In the blog, “Culture is King”, I introduced the concept of an “Engaged Board” where a healthy board culture contributes to high level of both challenge and support in the boardroom.
Achieving an appropriate blend of formal structures and processes that will contribute to a healthy board culture is perhaps the area most frequently discussed in governance codes. They help ensure the right issues are on the agenda at the right time with the right information available for discussion and decision-making.
But formal structures and processes, vitally important as they are, are not enough on their own to sustain a healthy culture and keep the board engaged. They need to be supported and supplemented by informal, “softer” initiatives outside of the boardroom if the NEDs are to be able to offer the optimum blend of challenge and support and to build positive relationships with their executive board colleagues. These will normally include:
time for board members to get to know each other away from the formality of board meetings, eg lunch/ dinner before or after board meetings. It is also helpful if such events include senior executive team members not on the board;
NEDs having the opportunity to get to know and discuss business matters, especially in their areas of expertise, with senior team members below board level;
NEDs having opportunities to see different parts of the business through planned visits possibly linked with off-site board meetings; and
NEDs discussing issues with executive board colleagues, where appropriate, between meetings with either NEDs or executive team members initiating the dialogue when either considers it helpful.
It would generally be expected that chairs would have more involvement with the executive team with regard to their areas of responsibility outside of board meetings than other NEDs. There will also be variation in the amount of contact depending on the size and complexity of the company and the normal working locations of board members.
Whilst respecting boundaries between the responsibilities of the board and those of management, it is equally important for the board not be hermetically sealed off from the business and that NEDs have a reasonable level of contact in different parts of the business in order that they can be aware of feelings in the business and of emerging developments.
The “softer” considerations discussed above aren’t easy. Board members are busy people and finding time to meet and talk informally is hard. However, an investment of the time and personal commitment in building strong relationships amongst board members will generally yield substantial returns especially when times are challenging. If relationships are generally good then board members will more easily recognise when tensions arise and have the confidence to discuss the issues and resolve them.