By Johnson Manyakara

Progressive Boards believe that Board renewal is a strategic imperative. Without a Board Renewal Policy(BRP) however, it is difficult to see how a Board can discharge this responsibility professionally and effectively. This post discusses the strategic purpose and make up of a BRP, informed by best practice.

A BRP serves to ensure that the Board’s membership comprises directors with an appropriate mix and diversity of skills, professional experience, tenure and personal background that allow the Board collectively and directors individually, to:

• Discharge their responsibilities and duties under the law effectively and efficiently;
• Understand the business and the environment in which the entity operates so as to be able to agree with the EXCO Team the entity’s objectives, goals and strategic direction which will maximise shareholder value; and
• Assess the performance of the EXCO Team in meeting those objectives and goals.

In addition to spelling out its purpose, a BRP should provide for matters detailed below.

Status of Policy

This refers to the frequency with which the policy should be reviewed and who by. Typically, a BRP is reviewed at least every three years by the Remuneration/Human Resources (HR) Committee and by the full Board, following recommendations from the Remuneration/HR Committee.

Application

The BRP will apply to the main Board and, where applicable, to subsidiary/divisional Boards, together the “Boards”.

Board Terms

Typically, Non – Executive Directors (NEDs) will serve no more than three 3- year terms. However, a NED’s continuing Board membership beyond three terms is subject to continued satisfactory performance.

The Public Entities Corporate Governance Act (Chapter 10:31) – PECGA (Chapter 10:31), provides for up to a maximum of two 4 – year terms.

Board Composition

Board members should be appointed to ensure a vibrant, efficient, and effective Board with appropriate balance of tenure, skill, diversity and experience.

In addition to merit, the PECGA (Chapter 10:31) further provides for gender balance, regional representation and for representation of specific fields of qualifications.

Board Appointment Process

Recommendations for new NEDs appointment are generally made by members of the Board to the Remuneration/HR Committee who will undertake appropriate background checks as to the candidate’s character, education, experience, criminal record and bankruptcy history. The Committee will then recommend a shortlist to the Board.  

Some Committees enlist the services of Recruitment Agencies or Independent Experts to carry out their duties in this regard. Shareholders make the final decision at an AGM, on the recommendation of the Board.

Terms of Appointment

Typically, all new NEDs receive a letter of appointment from the Board Chair, outlining matters relevant to the Board’s operation and policies and the terms of their appointment. Such matters generally include:

• Requirement for election and subsequent re-election by shareholders;
• Expectations of the Board in relation to preparing and attending Board meetings;
• Procedures for dealing with conflict of interest;
• Remuneration;
• Disclosure and notification obligations;
• Indemnification and directors’ liability insurance; and
• Availability of independent professional advice.

Board Performance Reviews

Progressive Boards undertake formal annual performance assessments, including a performance review of individual Directors.

The process for conducting the Board’s performance review is agreed by the Board. Typically, the process includes individual interviews with the Board Chair, or with an external Facilitator, to elicit comments or issues that the Directors may have or may like to raise. A questionnaire agreed to by the Board may also be used.

The results of the interviews and questionnaire will be compiled, including a quantitative and qualitative analysis. A written report summarising the results, issues for discussion and recommendations for interventions is presented to the Board and discussed with appropriate action taken.

The Board Chair’s performance is reviewed by the other NEDs or by an agreed Independent Expert.

Monitoring

Board renewal is monitored and considered as part of the annual Board, Board Committees and Directors’ performance evaluation.

Board renewal gives a Board vibrancy and is a key ingredient of Board and Director capacity building.