Top tips for creating an effective board agenda

Meetings of the governing body provide the mechanism through which strategic decisions are taken and the organisation’s performance is monitored. It is vital that the agenda of each meeting is properly structured in order to ensure that the governing body considers the right issues and thus makes the right decisions.

“In law and in terms of governance codes like King IV, governing bodies have wide responsibilities, including ultimate responsibility for the organisation’s performance and, in the case of companies, directors are held personally liable for the decisions taken,” says Anton van Wyk, Chair of the Corporate Governance Network, a forum of the Institute of Directors in Southern Africa sponsored by PwC. “As the responsibilities of the governing body expand, it is vital that the agendas for its meeting provide the right framework to encourage the right decisions to be taken.”

Clearly, the ideal agenda for any governing body would be driven by the organisation’s unique strategy and context. The Chair is responsible for compiling the agenda, in consultation with the CEO and the company secretary, and the process should be informed by the following principles:

• Agendas must be flexible enough to accommodate changes in both the internal and external environments in which the organisation operates. A critical focus should be on providing members with regular updates by experts on recent development and trends.
• Day-to-day management of the organisation should only be included if issues that would impact its functioning, reputation or future strategy arise.
• Members must satisfy themselves that they are receiving the right information and that it is credible.
• The records of the meetings of the governing body are important because they provide a useful guide for future deliberations, resolving future disagreements and providing a legal defence. Care must thus be taken in ensuring the accuracy of minutes.

As already noted, the actual items on the governing-body agenda would depend on the organisation’s particular circumstances and strategy. However, the following should be considered as permanent agenda items:

• Stakeholder relationships. As awareness has grown that organisations rely on, and affect, a complex web of entities and not just shareholders. Stakeholders should thus be a prominent agenda item, and should be integrated proactively into the risk-management framework.
• Accounting/financial results. Financial results remain one of the key performance indicators for organisational performance. Governing bodies often rely too heavily on audit committees. They should be alert to the warning flags of financial irregularity. These include complicated corporate structures, substantial intragroup financial transactions, use of special-purpose vehicles, complex shareholder transactions relating to acquisitions and the like.
• Governance and risk management. A critical focus here will be how governance principles, including governance codes, are being embedded into business conduct and practice. King IV will be a specific focus area.
• Strategic planning and risk management. Strategic planning is now seen as a fundamental responsibility of the governing body. Currently, macroeconomic and sustainability issues are hugely complex and will have far-reaching impacts on all organisations.
• Talent management. Governing bodies are responsible not only for recruiting the top corporate leaders but also for ensuring succession planning. This would also include the governing body itself.
• Sustainable development. Sustainability issues need to be identified and reported on. Investors are paying increasing attention to the impact of sustainability issues on long-term viability.
• Impact of the economic environment. The availability of credit continues to be affected by the 2008 financial crisis. Companies that rely on debt financing will want to continue focusing on this area.
• Technology and information governance and security. Governing bodies must ensure that their organisation’s business strategy is attuned to the digital world.
• Remuneration disclosure and policies. Remuneration remains a hot-button topic, and it should be recognised that disclosing the organisation’s remuneration practices and the philosophies that underlie them would help defuse a great deal of stakeholder anger about salaries that are apparently unfairly high.

“Time spent on crafting an agenda that promotes the right level of conversation about the right issues is time well-spent,” concludes van Wyk. “Without it, it is likely the governing body will not exercise oversight effectively, and will fail in its duty to guide the organisation successfully into an uncertain future.”

The IoDSA’s Corporate Governance Network has recently published a paper on this topic: The governing body agenda. Two other papers relate to this topic: Governing body’s role in cyber resilience and Governing bodies’ role in preserving the broad moral landscape.

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, [email protected], www.atthatpoint.co.za

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