The year of 2008 marked the beginning of the financial crisis that resulted in a global recession, and it took many years to recover. Large financial institutions went into administration, culminating in regulators of major jurisdictions such as the US and the UK introducing tougher regulations in the hope of preventing a repeat. Many factors precipitated the beginning of this crisis, including a lack of oversight, and interest in short term financial gains with no attention being paid to risk.
It was at this stage that the questions were asked: did company board members actually know what they were doing, or did they simply look the other way? Probably a combination of both. The Financial Times, therefore, decided that structured, professional training was required to ensure that directors execute their roles with fiduciary responsibility to ensure the long-term sustainability of any given organization. The Board Director Programme was established in 2011 in the UK and then 2013 in Hong Kong and Asia.
About The Board Director Programme
The Programme comprises workshops and a six-month Postgraduate Non-Executive Director Diploma, designed to provide and help directors develop the tools required to perform effectively and confidently at the board level. And as with any business school, significant effort goes into the upkeep of the alumni community by providing opportunities and content-driven events designed to ensure members continue to keep up to date and learn about contemporary board-related topics. Of course, networking is also a strong driver for this community and of equal importance for those wishing to find new board positions.
“Non-executive directors should devote time to developing and refreshing their knowledge and skills, including those of communication, to ensure that they continue to make a positive contribution to the board.”Section 1.19 of the Financial Reporting Council Guidance on Board Effectiveness, UK
Ignorance is not a defense—directors should be ensuring that they are up to speed on their roles, particularly since the degree of scrutiny and accountability has increased significantly. For example, in Hong Kong the number of disciplinary hearings for listed board members more than tripled between 2017 and 2020.
The liability and risk associated with joining a board is significant and the rewards, at least in terms of remuneration, can be comparatively low. So why do so many aspire to serve on a board? Generally, our experience shows that many genuinely want to “give something back.” They have had long, successful careers and are now at a stage where compensation is not a priority, but they would like to use their skills and experience to the benefit of another organization. For others, they love the dynamics of board work, the comradery of being on the team, and the knowledge that the decisions they make will lead the direction and success of the organization for years to come. For many others, this is simply the next step in the career trajectory. For some though, the simple prestige and perceived glamor of serving on a board is the primary motivation. But it is the former group that we usually see being committed to seeking out providers of training to ensure their own personal development and ongoing strong governance of their boards.
The Value of Board Training
Is training a realistic priority for most boards? A recent survey completed by the FT Board Director Programme in collaboration with the Tricor Group showed that from a group of more than 700 directors across mostly the APAC region, fewer than 60 percent adhered to ongoing training, despite 94 percent agreeing that directors can benefit from it. This is surprising, considering the regulators’ requirements. Board members must understand the nuances of regulations in their respective jurisdiction in order to remain compliant, while director duties and liabilities comprise the most basic of knowledge one should have before joining a board and accepting the associated liability.
And regardless of whether you are on the audit committee or not, each member is required to have a financial acumen that is of a sufficient standard to ensure that they can read and evaluate financial statements and contribute to decision making that is in the best financial interests of the shareholder. Board members must be able to understand how to spot and mitigate risk, while also comprehending how to introduce internal measures and controls that will manage both long and short-term risk factors. These components are critical to board performance.
But the FT Board Director Programme takes this a step further. We also believe that a board member should know what it truly means to be successful—we, therefore, pay additional attention to individual board skills. This means effective questioning to really drill down into key areas of corporate governance. It means understanding board dynamics, constructive challenge and conflict resolution, and appreciating the complex and sometimes volatile relationship between the board and both the chairman and the executive team. It means conducting in-depth due diligence prior to even joining a board to make sure this is a safe and right fit for you, and onboarding smoothly so that you can begin to contribute promptly.
Key Risk Factors
As time has gone on, other risk factors have crept into the domain of boards—factors that many, indeed most, board members have little to no understanding of and, therefore, must undergo training in. These are namely ESG (environmental, social and corporate governance) and cybersecurity.
With the onset of the pandemic, working dynamics have shifted significantly. According to our survey, 95 percent of board meetings were in person prior to 2020. However, last year this switched entirely, with 95 percent of board meetings now being online. The potential for cyberattacks has increased drastically, as has been shown by the increase in the number of attacks experienced by organizations throughout 2020.
Many avenues of these attacks are via company employees (95 percent of cyberattacks are caused by human error). Typically, most board members will not have knowledge about how to prevent these attacks, which is common and understandable. But they should know how to at least protect themselves. Basic steps towards sound cyber hygiene should be taken; usually training is needed but not sought (personal data was involved in 58 percent of breaches in 2020). And again, since board meetings are mostly online, one must ensure that suitable platforms are used with an adequate level of security and knowledge on how to use them.
ESG should now be part of any business decision. Previously, the concept was a “nice to have,” but is now rapidly becoming an “absolute must have.” Not only are regulators increasingly focusing on the quality of a company’s ESG report, but they are also looking at the ability for directors to discuss ESG with adequate expertise. ESG is more than a box-ticking exercise to satisfy the regulator. It is now becoming business critical, as sources of funding are trending towards sustainable organizations.
The aforementioned topics have highlighted how many concepts directors must be savvy with to protect themselves, their reputations and their organizations. Boards in general can often be quite tight networks where reputation is key and news travels fast. A poor performance on one board can have severe repercussions for one’s board career, as chairmen and nomination committees look for feedback on one’s previous board contributions when considering their suitability in the recruitment process.
Training from a reputable source is the clearest, most obvious and most objective way to ensure that your performance is effective and that you can add value to a board. Although this should be the responsibility of the organization to ensure directors possess the right skills and relevant knowledge for the job, often it will be left to the individual to invest in their own personal development. But it is a worthwhile investment and one that will serve the individual in all their board-related roles.
Find Out More
For more information on the FT Board Director Programme, contact Chris Moon at email@example.com
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