Turbulent times demand a greater focus on board effectiveness. While adherence to strong rules on corporate governance remain essential – as this report was in its final production stages, the Indian Satyam scandal highlighted the dangers of non-compliance in a part of the world not known for governance standards – the world economic crisis has introduced a need for discipline rarely seen in Europe over the last decade.
Variously impressed or shocked by the financial performance of private equity owned companies over the last few years, boards are increasingly adopting working methods with a single-minded focus on far-sighted strategies and hard-nosed delivery; driving shareholder value in a way not seen before. Privately owned or governed companies are also seeing the value of improved governance, evidenced by the growth of advisory boards. These are very often a precursor to the introduction of a fully balanced main board with strong independent representation playing as important a role as in publicly listed corporations.
Distilling the trends which we have tracked since launching this report in 1999 we can highlight the following as the features which best equip European boards for maximum effectiveness:
• Improving board composition and balance – ensuring diverse and rich perspectives from each board member.
• Allowing sufficient time for non-executive board members and chairmen to attend to their duties and responsibilities.
• Increasing international expertise, because very few companies these days are reliant purely on national revenues or ownership.
• Emphasising the value of properly independent directors, the global consensus is that independent directors should exceed 50% of board membership.
• Increasing use of specialised committees which meet separately from the main board meetings, reflecting the increased workload for boards these days.
• Improving board meeting dynamics and undertaking regular – certainly annual – formalised evaluations of the board and its performance.
See full Report, in pdf format.
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