Board Composition & Succession Planning Flashcards
(21 cards)
What factors might influence the size of a Board?
- The complexity of the business
- The industry/sector it operates in
- The companies AoA (unless specified is up to the board)
What factors should be considered when determining the size of the board?
BUSA
1. The requirements for a balanced board
2. The requirements of the UK Code on composition
3. The need to Service board committees
4. The Ability of the board to hold productive, constructive discussions and make prompt rational decisions
What will be included in a balanced board?
- Separate roles of Chair and CEO (p.9)
- An appropriate balance of exec, non-exec, and independent directors
- Appropriate skills, experience and knowledge
- Gender balance
- Diversity
What is a skills matrix?
A skills matrix is a tool used in the work place to identify and map skills/experience of members and highlight where there are gaps or areas of improvement
What does the UKCG code say on diversity within the board?
Principle J - “appointments and successions should be based on merit and objective criteria and should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths”
Principle L - “Annual evaluation of the board should consider its composition, diversity and how effectively members work together”
What did the ‘Women on Boards Review 2011’ advise re board composition?
Advised that FTSE 350 companies should publicly adopt targets for the % of women on their boards and report on their compliance. FTSE 100 companies should aim for min of 25% of female representation
What did the Higgs Report 2003 suggest on recruiting NEDs from diverse backgrounds?
Nom com should be tasked with considering tasks from various backgrounds, including:
1. Different areas of business (HR, client care, change management etc)
2. Different company types (private, charities, public sector etc)
3. For international markets should have at least one international NED
4. Consider bringing talented individuals from more diverse backgrounds to give exposure
What did the Hampton-Alexander Review say on Diversity of the Board?
Recommended:
- 33% of women on FTSE 350 boards
- FTSE 350 companies increase the number of women in roles of chair, SIDs and exec boards
What does the Parker Review suggest in Ethnic Diversity on boards?
Recommended:
- Each FTSE 100 board should have at least 1 director of colour by 2021, FTSE 250 board at least 1 by 2024
- Greater transparency and disclosure on ethnic diversity
What does the CA 2006 say on reporting on diversity?
Required listed companies to include in their strategic report a breakdown showing at the end of the financial year the number of persons of each sex who were:
- directors
- senior managers
- employees of the company (as.414)
What does the UKCG code say on reporting on diversity (prob. 23)
The annual report should describe the work of the Nom Com, including:
- the process used in relation to appointments, it’s approach to succession planning and how both support develop a diverse pipeline ;
- the policy on diversity and inclusion, its objectives and linkage to company strategy, how it’s been implemented and progress
- the gender balance of those in the senior management and their direct reports
What does the UKCG Code say on board appointments (principle J)?
Appointments to the board should be subject to a formal, rigorous, and transparent procedure and an effective succession plan should be maintained
What does the UKCG code say on the Nominations committee?
The nomination committee should:
- lead process for appointments
- ensure plans are in place for orderly succession
- develop a diverse pipeline for succession
What does the UKCG code say on the composition of the Nom Com?
Majority of members should be independent NEDS.
The chair of the board should not chair the committee when dealing with the appointment of their successor.
What should be included in the Nom Com report?
- The process used in relation to appointments
- how the board evaluation has been conducted
- the policy on diversity and inclusion
- the gender balance
What should be considered when accepting an offer of appointment?
REVIEWER
R-Report (read annual report)
E - Evaluate recent challenges
V - Value (consider salary)
I - Investigate culture & media coverage
E - Engagement (can they attend all the meetings
W - working with who (meeting with people)
E - Examine business model and strategy
R - Risks
What does UKCG Code say on Succession Planning?
P.J -“an effective succession plan should be maintained”
P.17-‘‘ensure plans in place.. and oversee the development of a diverse pipeline”
What does FRC guidance on board effectiveness say on Succession Planning?
“Board evaluations should inform and influence succession planning. They are an opportunity for boards to review skills, assess their composition and agree plans for filling gaps and increasing diversity”
What types of planning should succession plans cover?
Succession plans should cover:
- Contingency Planning (for sudden and unforeseen departures)
- Medium-term Planning (for orderly replacement of current members)
- Long-term Planning (the relationship between the delivery of the company strategy and objectives to the skills needed now and in the future)
What is said about refreshing board membership in UK CG code?
P.K - “consideration should be given to the length of service of the board as a whole and membership regularly refreshed”
What does the UKCG code said on annual re-election of members?
“All directors should be subject to annual re-election. The board should set out in the papers accompanying the resolution to elect each director the specific reasons why their contribution is and continues to be, important to the company’s long term sustainable success”
