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DEffective Board PerformanceBy Prof. Waswa Balunywa, PhD

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What is a Board of Directors•A group of individuals who over see the activities of a company

Different names of Board• The Board• The Board of Governors• The Board of regents•Board of Trustees

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Why Board of Directors

• Growing size of business leading to separation of management from ownership

• Need for expertise in management

• Need for independent views

• Oversee activities of the organisation

• Control business activities

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Different Types of OrganisationsPrivate sector• Private limited company• Public limited company•NGO sectorPublic Sector• Productive government Enterprise•Regulatory Enterprises

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Different Types of Boards• Policy Governance BoardsThese exclusively set policies and are unlikely to have committees because their staff perform their work.• Policy BoardsThese exclusively set policies and are unlikely to have committees because their staff perform their work. But they also have committees.• Collective BoardsA group of like minded people who work towards a specific goal. Members share responsibility for policy, management and operations. They tend to be in NGOs• Working/Administrative BoardsProvide policy and general direction. They also have board committees that do work e.g commission

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The Role of the Board• Approve goals and strategies• Appoint CEO and determine compensation • Ensure availability of financial resources• Approve annual budgets• Ensure compliance with laws and regulations• Ensure organization is supplied with right

staff• Monitor and control• Identify and manage risk• Represent interests of stakeholders

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Risk Function•Establish different types of Risk

•Establish the levels of Risk

•Establish how to measure the risk

•Establish how to mitigate risk

•Monitor and manage risks

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Control Function• Establish an audit committee• Appoint some internal Audit staff• Approve Financial Controls• Ensure Compliance with relevant laws,

regulations and codes• Monitor and evaluate goals, policies, plans and

strategies

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How are Boards are Constituted

Depends on the law establishing the company• Take care of interests of different stakeholders• constituteTeam of different experts relevant to the business• Political interest of founders or government

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Board Committees

Depends on types of the Board

• Finance committee

• HR committee

• Audit Committee

• Capex committee

• Technical committee

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Role of Board CommitteesVary from type of Board

• To undertake detailed scrutiny of the business

• Enables Board have detailed review of specific issues

• To get expert skills to deal with an issue

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The Board and Management• These are distinct organizations

• The board does NOT manage the company

•Management does day to day work

•Board does strategic operations

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What is an Effective Board

One that achieves results• Team oriented• Independent•Has culture of trust•Encouraged open discussion•Attempts to build consensus

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Who are StakeholdersThese are people with interest in or who are affected by the operations of the companyThese include;ShareholdersManagement CreditorsGovernmentConsumersLegislatorsGeneral public

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The Business of the Board• Financial Reports

•Report of C.E.O

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Skills required by Board membersBoard provides leadership and members require central skills to effectively manage after of the company. Some are specialized, others are general;

• Leadership skills• Financial analysis• Specific technical skills

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Leadership skills

•Management of teams•Conflict management•Ability to communicate effectively• Social skills (emotional intelligence)

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Financial skills

•Ability to interpret financial statements

•Ability to ask financial control

• Specific technical skills e.g engineering, marketing

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Meetings of the Board• Meetings should be frequent as by law

• Adequate preparations and notice

• Papers circulated in advance

• Reports written with adequate information

• Involvement of all members

• Avoid domination by Chair

• Avoid overly long meetings

• Agree on rules on how to behave during meetings

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Performance EvaluationBoard should undertake annual evaluation of;

• Full Board

•Committees

• Individual members

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Objective of Evaluation of the Board• Assess how board is performing

•Whether objectives are being achieved

• Board contribution to goal setting, strategy, risk taking

•How the team is performing

• Assess skills of the Board

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Objectives of evaluating Individuals•Whether the individual is contributing effectively

•Whether the individual is committed to the Board

•Whether the individual is the right person to sit on the Board

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Wh0 Evaluates

• External third party may conduct the evaluation

• Non-executive member should evaluate Chair

• Outsider can be engaged to evaluate Chair

• Chair can evaluate individual members

• Peer Evaluation

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What to Evaluate in a Board• Performance against the set objectives• Contribution of Board to goal and

strategy setting• Board management of risk• Responsiveness of Board to

organizational challenges• Relationship of board with management• Conduct of meetings• Composition of skill set of the Board• Effectiveness of committees

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What to Evaluate in an Individual• Commitment of members through

attending meetings and contributing to Board• Their preparation for meetings and

quality of the constitution• How they examine the knowledge and

expertise is handling board matters• Their continued interest in different

board matters through research, study and readiness to debate• Relationship with fellow board

members including communication, respect etc.

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Role of Chairman• Ensure success of organization by achieving goals of the

organization

• Cause business of meetings to be availed in time, setting agenda, giving notices, availing paper in a timely manner

• Conduct of meeting of Board to ensure participation of members, taking solid decisions and follow-up decisions of the Board.

• Manage relationships among board members and between board and management

• Ensure high standard of integrity, open communication and compliance with corporate governance standards.

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Board Room Behaviour• A clear understanding of the role of the board

• A common vision

• Independent thinking

• Rigorous Debate

• A usage of appropriate knowledge texture

• Team work

• Respect for colleagues

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Disqualification of a Board Member• Become of unsound mind

• Become bankrupt

• Is convicted of an offense of a criminal nature

• When disqualified by a professional qualification where he is a member with a professional body.