juliangapo

About Sharon Constancon

This author has not yet filled in any details.
So far Sharon Constancon has created 16 blog entries.

Understanding Your Evaluation of Each Principle of the UK Corporate Governance Code 2018 – Principle A

Understanding Your Evaluation of Each Principle of the UK Corporate Governance Code 2018 - Principle A

Outcomes-based Principles

This is the first of a series of articles where we will unpack some of the desired outcomes embedded in the principles of the UK Corporate Governance Code 2018 (“Code”). The Code requires the Board to focus on how the Principles have been applied, articulating what action has been taken and the resulting outcomes.

To do this a Board needs to understand what outcomes it should be striving for.

The Code, being principles-based as opposed to rules-based, sets best-practice goals in the form of desired outcomes as well as a set of processes.

The desired outcomes are stated as lofty and praiseworthy goals; the processes are, in general, a compliance list.

We are principally concerned with the desired outcomes, which by their nature may never be fully achieved by the Board, but alignment with which must nevertheless be continuously strived for.

The desired outcomes are not only what the regulator would like to see Boards striving for but reporting against them is what an interrogative stakeholder will use to assess the raison d’etre or purpose of a company, as well as the direction of its moral compass. Therefore, formulating an appropriate response to every desired outcome should be an important and necessary annual core focus of the Board.

This article will deal with Principle A, which gets straight to the point. Like most of the Principles, it is worded in a manner which requires the Board to deliver a considered, relevant and narrative response. Anything remotely ‘tick-box’ in approach or smacking of self-assuredness could be deemed inappropriate, leaving a Board open to well-earned criticism for failing to understand the purport of the Principle.

So how to formulate a considered, relevant and narrative response?

Principle A

A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society.

Desired outcomes:

We start by extracting each of the desired outcomes embedded in the Principle. There are several:

• an effective Board;
• an entrepreneurial Board;
• a Board which promotes the long-term sustainable success of the company;
• a company which generates value for shareholders;
• a company which contributes to wider society.

Taking only the outcomes above, we review the eight provisions in this Section 1 on Board Leadership and Company Purpose for guidance on the depth of issues to be considered in building the Board’s related outcome narrative:

Outcomes matrix:

Principle A, Provision 1

– an effective Board;
o Prov 1: The Board should address the sustainability of the company’s business model
o Prov 1: The Board should address how its governance contributes to the delivery of its strategy

– an entrepreneurial Board;
o Prov 1: The Board should assess the opportunities available to increase or ensure future success

– a Board which promotes the long-term sustainable success of the company;
o Prov 1: The Board should assess the basis on which the company preserves value
o Prov 1: The Board should assess the risks that could interfere with the future success

– a company which generates value for shareholders;
o Prov 1: The Board should assess the basis on which the company generates value

– a company which contributes to wider society.

To complete this exercise the rest of the seven provisions need to be mapped in the same way.

Steps to own delivery against the outcomes:

Above we have shown the beginning of the matrix needed to ensure the narrative is valid, robust and will stand up to scrutiny. In the above example, we have linked to these desired outcomes only the requirements in Provision 1 as an example of how to address this second step.

The third step would be responding to this matrix complete as relevant from all eight Provisions as they are relevant, which evidence that these desired outcomes are not just compliance processes to tick off, but factors which, if fully considered, go to the core of the business, its purpose and its strategy.

We have evidenced how each of these desired five outcomes for the first Principle are separate lofty and praiseworthy goals requiring the annual considered attention of the Board.

The fourth step would be to discuss the Board’s position regarding each outcome, a process which could be done in the form of a gap analysis – structured approach or a discussion – conversational approach.

The fifth step would be to formulate the general steps a Board should follow in order to strive for improving or addressing the gaps evident in each desired outcome.

The sixth step would be the Board, with the guidance of the Company Secretary, to define any actions needed to deliver progress on whichever outcomes this is required.

The seventh step would be Board monitoring and holding to account actions to deliver the outcomes.

The last step being the creation of the narrative annually of the company’s mapping against these outcomes.

Key message of Principle A

In our view, Principle A defines the highest order of achievement – an effective board.

Therefore, directly in relation to Principle A, we would expect the Board to:
– include a ‘tone at the top’ statement which defines how the Board will lead, set its moral compass, what it expects delivered and how the company should embed this culture, such that delivery of the outcomes becomes seamless
– be complemented with competencies to allow for entrepreneurialism to flourish within the risk appetite of the business
– have risk assessment competencies at board level to consider the corporate and reputational risks, combined and contagion risks and the risk register as built by the company
– have the right composition and structure to deliver and effective board
– be led by an effective Chair, aligned to the business cycle of the business, delivering a clear message of the appropriate business culture
– consider the shareholders, but equally in terms of the Companies Act 2006, Sections 171 to 177, particularly S 172, all stakeholders, both internal and external
– include in the stakeholder matrix, the wider society that provides the purpose of the company
– consider its assessment of success as more than a forecast in the form of extrapolated numbers, but to include robust strategic planning, delivery to defined plans and accountability
– review the policies, procedures, plans and other relevant documents that will support embedding the actions and outcomes, but also the cultures desired.

Each year the Board will assess its alignment to the outcomes, aiming for continuous improvement.

Stakeholder assessment of the Board:

A Board needs to keep in mind that an interrogative stakeholder will scrutinise any disclosure relating to these steps and processes, or lack thereof, to assess the credibility of the Board’s statements around any desired outcome.

 

Genius’ Code Outcomes Plan

Our Outcomes Plan will create the framework for a Board to deliver against and meet the requirements of Principle A. We will support the matrix formulation, the gap analysis, the determination of actions, assessment of accountability and finally supporting the creation of the robust and supported narrative against the outcomes.

 

Authored by John Nassel-Henderson and Sharon Constançon

Visit the website here

By |2019-11-06T13:05:28+00:00November 6th, 2019|Uncategorized|Comments Off on Understanding Your Evaluation of Each Principle of the UK Corporate Governance Code 2018 – Principle A

How does one measure whether a Board Evaluation has achieved its objectives?

Clarification is Key

In order to answer this question, it is important to establish what the original objectives were. Very often, this is not clarified between the Chairman and the Board Evaluator in the beginning, resulting in a missed opportunity to define achievements gained in the process.

In addition, there are objectives defined by the company secretary and those suggested by the Board Evaluator.

Can these three sets of defined outcomes be aligned to deliver the best value to the company? Most definitely, they can!

The Chairman or the Company Secretary may have a specific need they want to address which the Board Evaluator needs to objectively assess as the program progresses. The Evaluator, through experience, will focus on key areas they are aware are often troublesome for Boards.

Not all Evaluators focus on the same areas nor have the same broad width of experience, so choosing the balance and focus ranging from governance process to people behaviour is critical.

What exactly does “Good” feel like when you reach it?

What is required to transition this Board from where it is to becoming a high performing Board?

From a Board Evaluator’s perspective, the most important outcome is that the Board has matured in their governance behaviour, has addressed their blind spots and individual perceptions, has learned to listen, to speak up and challenge effectively and has found new, productive ways of working together, so that the leadership TEAM of the organisation achieves cohesion and clearly defines the “tone from the top”.

The Chairman might have wanted to escape the evaluation with as few recommendations as possible – it takes work and effort to change. Often Chairmen feel they are already doing their best and feel that further input is not required.

In my experience Chairmen are typically wonderfully pleased with the improved workings of the Board, tangibly feeling that there are positive changes, but sometimes not quite sure they can put their finger on why.

This “new place” the Board is at is the outcome of each Director making minor changes; themselves contributing to all working better together.

The Company Secretary is pivotal.

The Company Secretary is the role that is most realistic about where the Board is at before the Evaluation process begins and they often comment on the improved interactions that emanate from the exercise, which often allow their full skills to be deployed.

After one particularly difficult evaluation, given that there were high levels of negativity to the exercise happening, a FTSE Company Secretary commented that “It has been amazing to see the transformation and to witness a Board meeting like the last which was totally transformed; I agree that most of the “work and transformation” had happened during the exercise such that immediate changes were evidenced.”

Directors, being intelligent people in the first place, invariably feel they have learned a lot about themselves, each other and have become more mindful of their impact, contribution and the value they can bring. In most cases, Directors are sensible enough to respect their own need for personal improvement, embrace it and these elements together, contribute to the Directors delivering within a highly effective Board.

Conclusion

A Board Evaluation should be enjoyed and should add value, wonderfully summarised by an initially sceptical Chairman, “I am proud of my Board, you raised some tough challenges and they have heard you and are thinking differently as we embed the recommendations raised so that we are truly “fit for the future.”

By |2019-09-11T13:17:33+00:00September 2nd, 2019|News & Events|0 Comments

Egos in the Boardroom

 

A senior Chairman recently made the comment to me, “The problem I have is that my boardroom is just not big enough for all the egos!”

 

We can sympathise with the challenge that Chairman faced; trying to corral all the egos, whilst still putting the needs of the business first. How similar, though, to where we as a nation find ourselves now, with so many egos fighting to be “Top Dog” amidst Brexit and political uncertainty.

Of course, this uncertainty has huge cost implications to the UK economy and, whichever of the “egos” wins out, getting action taken as a first step will be a good beginning.

The question then is have they taken the right decision and how will that impact their premiership and equally, the economy?

By |2019-09-11T13:17:42+00:00August 9th, 2019|News & Events|0 Comments

How Open to Constructive Criticism Are You?

 

 

The larger the company and more senior the Board Directors and Chairman, the lower the appetite to receive constructive criticism.

Although long-serving Directors will know their company inside out, they have reached a point where they are competent to challenge, but uncomfortable in receiving constructive criticism.

“New Blood”

When “new blood”, as in new Directors or those with different skills are introduced, there is a natural resistance to these disruptive forces. A Board evaluation can equally be uncomfortable where Directors are able to view themselves through the eyes of an outsider. All are perceived in some way or another as a threat.

Directors and particularly Chairmen can become entrenched in their ways; where they have been in the role for up to nine years, they have found a place of personal comfort and naturally do not want disruption during their “watch”.

We are human

These human, emotional reactions are totally counter-intuitive to what we rationally know as a way to support continuous improvement. It is always rewarding to see the healthy approach taken by some Directors when constructive comment is taken positively.

 

What’s your view on the tenure of Directors – Is nine years too long or not long enough, particularly in the case of the Chairman?

By |2019-09-11T13:17:49+00:00July 31st, 2019|News & Events, Uncategorized|0 Comments

“New blood” can lead to resistance

 

 

 

 

The larger the company and more senior the Board Directors and Chairman, the lower the appetite to receive constructive criticism.

Although long-serving Directors will know their company inside out, they have reached a point where they are competent to challenge, but uncomfortable in receiving constructive criticism.

When “new blood”, as in new Directors or those with different skills are introduced, there is a natural resistance to these disruptive forces.

A Board evaluation can equally be uncomfortable where Directors are able to view themselves through the eyes of an outsider. All are perceived in some way or another as a threat.

Directors and particularly Chairmen can become entrenched in their ways; where they have been in the role for up to nine years, they have found a place of personal comfort and naturally do not want disruption during their “watch”. These human, emotional reactions are totally counter-intuitive to what we rationally know as a way to support continuous improvement.

It is always rewarding to see the healthy approach taken by some Directors when constructive comment is taken positively.

What’s your view on the tenure of Directors – Is nine years too long or not long enough, particularly in the case of the Chairman?

By |2019-09-11T13:33:58+00:00July 31st, 2019|News & Events|0 Comments

Day two of the ICSA Annual Conference 2019.

 

 

 

Day two of the ICSA Annual Conference 2019.

Yesterday was a productive day of networking and meetings at our stand.

This afternoon Sharon Constançon will be participating in a session, “How to identify toxic behaviour in the boardroom”, exploring how antagonism, unproductivity and disengagement are some of the behaviours that can undermine even the most experienced and enthusiastic boards.

Don’t forget if you are attending, drop by our stand and say hello.

By |2019-08-01T12:31:36+00:00July 10th, 2019|News & Events|0 Comments

What is the value of questionnaires in a Board evaluation three-year cycle?

What is the value of questionnaires in a Board evaluation three-year cycle, with years two and three being light-touch, questionnaire-based reviews benchmarking progress from year one?

A questionnaire in combination with an interview approach (i.e. year one) tends to add limited additional content, but it does provide reporting and statistics in a visual red, amber, green format.

Are both a qualitative report and a quantitative report preferable in year one?
We note a lower appetite to complete a questionnaire in addition to Directors providing the time for interviews.

We suggest the two streams of assessing the information is useful if there are major issues that need highlighting graphically, or where there are more academic kind of Directors that will need to see a standardised process driving the sourcing information.

The higher value is achieved from a questionnaire designed from year one outcomes and bespoke to the recommendations raised for that board. This can then be used in years two and three to map the progress made on key recommendations and planned actions.

By |2019-09-11T13:18:09+00:00June 19th, 2019|News & Events|0 Comments

How does a chairman in conjunction with the company secretary assess who best to evaluate the Board?

How does a chairman in conjunction with the company secretary assess who best to evaluate the Board?

An option is via the procurement process rather than via the Chair or Company Secretary, usually by tender, where there is no contact and a rigid system/process which requires everyone to mould themselves into. This is usually geared towards low price being a key factor.

Another method requires a proposal to be submitted to the Company Secretary or the Chairman direct, they shortlist and hold meetings in person with about three candidates.

The third option falls in-between options one and two, where there is no face to face meeting and the decision is made from the submitted proposal, usually by a panel of people.

We question whether companies end up with the best result is they have not assessed the personality and technical match by having worked through the paper-only process?

The most beneficial option must be the second one described, where the Chairman has the opportunity to meet and ensure a match between the company and evaluator is assured. Both the Board and evaluator need to work together as a team to deliver optimal outcomes, which are then owned by the Board in order that improvements can be achieved.

By |2019-09-11T13:18:15+00:00June 12th, 2019|News & Events|0 Comments
Social Media Auto Publish Powered By : XYZScripts.com
This website uses cookies and third party services. View our Privacy Policy Ok