Peter Crow
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Essential qualities of a director?

4/10/2016

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Recently, an article was posted on the ICSA: The Governance Institute website, describing 5 essential qualities of a non-executive director. The author lists the following five 'core qualities' and suggests these need to form the basis of evaluations when companies are appointing non-executive directors:
  • Big picture thinker
  • Governance knowledge
  • Independent mindset
  • Ambassador potential
  • Energy and commitment
This is a good list and several of the items are intuitively appealing. However, having read the article a few times now and compared these suggestions with the findings from my own research and others elsewhere, I am not sure all of these qualities are actually 'essential'. This set me thinking, leading to some supplementary questions:
  • Why have these five qualities been singled out?
  • The fourth quality, 'ambassador potential', stands out as being somewhat different from the others. While some level of ambassadorial capability is desirable in the chairman (because they are usually the spokesman), I struggle to understand why it might be crucial in directors who do not speak for the company. The quality may be more usefully categorised as a desirable item.
  • The title of the article suggests these are essential qualities of non-executive directors. But what of executive directors? Do they possess different qualities? The law makes no distinction between executive and non-executive directors. If a board is to be effective, big picture thinking; knowledge of board practices (i.e., governance knowledge); an independent mindset; and, energy and commitment are more likely to be essential qualities for all directors.
  • What of other qualities that have been suggested as being highly important including competence (to understand the business of the business and complex information); the ability to deal with ambiguity and change; vigorous debate; and, teamwork and trust, for example?
  • Though not stated explicitly, the use of 'essential' implies these qualities are universally applicable. Given the complex and socially dynamic nature of corporate governance, companies and markets, is this reasonable?
  • How might possession of these qualities translate into a beneficial impact on business performance?
Though progress has been made in recent years, these questions demonstrate our knowledge abut boards is far from complete. We still have much to learn about how boards actually work; how they should work; and, crucially, whether boards can influence company performance through the decisions made in the boardroom (or not). If answers to these very difficult questions can be found, they will probably have significant implications including perhaps to a new understanding of corporate governance and updated guidance for board practices, director recruitment and on-going director development. While some directors may struggle to come to terms with such implications, the flow-on effects for sustainable business performance, economic growth and societal well-being are likely to be significant.
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Dr. ​Peter Crow, CMInstD
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