The Tribune

CORPORATE governance has been transformed over the past century from an ‘old boys clubhouse’ to a strategic asset focused on preparing a company to withstand future volatility in markets, human capital, competition, money laundering, cyber crimes and other factors. According to Forbes contributor Betsy Atkins: “When we look back five years from now, governance 4.0, the era of future-proofing, will seem the obvious thing we should have embraced sooner.”

A critical component of corporate governance is the Board of Directors. Principle VI of the Organisation for Economic Co-Operation and Development (OECD) provides a list of Board of Directors responsibilities that include, but are not limited to, acting on behalf of shareholders and establishing various committees led by qualified individuals. The Insurance Commission of The Bahamas’ guidance note for corporate governance and oversight assessment criteria, most recently amended in August 2018, explains: “In general, corporate governance and oversight involves relationships between an organisation’s Board, management, shareholders, customers and employees.” And, while accepting that corporate governance processes will vary from company to company, the Central Bank of The Bahamas’ corporate governance guidelines, revised in May 2013, further explain that “the Board of a licensee should comprise (except where specific exemption has been granted) both executive and non-executive members, as appropriate to the organisation’s needs, who can act independent of undue influence from internal and external sources”. The strategic usage of directors is the focus of today’s article.

Strategic director composition

Taking an honest assessment of your Board’s composition is the first step. Your current Board members should be profiled regarding their experience, background, demographics and skills. Once gaps have been identified, fill them. It is possible, for instance, that your Board has only one female member and no members with expertise in ESG (environmental and social factors). These are the gaps that should be filled when recruiting new Board members.

In The Bahamas, various regulators have established minimum standards, including fit and proper criteria and composition requirements for Boards.

Take a strategic approach to leadership in committees

There is a tendency for Board leadership roles to be awarded to the loudest voices in the room. It would be more effective to rotate committee chairs regularly to give everyone a chance and provide fresh perspectives. The rotation of your nominating and governance chair is particularly critical. Additionally, it is essential to set committee objectives and use executive sessions to ensure alignment between the board and chief executive.

Moreover, the committee chair should be process-oriented, willing to challenge ideas to promote understanding among committee members, a good listener and a proponent of committee evaluations.

Embrace hybrid Board meetings for maximum participation

Some strategists contend that, post-pandemic, the best approach is to host either entirely digital or entirely in-person meetings so that everyone is on an equal footing. This writer disagrees. Adopting a hybrid system with a set rules of engagement for all participants increases participation, real-time transfer of crucial analysis, and the ability to have a wide range of Board members’ expertise available for decision-making.

Conclusion

Today, more than ever, Boards must place a high priority on diversity. It is often easier to say than to do. Despite this, achieving your company’s goals and increasing your Board’s effectiveness is feasible with the proper framework.

• NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years. He has held positions at a TerraLex member law firm, a Wolfsburg Group member bank and a ‘big four’ accounting firm. Mr Smith is a certified anti-money laundering specialist (CAMS), and the compliance officer and money laundering reporting officer (MLRO) for CG Atlantic’s family of companies (member of Coralisle Group) for The Bahamas and Turks & Caicos.