Corporate governance: Interview with Dr Roger Barker, Institute of Directors

The Key

interviewIn January 2014, the schools minister, Lord Nash, announced that the Department for Education is committed to establishing a more professional standard of school governance, with governing bodies acting more like corporate boards, and appointing people with the skills to help their schools succeed.

roger-barker-iodWe spoke to Dr Roger Barker, director of corporate governance and professional standards at the Institute of Directors (IoD), to find out about his experience of governance, and to see what schools can learn from the corporate sector.

Roger’s role encompasses corporate governance, board effectiveness, risk management, company law, and corporate social responsibility. He is also chairman of the education committee of the European Confederation of Directors’ Association.

qAre there universal principles of good governance that apply across all sectors, including schools?

Governance is about how organisations are directed, controlled and held accountable. In essence, all boards are decision-making bodies, with responsibility for oversight and the delegation of authority (but not ultimate responsibility) to management.

Some key principles of good governance for all organisations include:

  • Putting in place an appropriate constitutional and governance framework
  • Having an effective board with collective responsibility for the organisation’s long-term success, risk oversight, and maintaining internal controls to safeguard the organisation’s assets
  • Having an induction programme for new board members
  • Holding regular board meetings, and supplying directors with timely information
  • Reviewing the board’s performance periodically

q

What is the optimum size of a board?

 

The composition and skill level of the board should suit the size and complexity of the organisation.

Being the wrong size may limit a board’s effectiveness.

Having too many members can mean meetings become protracted, with some members choosing to let others do the hard work. As a result, companies have been known to shrink their boards to improve strategic thinking and development. At the opposite extreme, too few directors may limit the knowledge and experience around the table.

It has been suggested that the average composition of ‘effective’ boards in the UK is between six and 12 directors, depending on the size and complexity of the company.

Larger corporate boards tend to be supported by three main committees: typically, the audit committee, remuneration committee, and nomination committee (responsible for board appointments).

q

Do you recommend that corporate boards look at specific skills when recruiting new members?

Boards need a mix of competencies and experience. No single person or small group of individuals should dominate decision-making. You want people to bring different perspectives, and the necessary expertise and skills.

When recruiting, a board should identify any skills gaps on an objective basis, and set out the skill set it is looking for. It is useful to set up a succession planning process, which would involve reviewing the talent you already have, and identifying gaps and any problems that may be occurring, before attempting to find a solution.

q

How should a board monitor its performance?

 

An effective chair should ensure that the board undertakes a periodic appraisal of its performance. In addition, arranging an external evaluation every few years can result in advice and recommendations for the board to improve the way it functions.

Typical methodologies include:

  • Paper-based questionnaires
  • One-to-one interviews (individual assessments should remain confidential)
  • An awayday for board members

The chair should choose which direction to take, feed back the results and act on the outcome. This might mean proposing new members or seeking to refresh board membership.

All directors should have an induction when they join the board. These are typically run by the company secretary and cover:

  • Introduction to the role and legal responsibilities of a director
  • The operation of the board – articles of association, committee structure
  • The organisation’s background – vision and values, history, major events
  • Running the organisation – key policies and procedures
  • Stakeholder relations
  • Practical issues – expenses
  • Directors should also update their skills and knowledge regularly.

q

When problems occur in corporate boards, what tend to be the most common causes?

Board members must think critically and independently about the challenges they face and avoid ‘group think’, which may mean decisions are not thought through or challenged sufficiently.

One way to avoid this is through having diversity on the board – for example, in terms of gender, age and background. Ultimately, however, directors’ personal qualities are the key determinants of a board’s performance.

q

What three practical things could an individual on a board do to be more effective?

  1. Have a clear understanding of his/her role on the board
  2. Develop awareness of the psychology of the boardroom, including the personalities and experience of other directors
  3. Improve understanding of how the organisation and sector operates, and combine this with knowledge gained from personal experience

On the second point, the role played by the chair is particularly important in ensuring that board members make effective contributions. For example, if a chair immediately expresses his/her view, it can be difficult for others to disagree. A skilful chair will understand group dynamics and gather others’ thoughts and opinions.


The full interview with Roger features in The Key’s ‘Strengthening governance’ booklet, which you can download here as a PDF.

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