The Independent Director in Society

Inhaltsverzeichnis

1. Frontmatter

2. The Challenge

   1. Frontmatter

   2. 1. Introduction

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      Society faces a crisis of governance. How well our institutions perform often depends on how well they are governed. Stakeholders can have a major impact but the principal responsibilities lie with boards of directors. Original specially commissioned Henley Business School research has been carried out and includes results from interviews with 43 key opinion leaders along with detailed questionnaire replies from 623 respondents drawn from the board members of the National Health Service (NHS) and NHS Trusts, universities, charities and sports organisations. This research was fully supported by key stakeholders responsible for governance within all these major institutions and sectors. Supplementing this research and findings is additional research from key literature upon governance in both business and politics as well as surveys of all relevant academic published material and case studies. Many of the research results reveal many causes for concern and urgent action.

   3. 2. Challenges and Consequences

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      The complexities of governing—even relatively small institutions—are regularly very challenging across all the sectors studied. The Ardwick Green case study shows how Board failures can bring an institution to the brink of collapse. It is necessary to look at the underlying causes of the ineffectiveness of executive boards and their governance as well as at the damage that is—thereby—inflicted upon society. The authors lay out the imperative for change and also suggest areas where independent directors can make a real difference and have positive impact. There are challenges specific to the Health, Education, Sport, Charity and Business sectors as well as exploration of common challenges. Each sector already has its Codes of Governance. Boards and Directors need to adhere to these as well as make further positive impacts in order to govern their organisations effectively and responsibly.

   4. 3. Independence and Value Creation

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      The Independent Directors are the real custodians of the future of organisations and have a vital role to play in dealing with the many forms of crisis in corporate governance. Solving the crisis requires a better understanding of the meaning and concept of independence. Independent directors govern organisations, but they are also the servants of those organisations. Their purpose is to serve as well as control. Additionally, they have a duty to their organisations and sectors, but also a great duty to society and the people they serve. One common reason for failure is that directors are either not sufficiently independent or else do not effectively exercise that independence when they have it. Sometimes directors lack conviction—often because they have insufficient knowledge or data to work with. Whatever the causes, this lack of independence means their judgement is compromised and they go on to make poor decisions.

   5. 4. Engaged Stewardship: Governance and Service

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      A culture of engaged stewardship needs to be created. The London Ambulance Service case study shows how such a culture of engaged stewardship can be inculcated and then sustained. Being truly independent helps directors to build that corporate governance culture and also fully contribute to it, thereby, enabling it to flourish and grow as well as develop the mindset required in order to have a positive impact on society. Rather than looking at the mechanics of the director’s role—a mistake many policy makers have made up until now—instead focus needs to be upon issues such as board culture and relationships between directors.

3. Independent Directors and Boards

   1. Frontmatter

   2. 5. The Importance of Knowledge

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      Two of the most important attributes of any independent director are knowledge and experience. It is absolutely vital for directors to have basic professional skills—including financial literacy—to do their job effectively. They also need contemporary knowledge of what is happening outside their sector in order to bring best practice to their boards. One case study example is universities who are increasingly behind the curve when it comes to the digital revolution and its ability to transform operations. Similarly the NHS case study demonstrates it has a vast and complicated supply chain but the service lacks the up-to-date knowledge of logistics and supply chain management required. This has been further underlined by the varied responses to the Coronavirus. Additionally Henley Business School research has revealed many of the other gaps in skills and knowledge required to be an effective Independent Director.

   3. 6. Engagement and Evidence

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      Knowledge and experience are closely related, and it is necessary to look closely at the kinds of knowledge the independent director needs and where to find it. Where do you find the data you need? How do you interrogate that data to find out what it really means? And once you have it, how can you use it as evidence to add value to your organisation? Once Independent Directors have gathered evidence then they have a powerful tool for driving change and creating real positive value for society. The case study of 4global and its work with the England and Wales Cricket Board shows what can be done. It is necessary to remember the endgame; knowledge and experience help organisations work towards their goals and meet societal needs.

   4. 7. The Role of the Chair

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      The role of the independent chair is vital. There are many examples of good chairs making a real difference to organisations and society. The transformation of England Hockey is one such case study. There is a correlation between ineffective or domineering chairs and lack of board and/or independent director effectiveness. It is the responsibility of independent directors to ensure they truly are independent; but, equally, it is also the chair’s responsibility to create and sustain a culture of independence and engaged stewardship so that individual directors can do their job effectively. Experience and knowledge count for little unless they are put to good use. Research shows many independent directors struggle to make impact while a sizeable number feel they are unable to really add value.

   5. 8. Making Impact

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      Impacts that a high-performing board can have are explored including creating real societal value drawing upon examples from business, charities, healthcare, universities and sport sectors. The Dual Assurance model case study from the University of Exeter demonstrates how good governance really can make a difference. There are always barriers to impact but these can be overcome. The fundamental purpose of why boards and directors exist is really not to make money, perpetuate their organisation or their own position but to act as good stewards and custodians to deliver the goods, services and value that both stakeholders and society need.

4. Making Boards More Effective

   1. Frontmatter

   2. 9. Selection, Training and Evaluation

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      Practical recommendations to make boards more effective are given. Some are the responsibility of boards themselves, while three recommendations for boards to consider for improvement are improved board composition and greater diversity, improved certification and training, and improved board evaluation and performance appraisal. These recommendations are important especially since research shows that in some sectors up to 50% of independent directors are recruited because they are friends of the CEO or chair.

   3. 10. Recommendations for Policy Makers

      Gerry Brown, Andrew Kakabadse, Filipe Morais

      Abstract

      Recommendations for policy makers include paying Independent directors in order to help attract a broader cross-section of people to become independent directors and, thereby, deliver more diverse boards. An overhaul of governance structures is also recommended in the private, public and third sectors. A culture of engaged stewardship needs embedding in all of our institutions to ensure that they are run in the interests of all stakeholders. The mandate of the NHS is too broad and also too open. As a consequence it makes the job of board trustees extremely difficult if not almost impossible to achieve. Proposals are made for a more defined mandate.

5. Backmatter