Written by Joseph F.X. Zahra, 15 June 2015
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The confusion on the purpose of boards of directors and who qualifies as a board director lives on despite greater awareness on corporate governance by means of conferences and seminars and more restrictive criteria exercised by the MFSA on regulated or listed companies. The main purpose of a board is that of strong oversight over functions and performance, and strategic support to the executive’s efforts to create long term value for the business.
This translates into a meaningful role and responsibility for both executive and non-executive directors especially in their fiduciary duties, meaning their allegiance to the company while placing the company’s interests ahead of their own, and prudence, applying therefore diligence and professionalism in business decision-making. The contrary to this is appointing persons with conflicts of interest and lack of foresight, discretion and circumspection. Unfortunately experience has shown that it is in these specific areas that board of directors have failed.
The selection of the right persons for board appointments becomes a prerequisite for a properly functioning and successful board. The check-list for board member will include: do they have the right business experience for the needs of the company at this stage of its development? Is there the right mix of experience and competence? Do they have the reputation for independent thinking? Can they challenge enough the executives and brave enough to rattle the status quo? Can they see beyond their tip of their noses? Do they consider decisions long term? Are they prepared to spend time on strategy?
Not all executives qualify for board positions and not all independent, non-executives do a good job. Character and personality score at least as high as competence and experience in the selection of board members. Are we prepared to go back to the loyalty and prudence of what the young would call “old fashioned courtesy”? Truly, it is again the time for ladies and gentlemen in board rooms.