Criticality of Board Capability

Having reviewed the statement prepared by the ASX 200 Boards in relation to Director capability, incorporating skills and experience, we have noted indicatively two approaches.

One reflecting a comprehensive matrix of relevant Director capabilities and the number of Directors possessing that relevant capability, and the other primarily offering a simple list of capabilities with limited reference to individual Director capability.

In the latter approach, the statement of Directors’ capabilities was summarised in a simple list revealing that Board members collectively possessed the identified capabilities and experience.  In the more comprehensive statement of Board capabilities and the incorporation of a matrix, companies nominated and described the capability and then indicated the number of Directors possessing that capability.

The latter, from our perspective and from a governance perspective, would be the only acceptable approach.  Indicatively, Director’s skills and experience published across the ASX 200 companies provided information on specific industry and international work experience possessed by Directors as relevant.  The broad headings that were incorporated in disclosures included the following:

  • Stakeholder management
  • Board experience
  • Experience as a Board Chair
  • Experience as a senior executive including that of a CEO
  • Knowledge of a specific industry sector
  • International experience
  • Knowledge of global markets and trade protocols
  • Experience in business planning and strategy development
  • Financial acumen, audit and financial reporting experience
  • Risk management and compliance experience
  • Knowledge of remuneration, people and workplace culture issues
  • Knowledge of talent development, succession planning and nominations
  • Knowledge of health and safety policy and practice
  • Knowledge of the environment regulations
  • Experience in mergers and acquisitions and capital markets
  • Experience in supply chain and logistics
  • Knowledge of specific customer segments
  • Knowledge of ICT and the digital environment including cybersecurity
  • Experience in sales and marketing
  • Experience in corporate communications and investor relations
  • Experience in social media
  • Engagement in research and development and innovation
  • Experience as an entrepreneur
  • Knowledge of the public sector including public policy
  • Experience in engaging with Government officials
  • Possession of relevant personal qualities

Comment by academics, business leaders and journalists reviewing various reports have revealed a number of key obligations which Boards need to meet in forming a Board, in the first instance, and managing renewal.

Among the primary tasks which are essential in establishing and maintaining an effective Board with an appropriate spread of relevant capabilities, the following are likely to be included:

  • Align Director capability to the organisation’s strategic imperatives
  • Avoid a focus on generic skills which add little value and represent threshold capabilities
  • Differentiate capability requirements for Board members and the Chair
  • Focus on the capabilities essential to lead Committees of the Board and deal with special subject matter issues
  • Explore avenues in the nominations process which will build on core key capabilities
  • Allocate resources to the continuous development of Directors’ knowhow. This may also incorporate rotating Directors across Committees to build knowledge and understanding
  • Review the Board’s capability matrix and continually assess its relevance as the needs of the organisation change

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