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Men in Suits
  • Directors' Institute

The role of a board of directors in ensuring effective corporate governance

A board's responsibility is to steer an organisation to success. Every board member is responsible for providing excellent corporate governance, and a board is only as good as the directors that sit around the table. So, what makes a good board member? What characteristics should they have?

The efficacy of the board will determine how the organisation performs in the long run. This means that individual board members must possess a set of characteristics that will enable them to provide effective stewardship and direction while also assisting the management team in meeting their strategic goals.



Let us look at some of the behavioural characteristics that make a good board member and director.


Passion

A company director must be passionate about the business or a certain area of competence. People will be motivated to give their all if they fully support the organisation's goal, vision, values, and ethos. Being enthusiastic about the company can also help you connect with the other board members and the executive staff.


Curiosity

All directors should be naturally curious and eager to learn new things. What was relevant in 2010 may not be relevant in 2023. There is a perpetual desire to learn, unlearn, and evolve, which is only achievable with an intrinsic sense of curiosity.

When making a choice, a director must ask the correct questions and consider both the short and long-term repercussions. It is not about always having the perfect answers, but rather focusing on the process of figuring out the solutions through critical inquiry and being curious.


Communication that works

Successful directors are able to explain their thoughts and opinions in a structured and straightforward manner; they can customise the substance of their communication to the target audience and convey their message succinctly. Specific subjects at board meetings can be contentious at times, and being able to handle them through strong communication is critical to success. A confident director who can properly convey their thoughts can assist the organisation make better decisions when it comes to solving difficulties or capitalising on opportunities.


Good listening skills

No single director can be an authority on every subject. As a result, when it comes to business discussions, it is critical that a director listens to their colleagues. Other directors will add ideas/critiques from their areas of expertise, and it is critical to consider all of them when reaching a decision.

Proper listening during board meetings will also reveal certain unspoken corporate needs. Good listening skills combined with the curiosity to ask the proper questions can lead to successful boardroom decision-making.


Being moral

Several instances of unethical behaviour by board members have occurred in the past, significantly impacting their careers and the reputation of the institution they serve. This is unfortunately common in both for-profit and non-profit enterprises. Insider trading, misappropriation of donor funds, and overstating income and earnings to attract investors are all examples of unethical behaviour.

"Ethics is knowing the difference between what you have a right to do and what is right to do," Potter Stewart says. A director must be highly ethical and do the right thing without breaching the law. The tone for ethics in the organisation is set at the highest levels.


Consider the long term

Short-term incentives such as share price or performance-based compensation may inspire the management team at times. It is the board's obligation to get them to consider it long-term. An effective director will think strategically over three to five years, rather than just the next quarter or two.

Boards are incentivized to consider longer term and develop plans to carry out the organisation's long-term strategy. This long-term thinking will assist an organisation in broadening its moat and reinvesting profits in the growth of its business.


Adaptability

Industry and business changes can have a significant impact on a company's short, medium, and long-term strategy. The organisation's strategy must anticipate some of these changes and be able to survive and prosper in changing environments.

To guarantee good corporate governance, a director must be nimble enough to change course rapidly when necessary. This is anticipating a trend to gain an advantage before the competition and planning ahead of time with contingencies in place to flip paths if things don't go as planned.


Prioritization that is ruthless

According to Michael Porter, "the essence of strategy is deciding what not to do." A corporation has multiple conflicting priorities that demand attention and resources, and all choices made by Boards are resource allocation decisions at some level.

A smart corporate director will prioritise all actions that have the greatest influence on the firm, which frequently involves choosing only a few things to execute amid numerous competing priorities. Focus is extremely useful in the boardroom for ensuring excellent corporate governance.


Time management

Being a member of a board takes time. Board and committee meetings necessitate a significant amount of preparatory time, and a director must be adept at time management. Nothing is worse than showing up for a board meeting without having read the documents and be prepared for discussions. Time management is critical for a director's performance.


Acceptance of diversity

According to Malcolm Forbes, "diversity is the art of thinking independently together." Diversity can take various forms, including team members, gender, colour, beliefs, opinions, and ideas, and a successful director must embrace diversity. Working with people from various backgrounds would also imply developing genuine relationships at work, advocating inclusion efforts, and respecting every different point of view before making judgements. Diverse boards, it is true, make better decisions.


Great directors are the foundation of good company governance

Good corporate governance combines the board of directors abilities, expertise, concentration, and passion. Directors are the organisation's leaders, and employees look to them for guidance. They can motivate other team members to collaborate with them to achieve the organisation's strategic goals by displaying some of these behavioural attributes.


Our Directors’ Institute- World council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out in an efficient manner helping you to make a significant contribution to the board and raise corporate governance standards within the organization.


Our ESG Expert certification will help you to amplify your understanding of corporate governance in a detailed manner paving a way for you to become a globally recognized ESG leader.

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