience
(2) Learning agility
(3) Cultural intelligence
(4) Digital intelligence
Due to the increasingly challenging working environment that combines volatility, uncertainty, complexity and ambiguity (VUCA)
Resilience = the process of adapting well in the face of… threats
or significant sources of stress. It means “bouncing back” from difficult experiences
the need for increasing levels of director commitment and the significant uplift in broad scrutiny
BOARD ATTRIBUTES - 21ST CENTURY LEADERSHIP COMPETENCE - LEARNING AGILITY
What is learning agility?
Research has identified four behaviours that enable, and one that derails, learning agility.
What are the 4 enabling behaviours?
What is the derailing behaviour?
= a mindset and corresponding collection of practices that allow leaders to continually develop, grow and utilise new strategies that will equip them for the increasingly complex problems they face in their organisations
Enabling behaviours:
(1) innovating = involves questioning the status quo, challenging assumptions and seeing things from multiple perspectives
(2) performing = involves immersing yourself in the experience, observing, listening and quickly processing data
(3) reflecting = involves gaining feedback and raising self-awareness
(4) risking = involves taking ‘progressive’ risk where success is not guaranteed
Derailing behaviour:
Defending = involves being closed and defensive to critical feedback and is a predictor of lower leadership performance
BOARD ATTRIBUTES - 21ST CENTURY LEADERSHIP COMPETENCE
CULTURAL INTELLIGENCE
What does cultural intelligence measure?
What are the 3 measurable sources?
DIGITAL INTELLIGENCE
Digital intelligence defined by a leader’s ability to be what 5 things?
measures one’s ability to empathise with broad groups of others who are part of different national or corporate cultures
(1) one’s cognitive quotient, (2) one’s physical quotient and (3) one’s emotional/motivational quotient
Defined by a leader’s ability to be:
(1) curious and have a mindset that is open to the changes that digital offers
(2) fast-paced and apply an agile ‘fast-fail’ mentality
(3) open, collaborative, and experimental
(4) well networked
(5) able to use social working practices
BOARD ATTRIBUTES - COMMITMENT & PERSONAL DISPOSITION - PERSONALITY STYLES
How is one’s personality defined?
What are the Big Five personality traits?
Which 3 are positively related to board performance?
defined as the characteristic set of behaviours, cognitions and emotional patterns that evolve from one’s biology and environment
(1) openness to experience, (2) conscientiousness, (3) extraversion, (4) agreeableness and (5) neuroticism
(1) openness to experience, (2) director conscientiousness (which can be viewed as a more generic construct of board commitment), (3) agreeableness
BOARD ATTRIBUTES - COMMITMENT & PERSONAL DISPOSITION - MINDSET
What does mindset describe?
What are the 2 types of mindset?
What are 2 typical behaviours for each?
What may be the results of each mindset?
describes one’s attitude towards intelligence
Fixed mindset of growth mindset
Fixed mindset (see intelligence as a static trait) = (1) the tendency to avoid challenges; (2) to give up easily when faced with obstacles]
Result = person holding this fixed mindset may plateau early and achieve less than their full potential
Growth mindset (having the belief that intelligence can be developed) = (1) likelihood of embracing challenges when they occur; (2) persisting in the face of setback
Result = leads to a desire to learn and therefore a tendency to reach a variety of more positive outcomes
