Thought Leadership

Board Effectiveness
- Governance issues
- Culture and climate
Business Assurance

Board Effectiveness

This is a discussion document on Board Effectiveness in Regulated Businesses, and those companies that own them.

If the Board of Directors of a regulated business makes its objectives, processes and procedures such that they drive compliance within the organisation then the costs of compliance may be significantly reduced and the level and quality of compliance significantly enhanced.

The topics listed may form the agenda for series of formal and informal meetings of the Boards of the companies concerned together with representatives of senior management when appropriate. The goal would be to draw effectiveness and compliance into a single pertinent agenda for the officers of the business.

The first two areas may form the sub-agenda when the formal tasks of the meetings are the other more technical areas; sustainability, financial strategy etc We would recommend external facilitation for the first two or three of these meetings as the Board establishes its new working style.

Governance issues

Combined Code compliance seen as a starter
- Board composition, succession and compensation
- Duties and responsibilities of the two Boards
- Leadership, Team work and effective dynamics*
Group and company relations when the latter is a regulated entity - who decides issues
Role of any independent NEDs on the subsidiary board - they will not be on the main board
Need for committees of the sub. board eg. Nominations, audit, remuneration
Conflicted Executive Directors eg. Group CEO as chairman of subsidiary board
Utility and competition legislation impacts
Need for all NEDs to have a depth of knowledge of the activities of the sub. company - induction, ongoing interaction with executives/senior managers
Lender covenant compliance issues and governance

Culture and climate

In the review process the role of the Chairman will be crucial.*

Development of the questionnaire
Management of open forum discussions
Criticise and comment welcomed
Encouragement to contribute
Brain-storm rules, nothing ruled out
Bridging from circumspection to candour, an emotional "work-out"

Business Assurance

At the conclusion of the above process the Board may now view itself as operating as a well-knit team and must now turn its mind to matters at hand.

Sustainability

In relation to compliance with regulation it requires appropriate "Business Assurance" - a balance between control & innovation. This consists of:

Relevant evidence that controls are in place and effective
Evidence that you are managing risk - an evidential trail showing that risks are owned and managed and demonstrating acceptable levels of control
Pro-active efforts to evaluate future regulatory requirements and emerging technologies to seek competitive advantage from early adoption.

Financial Activities

Accountability
Compliance
Controls
Planning for the future
Future worth to shareholders
Economic Appraisal and values

Environmental Impacts

Regulatory issues
Clean water
Safe waste management
Avoiding pollution
Beneficial activity

Social Impacts

Acceptability of practices
Reality versus public perception
Risk assessment/management
Impact on local environment
Impact on stakeholders
Positive development of staff's business, skills
Encouragement of staff to participate in the local community

Stakeholder relations

Government departments eg. DTI, defra etc.
Regulators - Economic, quality eg. Ofwat, Ofgem, H&S Exec., Environment Agency, Drinking Water Inspectorate, customer representative orgs. etc.
NGOs - RSPB, Greenpeace, FOE etc.
Surveillance orgs. eg. MBIA
Equity and debt investors
Media - external and internal communications