“Ask Alison” – Strengthening the Board and Management’s Relationship

By on October 12, 2017 in Editor's Pick with 0 Comments

This is the first in a series of blogs by Alison Gaines FAICD Managing Partner Asia Pacific, Gerard Daniels. She will provide board governance tips for BCCM members.

The relationship between management and the Board should be a partnership, with each understanding their unique role and contribution to the performance of the organisation.

Critical for a successful relationship are willingness to partner, clarity about roles and trust.

For the board to be successful it must make the effort to understand deeply the organisation, its strategic and operating environment and the needs of members. For management to have a successful relationship with the board it must deliberately build the boards understanding of the business and engage in strategic conversations, usually through regular reporting and well-crafted strategic planning events.

The board’s role is to effectively govern strategy, performance, conformance and the assets of the organisation and give the CEO and management a clear license to act. In a membership environment the Board also strengthens bonds with members.

There are certain things the board can do to create a successful relationship. It can outline its role in the board charter and committee charters. It can agree to the style of behaviour it prefers through the code of conduct and conflicts of interest regime.

The board, with management, can also lay out the framework for management. The principal mechanism is the strategy and its planning horizons. Additionally the board can give guidance to management by setting the annual delegations register, agreeing the risk framework and risk appetite and setting the executive key performance indicators and remuneration structure.

Key to building trust is to ensure ongoing dialogue about performance and conformance and making sure there are no surprises in the boardroom.  Boards hate surprises, unless it’s an unplanned windfall. The Chair and CEO should work closely to ensure there are no surprises. They can do this best by setting mutual expectations of what is board business and having a plan for urgent matters and crises. Well-crafted agendas and reports to the committee and boards should be the building blocks for the boards understanding of the business. Exception reporting and trend analysis are good tools to give signals to the board about emerging issues.

The board must be able to rely upon its access to the company secretary and auditor to support its governance role. The CEO should always be available to the chair and other board members. The CEO and chair should agree to the rules of board members’ access to other management.

Trust relies on mutual respect. Understanding the value of the board and management to each other lies at the heart of this unique relationship.

This is a summary of a member webinar from September 2017.

Alison Gaines is a Fellow of the Australian Institute of Company Directors and holds the Certificate of Corporate Governance from the international business school INSEAD. She has run the Gerard Daniels Board Consulting practice for nearly 12 years, advising many Australian mutual and coops.  She has been CEO of a member organisation and a mutual insurance program and currently sits on the Board of several membership organisations.