HIGH PERFORMANCE BOARD

17 August 2011

Craig Hunter FCIS

Craig Hunter FCIS - my career

• Chartered Secretary in Public Practice – 30 years experience, with award winning business

• FTSE and global companies, charities, private groups, sporting organisations, sole traders

• British Swimming independent director

• European Swimming technical committee member

• International swimming referee

• British Swimming team manager 1989-2006

• Olympic Games 2000, 2004, 2008

• Commonwealth Games 1998, 2002, 2006, 2010

• UK Sport Mission Control panel member

Programme

• Governance structure & board composition

• Directors’ duties and responsibilities

• Effective performance• Purpose of the board

• Independent directors

• Competencies

• Behaviour

• Governance oversight

• Board evaluation

Typical corporate structureShareholders

Annual General MeetingAnnual General Meeting

ExecExec Non-execNon-exec

Audit Executive Remuneration Nomination

Clients

Board of Directors

Typical sport structure?Council

Annual MeetingAnnual Meeting

Board of Directors

Audit Executive Remuneration Nomination

Membership

HC RepsHC Reps IndependentsIndependentsExecExec

Legal status

• Incorporated body• Company limited by shares of guarantee

• Articles of association

• Companies Act 2006

• Charity• Trust deed

• Charities Act 2006

• Unincorporated body• Rules

Round table discussion

• Briefly outline your board composition and structure as well as the challenges you face

The perfect model - 1

• Independent chair• Internal or external appointment?

• Dynamic CEO• Supported by executive management team

• finance, legal, marketing, performance/participation

• Appropriate non-executive/independent directors• Skills based –v- regional/Home Country representatives

• Appointed –v- elected

The perfect model - 2• Board composition and size

• Diversity

• Candidates able and willing to challenge convention

• Balance of executive and independent/non-executive

• Broad range of experience

• Appointment• Process, rolling –v- fixed term, terms

• Duties

• Delegations of authority

• Terms of reference

• Effective performance

• Board evaluation

• Succession planning

Directors’ duties and responsibilities

• Companies Act 2006• Duty to

• act within powers

• promote the success of the company

• exercise independent judgement

• exercise reasonable skill, care and diligence

• avoid conflicts of interest

• not accept benefits from third parties

• declare interest in proposed transaction

• declare interests in existing transactions

Dept. Business Innovation & Skills

Simple high-level guidance for directors:

• Act in the company’s best interests, taking everything you think relevant into account

• Obey the company’s constitution and decisions taken under it

• Be honest, and remember that the company’s property belongs to it and not to you or its shareholders

• Be diligent, careful and well informed about the company’s affairs. If you have any special skills or experience, use them

• Make sure the company keeps records of its decisions

• Remember that you remain responsible for the work you give to others

• Avoid situations where your interests conflict with those of the company. When in doubt disclose potential conflicts quickly

• Seek external advice where necessary, particularly if the company is in financial difficulty

Effective performance

• Effective directors

• Effective decision-making

• Effective board performance

• Board evaluation

Round table discussion

•Describe your role within your organisation/sport

•What attributes/skills do you have?

•What constrains you/your board/your organisation?

The purpose of the board

• Key decision-making body responsible for leadership, integrity, performance, and risk profile of company

• Board should determine the purpose of its meetings

• Reassert the distinction between governance, strategy and operational matters

• Emphasise the importance of the board proactively crafting policies, processes and systems to ensure the delivery of its strategic objectives

• Ethical sensitivity?

• Consider how the board, collectively and in terms of individual contributions, might improve the overall effectiveness of their responsibilities in areas such as decision-making, strategy development and financial analysis

Skill levels in the boardroom

• Importance of induction

• Development and training • Need for on-going support and development

• Access to operations and staff

• External advice

• Benchmarking directors’ performance – evaluation

Competencies

• A breadth of experience

• Team player who leaves their ego at the door

• Independent adviser, able to challenge as well as support

• Committed and prepared

• Articulate communicator and good listener

• Sharp mind and good judgement

• Visionary, creative, and passionate

• Build strong relationships and act as ambassadors

• Self-confident without being dogmatic

• Enhance their contribution through feedback

Source: Whitehead Mann

Weaknesses

• Being a passenger or nodding dog

• Critical but not supportive – not adding value

• Still acting as a Chief Executive or frustrated Executive/Director

• Sloppy thinking or not up to the job

• Self centred

• Demanding too much detail and overloading

• Unprepared

• More on “broadcast” than “receive”

• Lacking courage to disagree

• Divisive and dogmaticSource: Whitehead Mann

The independent director

YES, I challenge our

executives YES, I keep up to date with current

developments

YES, I attend board

meetings

YES, I am independent

YES, I understand

the business

The Boardroom Framework

Purpose

People

Process

Drives

Promotes

Facilitates

OutstandingPerformance

StrongManagement

Quality WorkingPractices

RolesObjectives

Responsibilities

BoardComposition/

Structure

BoardMeetings

BusinessKnowledge

OngoingDevelopment

RelationshipManagement

Skills and Skillsdevelopment

Policies andProcedures

Communication/Reporting

Guidelines, Regulations, and Commercial/Sporting Requirements

Boardroom behaviour

ICSA report concluded:

“Best practice boardroom behaviour may be characterised by• A clear understanding of the role of the board …

• Independent thinking

• Challenge which is constructive, confident, principled and proportionate

• Rigorous debate … and

• Supportive decision-making environment”

Appropriate boardroom behaviours

• Develop a culture of constructive and robust challenge in the boardroom

• Avoidance of “groupthink” culture

• Interrelationships within the boardroom

• Group dynamics, as well as the contribution of (key) individuals

• Interaction with employees

• Social context (dinners, away-days, events)

• Ground rules for meetings

Board agenda and meetings

• Standard agenda items and annual plan

• Allocate sufficient time

• Presentations by key executives

• Role of board papers

• Robust discussion & challenge

• Behaviour

• Corporate message - unanimity

• Accountability

• Use and role of committees

• Focus on strategy, financial management, governance, performance/participation, risk

Governance oversight

There are three levels

• Institutional – are the corporate governance policies and architecture fit for purpose?

• Organisational – has management installed adequate processes and systems?

• Behavioural – are directors exhibiting the appropriate behaviour?

• Sport & Recreation Alliance• Voluntary Code of Good Governance for the Sport and

Recreation Sector

Board evaluation - 1

The Walker Review:

“The board should undertake a formal and rigorous evaluation of its performance, and that of committees of the board, with external facilitation of the process every second or third year…”

Board evaluation - 2

• Who is involved?• Chairman

• Directors (executive & independent)

• Staff

• Independent observer?

• Process: robust assessment of strategic plan and outcomes

• Frequency and facilitation

• Potential conflicts of interest

• Nature and importance of board evaluation

• How outputs of the process can be meaningfully disclosed without compromising confidentiality

• Notification to stakeholders

Resources• www.icsa.org.uk

• Corporate, voluntary & community sector

• Committee terms of reference

• Audit, Executive, Nomination, Remuneration, Risk

• Guidance

• Joining the right board: due diligence for prospective directors

• Induction of new directors

• Directors’ duties

• Job/role descriptions

• Financial Reporting Council• The UK Corporate Governance Code (June 2010)

• Guidance on Board Effectiveness (March 2011)

www.versec.co.ukM: 07771 814929T : 01727 855512F : 01727 855501

E : craig.hunter@versec.co.ukRegistered in England at 39 Alma Road St Albans AL1 3AT

Company Number: 3999397VAT Number:706 0811 65

www.versec.co.ukM: 07771 814929T : 01727 855512F : 01727 855501

E : craig.hunter@versec.co.ukRegistered in England at 39 Alma Road St Albans AL1 3AT

Company Number: 3999397VAT Number:706 0811 65

Sport Management Consultancy