In both Sir David Walkers report on corporate governance in UK banks and other financial industry entities and Sir Christopher Hoggs recent review of the Combined Code , they establish a clear link between board behaviour and business performance. They advocate that to enhance the boards performance and awareness of its strengths and weaknesses, board evaluation reviews should be externally facilitated and the chairman should hold regular development reviews with each director. However, they make it clear that behavioural change cant be enforced through regulations.
Crelos and partner Tavistock Institute of Human Resources were one of the main contributors to the Walker report (chapter 4 and Annex 4) as expert psychologists, social scientists and organisational consultants working with and consulting to large firms across industries.
Scientific research over the last ten years and our experience of working with such organisations have proved that behaviour can be learned and is predictive of performance. We recommend that Board evaluation should be an ongoing process of development not a one-off-event. It is the role of the Chairman to turn the boardroom into a more challenging environment and to ensure that board members are appropriately skilled to add value to the Board and to establish effective interactions in the Board Room.
Ali Gill, CEO of Crelos, explains Board evaluation is an ongoing process of development not a one-off-event. This requires Chairmen and their Boards to realise their infallibility and engage in the task of developing themselves and the way that they interact. The boardroom should be a more challenging environment and it is the role of the chairman to ensure that he or she is sufficiently challenged by non-executive directors to benefits from healthy debates.
It is the Chairmans role to ensure that board members are appropriately skilled. Behaviour is observable, measurable and learnable. It is not static. It is contingent on context and situation therefore must be actively worked on to maintain an optimal state.
Chairmen should be schooled in behavioural change and group dynamics. Surfacing and discussing board behaviour ensures that group dynamics such as groupthink, passive free-riding and ineffective communication are exposed and replaced by positive behaviours.
Sir David recommends that Boards and their sub-committees should regularly undergo a formal and rigorous evaluation process [ ] with external facilitation.
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