When it comes to corporate governance, we need to go beyond the written down rules and regulations. What matters is what is right or wrong and not what is articulated in the regulations.
I was surprised to read the David Tang’s reply to a question on the British Airways’ debacle of complete shutdown of its computers a couple of weeks ago (FT 10th June 2017). David Tang is my favourite FT Weekend columnists and it is the first column that I go to every Saturday for these last ten years.
The boards of directors of listed and regulated companies have been hardened further during these last ten years as regulators’ tentacles have reached the board rooms and company secretary offices of thriving business and financial institutions.
There is no alternative to heterogeneity. Different views and opinions from persons with different experience and competence enrich discussion and provide for better decision-making. People with similar views and opinions on a board of directors can fall into the trap of immobility, recycling of the same ideas year in-year out, lack of innovation in policy and strategy. Grid-lock.
It is challenging times for members of board of directors of companies. Boards have never had it so hard. They are pressured by the market to have their companies giving short-term results when they understand that the business is there for the long-term. They are asked to comply with stiffer regulations, when they should be focusing on business strategy and performance. Meanwhile, they are being hounded by small shareholders and the public on the social media as their professionalism, experience and performance is being challenged by attacks that they are not doing enough, that they are being highly (or excessively) paid and that they have conflicts of interest.
The selection of directors on boards is often criticised for the fact that it is always the same persons who are invited to sit on various corporate boards as independent, non-executive directors. Usually, these are persons of extensive experience and social standing that give prestige to the board of directors besides the benefits of competence and experience. Truly, blue ribbon boards with a list of important well-known names sitting around the table.
The confusion on the purpose of boards of directors and who qualifies as a board director lives on despite greater awareness on corporate governance by means of conferences and seminars and more restrictive criteria exercised by the MFSA on regulated or listed companies.
Directors have a long list of duties most of which are of a fiduciary nature. These are obligations that have to be taken seriously by all directors including non executive directors.
Some statistics from the United States of America – courtesy of Bloomberg Business Week: 64 per cent of directors on the Standard & Poor’s 500-stock index have served ten to fifteen years on a board of directors.
There is more than ample evidence that boards of directors in Malta are steadily, although quietly, changing. A number of factors have contributed to this.
