Executive Cross-Border Hiring: 5 Suggestions, 5 Pitfalls

Dr. Ankoor Dasguupta notes that with nearly half of global hires now from emerging markets, cross-border executive recruitment can catalyze transformation or trigger costly misalignments. Unpack 5 strategic suggestions—like anchoring in strategy and prioritizing contextual intelligence—and steer clear of 5 pitfalls, including the “global savior” fallacy and ignoring the human toll, to build agile, culturally elastic leadership. Explore the suggestions and pitfalls here.

Seagull Management – Stay Away from this Structure!

Colin Thompson warns: Imagine your organization undergoing five medical procedures at once—each succeeds, but the “patient” dies of shock! That’s the peril of “seagull management,” where leaders swoop in, dump changes, and fly out. Explore why managing the dynamics of change through a dedicated Transition Management Team is key to winning hearts, aligning efforts, and ensuring lasting success in knowledge-driven companies. Transform your change strategy and avoid the pitfalls—check out the insights now.

When Boards Think Better: The Cognitive Advantage of Women in Corporate Governance

In today’s turbulent business landscape, Dr. Ankoor Dasguupta explores how homogeneous boards are a liability—discover how women’s unique cognitive perspectives disrupt groupthink, enhance risk oversight, and drive superior decisions through epistemic friction and deeper deliberations. Backed by global evidence, learn why reaching a threshold of three or more women transforms governance from affirmation to examination, fostering resilience and innovation. Dive into the cognitive advantages reshaping corporate leadership—read the full article here.

I was reading this paper where it says “Although the concept of political capital is not explicitly invoked, the qualities that women possess are assumed to be the sources of their influence. Thus, we invoke the political capital perspective to help make sense of this body of literature. “ 

Let me craft a metaphor to start with. A ship navigating turbulent waters rarely fails because of a single catastrophic command. More often, failure emerges through subtle navigational errors assumptions left unchallenged, weak signals ignored, familiar routes followed despite changing conditions. The most resilient ships are not led by louder voices, but by bridges designed to surface dissent, test judgment, and recalibrate course before deviation becomes disaster. My learning is that corporate boards operate under similar conditions.

Abstract

In an era defined by geopolitical uncertainty, technological acceleration, regulatory scrutiny, and shifting societal expectations, governance has become less about authority and more about cognitive quality. Increasingly, global research across corporate governance, behavioral science, and decision theory converges on a critical insight: boards that include women tend to demonstrate superior decision outcomes—not because of gender symbolism, but because cognitive diversity reshapes how collective judgment is formed.

In this article I observe the cognitive advantage women bring to corporate governance, moving decisively beyond representational narratives. It focuses instead on how female participation alters boardroom thinking, strengthens decision processes, and mitigates the structural weaknesses of traditional governance models across global contexts.

From Representation to Cognition: Reframing the Governance Debate

The way I see it, Boards are not operational teams. They are judgment bodies. Their primary function is not execution but interpretation—of risk, of incomplete information, of long-term consequences. In such environments, homogeneity of perspective becomes a liability, even when individual competence is high.

For much of the past two decades, discussions around women on boards were framed through lenses of equity, regulation, or reputational signaling. While these dimensions are neither trivial nor irrelevant, they do not sufficiently explain why gender-diverse boards consistently demonstrate stronger governance performance across markets. The more consequential question is cognitive, not moral: How does the presence of women change the way boards think?

Women often arrive in boardrooms through professional paths that differ from traditional executive pipelines. These paths frequently shaped by navigating structural constraints, heightened scrutiny, and non-linear careers—cultivate distinct cognitive orientations. The result is not ideological opposition, but epistemic friction: a productive disruption of unquestioned assumptions. I was also reading this paper where it states “However, simply hiring more women to increase gender representation is insufficient on its own. To build a sustainable culture of gender diversity, organizations must go beyond the hiring process and implement retention strategies that actively support and engage women throughout their careers.”

Groupthink and the Structural Vulnerability of Boards

Irving Janis’s theory of groupthink remains foundational in understanding decision failure among elite groups. Groupthink does not arise from incompetence; it arises from cohesion combined with similarity. Corporate boards, particularly those with long tenures and shared professional backgrounds, are structurally predisposed to this risk.

The presence of women has been shown to alter this dynamic in measurable ways. Research consistently indicates that female directors are more likely to ask clarifying questions, revisit foundational assumptions, and raise concerns framed not as objections, but as inquiries. This distinction matters. Rather than challenging authority directly, women often challenge certainty. They interrogate what is taken for granted. This shifts the boardroom from a space of affirmation to one of examination. Over time, this recalibrates norms—making dissent safer and consensus more deliberate. The result is not slower governance, but more resilient decision-making.

Cognitive Diversity and the Architecture of Judgment

Cognitive diversity refers to variation in how individuals perceive problems, integrate information, and evaluate outcomes. Unlike demographic diversity alone, cognitive diversity directly influences the structure of deliberation. Across governance and behavioral research, several consistent patterns emerge in relation to women directors. They tend to demonstrate stronger contextual integration, combining quantitative indicators with qualitative signals. They are generally less prone to overconfidence in probabilistic judgment and more inclined toward scenario-based reasoning, particularly in ambiguous or high-risk situations.

In boardrooms, these tendencies manifest as deeper questioning of forecasts, broader interpretation of risk, and greater attention to unintended consequences. Importantly, this does not replace analytical rigor—it complements it. This cognitive contribution becomes especially valuable in environments where traditional metrics lag reality, such as reputational risk, regulatory exposure, technological disruption, and stakeholder trust.

Risk Oversight and the Ethics of Prudence

One of the most empirically supported findings in governance literature is the relationship between women on boards and improved risk oversight. Across regions, boards with meaningful female participation exhibit lower incidence of financial misreporting, stronger compliance cultures, and earlier identification of operational and reputational risks.

This pattern is often misinterpreted as risk aversion. A more accurate interpretation is risk discernment. Women directors tend to frame risk as systemic rather than isolated. Financial exposure is considered alongside legal, ethical, human, and societal implications. In an era where intangible assets increasingly define enterprise value, this integrated risk lens is strategically indispensable.

From ESG governance frameworks in Europe to fiduciary oversight in North America and stewardship expectations in Asia-Pacific markets, the influence of women on risk deliberation is increasingly visible, not as conservatism, but as prudence informed by complexity.

Decision Process as a Governance Asset

One of the least discussed but most critical contributions of women to board effectiveness lies in decision process rather than decision outcome. Qualitative studies of board interactions reveal that gender diverse boards tend to deliberate longer, revisit assumptions more frequently, and resist premature closure. While this may marginally slow decision velocity, it significantly enhances decision robustness.

In complex adaptive systems, speed is not the same as effectiveness. Decisions that appear efficient in the short term often incur hidden long-term costs when underlying assumptions go unexamined. Boards that include women are more likely to tolerate productive tension, allowing uncertainty to be explored rather than suppressed. Over time, this strengthens institutional learning and reduces strategic blind spots.

Global Evidence Across Governance Systems

The cognitive advantage of women in corporate governance is not confined to a single cultural or regulatory environment. Evidence spans diverse governance systems.

I keep hearing from my friends who live in and around Nordic countries, which institutionalized gender diversity early, demonstrate stronger transparency and long-term stability. I also observe that European Union research links female board participation with heightened ethical sensitivity and stakeholder alignment. North American studies associate it with improved monitoring effectiveness and reduced executive entrenchment. Emerging evidence from Asia-Pacific markets suggests early gains in oversight quality when women are meaningfully integrated.

Across contexts, one pattern unfolds, which is the benefit is not numerical presence alone, but structural inclusion. Where women are treated as symbolic additions, cognitive gains are muted. Where they are integrated as full contributors, governance quality improves.

The Threshold Effect and the Limits of Tokenism

A critical insight from governance research is the threshold effect. One woman on a board changes optics. Two begin to influence dynamics. Three or more begin to alter cognition. At this point, women cease to be perceived as representatives of a category and are instead recognized as contributors to judgment. This shift enhances psychological safety for dissent across the board, benefiting all members. Thus, the governance advantage lies not in diversity as an abstract ideal, but in critical mass that enables cognitive normalization.

As a closure note

I’d say, there are spaces where assumptions are examined rather than inherited, where certainty is earned rather than assumed, and where silence is interpreted not as alignment but as a signal worth investigating. When women participate meaningfully in boardrooms, something subtle yet profound occurs. Questions surface earlier. Risks are named sooner. Decisions carry greater epistemic humility. Hence in closing this piece, my two cents is that in an age where governance failure is less about lack of information and more about failures of judgment, the cognitive advantage of women in corporate governance is no longer a peripheral consideration.

Introduction

Generative artificial intelligence (GenAI) has travelled from the research lab to the board agenda with astonishing speed. Chatbots draft marketing copy in seconds, foundation models explore vast design spaces for new drugs, and algorithmic copilots guide employees through complex tasks. Yet the same technology that promises double-digit productivity gains also carries systemic risks: algorithmic bias, privacy breaches, novel forms of intellectual-property infringement, and opaque decision logic. Regulators from Brussels to Washington are codifying “trustworthy AI” requirements, while investors and civil-society groups scrutinise corporate disclosures for evidence of ethical deployment.

Directors therefore face a dual mandate: they must extract strategic advantage from GenAI while protecting stakeholders from unintended harms. High-level frameworks built on fairness, accountability, transparency, privacy, and safety abound, yet a yawning implementation gap persists between principle and practice. In a 2025 global survey sixty-six per cent of boards conceded limited AI fluency and one third devoted insufficient agenda time to the topic (Deloitte, 2025a). As a result, many firms under-invest in risk controls or, conversely, hesitate to scale promising pilots for fear of mis-steps.

This article distils recent governance and leading practice guides into an actionable roadmap. It argues that boards can reconcile opportunity and responsibility by concentrating on three interlocking levers: capability, structure, and metrics. When these levers mesh, they create a governance flywheel that both safeguards stakeholders and accelerates innovation and enterprise value.

Why GenAI Oversight Is a Fiduciary Imperative

GenAI already shapes competitive positioning in every major sector. Pharmaceutical executives credit large-language-model pipelines with halving drug-discovery timelines; retailers deploying algorithmic pricing engines see margin lifts exceeding three percentage points; professional-services firms report that copilots enable junior staff to complete routine assignments forty per cent faster. These gains translate into higher valuations, and more than a third of global chief executives report revenue or profit growth directly attributable to GenAI (PwC, 2025).

Rewards of this magnitude arrive hand in hand with asymmetric risk. Unchecked models can entrench discrimination, expose trade secrets, hallucinate dangerous misinformation, or breach copyright law at scale. The EU AI Act, which begins phased implementation in 2025, demands risk-management plans and human oversight for high-risk systems. In the United States the Securities and Exchange Commission warns against “AI washing,” and Delaware courts have signaled that directors may face Caremark liability if they fail to implement information systems for mission-critical risks.

The board’s fiduciary duty of care obliges directors to stay informed about technologies that materially affect strategy, and the duty of loyalty requires them to see that AI initiatives align with stakeholder interests. Consequently, GenAI oversight is not a discretionary technology topic but an essential component of modern corporate governance. Boards that master AI avoid litigation and reputational damage, yet they also gain privileged insight into emerging profit pools.

Building Board-Level Capabilities

Effective oversight begins with knowledge. Directors cannot govern what they do not understand, so leading boards schedule regular AI teach-ins covering model architectures, data-quality pitfalls, bias-mitigation techniques, and the evolving regulatory map. Advanced boards go a step further, simulating failure scenarios, such as a generative model hallucinating faulty financial advice, to test escalation protocols.

Forty percent of boards surveyed by Deloitte (2025a) are reconsidering composition because of AI. Options include:

• recruiting directors with AI engineering or data-ethics credentials;
• appointing a board observer, often an academic or former regulator, who attends meetings solely for technology discourse;
• establishing an external AI advisory council that feeds independent perspectives into committee deliberations.

AI advances weekly, not quarterly. Boards can institutionalise curiosity by assigning directors to monitor specific AI domains—e.g., GenAI IP risk or synthetic-data innovation—and rotate these “sentinel” roles annually. Including AI proficiency in the annual board-evaluation instrument ensures accountability; nom-gov committees can then integrate results into succession planning.

Directors should triangulate perspectives, not just from the CTO but also the CRO, CHRO, and General Counsel, to see how AI affects risk, workforce, and compliance. A standing “AI segment” in every full-board agenda signals that oversight is ongoing, not episodic.

Structural Foundations for Responsible AI

Capability must be anchored in formal structure. Boards adopt one of three main architectures.

• Whole-board oversight with AI as a recurring agenda item—suitable for smaller companies where GenAI implications touch every committee.
• Expanded remit of an existing committee—usually Audit (controls and disclosures) or Risk (systemic hazards and resilience).
• Dedicated Technology or AI committee—in data-intensive sectors where AI is strategic and complex (e.g., fintech, med-tech).

Whatever the model, charters should spell out AI duties, information requirements, and meeting cadence, while minutes should record directors’ challenge questions to demonstrate an effective monitoring system.

Boards also verify that management has erected an internal governance framework. A single executive owner, whether chief information officer, chief digital officer, or chief AI officer, should hold accountability for AI strategy and risk. The company needs a written AI policy that covers data ethics, model validation, human-in-the-loop thresholds, and incident-escalation paths. A cross-functional AI ethics committee should review high-risk deployments and report its findings to senior leadership.

Integration with core processes turns policy into practice. AI must feature prominently in:

• Strategy off-sites. Directors and executives should map how GenAI alters industry value chains and revisit business-model assumptions.
• Capital budgeting. AI projects should flow through disciplined stage-gate funding; ROI metrics need to account for both value creation and risk-mitigation spend.
• ERM dashboards. “AI risk” deserves its own line on the corporate risk register with sub-risks (bias, IP leakage, explainability).

Reporting must be reliable. Management should provide quarterly AI-governance reviews that summarise project status, bias-audit results, incident logs, and regulatory changes. Severe events, such as discriminatory lending produced by an algorithm, should trigger immediate alerts to the relevant committee. These arrangements move companies from a reactive stance toward a proactive, transformative governance posture in which AI contributes to long-term value while remaining under prudent control.

Making Ethics Measurable

High-level AI principles become operational only when translated into metrics. Boards collaborate with management on a balanced scorecard that spans performance, risk, and compliance. Value-creation indicators show the share of revenue derived from AI-enabled products, reliability indicators track model error rates, fairness indicators measure disparate impact, transparency indicators log documented explainability, oversight indicators record human review, and resilience indicators capture incident-response times.

Dashboards using intuitive red-amber-green codes help directors grasp emerging trends. A spike in amber fairness flags demands prompt action. Boards reinforce accountability when they embed risk appetite into explicit thresholds. An organisation may tolerate no regulatory violations and no more than a one-per-cent disparate-impact deviation in lending algorithms; any breach automatically escalates.

Internal audit periodically samples AI models to confirm adherence to policy and flag gaps in validation or data provenance. Although external assurance regimes for AI are still emerging, forward-looking boards pilot voluntary audits to pre-empt regulation and earn investor confidence.

Metrics must evolve. Early in a company’s AI journey the focus rests on inputs, training hours or policy adoption. As programmes mature attention shifts toward outcomes, trust scores, declining incident frequency, and ultimately sustained shareholder value.

Governance as an Innovation Enabler

Robust oversight is often caricatured as a brake on experimentation, but clear guardrails actually de-risk exploration and encourage managers to scale pilots. Firms with formal AI ethics committees report quicker time-to-market because requirements are transparent from the start. Rigorous bias testing opens new customer segments by proving inclusivity, and strong transparency practices differentiate brands in trust-sensitive markets such as healthcare and finance.

Governance structures improve data quality as well. Monitoring protocols create feedback loops that boost accuracy and operational resilience. Over time a balanced governance approach shifts the conversation from eye-catching demonstrations to repeatable, auditable, defensible value creation that underpins sustainable returns.

Conclusion

The boardroom stands at a pivotal juncture. GenAI’s upside is indisputable, but so are its social and regulatory headwinds. Directors who regard AI as merely an operational detail will likely preside over fragmented pilot projects, rising compliance costs, and reputational landmines. Conversely, boards that cultivate capability, embed structure, and insist on metrics transform AI from a risk factor into a strategic asset.

The agenda is straightforward, though not simple:

• Capability: raise AI literacy, refresh the skills matrix, and foster continuous learning.
• Structure: allocate formal oversight, institutionalise cross-functional management frameworks, and integrate AI into strategy, ERM, and budgeting.
• Metrics: operationalise ethics and value through balanced scorecards, including fairness, transparency, reliability, and ROI, monitored via dashboards and audited for assurance.

Click here to access Antonio Miranda’s full white paper

References

Corporate Governance For Growing Companies

Corporate Governance is the system of processes, activities, standards and reporting to facilitate and deliver growth in long term shareholder value by reducing risk while maintaining a flexible, efficient and effective management framework within an entrepreneurial environment… Open Expert File

Author: Frank Lewis – CEO – UK

“Diversity: Coming Soon”

In March of 2019, I visited the American Occupational Therapy Association’s (AOTA) website to refresh my memory of the organization’s Vision 2025; meant to provide aspirational guidance to its members… Open Expert File

Author: Fatima Adamu-Good – Executive Consultant – USA

LEADING A BUSINESS THROUGH IPO, EXIT AND BEYOND

• Deciding whether to float or not?
• Short, medium, long term – the pros/cons of different scenarios
• How to enhance shareholder / stock value
• What are the pitfalls which can result in a flotation and how to avoid them
• What are the Corporate Governance, risk mitigation and due diligence requirements?
• How do you go about assembling an effective Board of Execs and NEDs?
• What are the key skills of a successful Non-Executive Chairman?
• Examples of leading ailing businesses through turnaround and learnings gained.

DECIDING WHETHER TO FLOAT OR NOT?

Need to be certain you want to move into a public spotlight that comes with being listed

Significant greater rules and regulations as a public company

Undergo internal audit to ascertain whether the business is in a position to do so. A full business review

Assessing in advance issues including:

• Corporate structure
• Board structure
• Board and senior management abilities
• Corporate Governance analyses
• Issues which would prevent Listing
• Internal control reviews
• Tax check ups and requirements

UNDERSTANDING THE REQUIREMENTS OF INSTITUTIONAL INVESTORS

• Solid management team
• Proven concept
• Sizeable market opportunity
• Differentiated proposition
• Rationale for joining the AIM
  • Growth Capital
  • Raise profile
  • Incentive / retain staff through tradable equity

The items above should form an executive summary to the superior strategies for business plan and strategy document, together with a financial summary, to use as a preliminary document to start to assist the Company.

IPO PROCESS – PHASE 1 – STRATEGIC ISSUES

Strategic issues:

• Business Plan and Strategy
• Rationale for an IPO
• Capital Structure and Debt Financing
• Intentions of major shareholders post listing
• Issue size and structure
• Timing
• Advisors
  • Nomad
  • Legal
  • Accountants
  • PR
  • Registrars

Indicative AIM flotation timetable

The Advisors

IPO PROCESS – PHASE 2 – PLANNING

Planning:

• Corporate Structure and domicile
• Financial Track record
• Dividend policy
• Board Structure and Corporate Governance
• Incentivisation Schemes
• Employee Participation
• Project Timetable

DUE DILIGENCE

• Financial Modelling
• Long Form report
• Commercial due diligence
• Legal due diligence
• Prospectus Drafting
• Shareholder Agreement
• Underwriting Agreement
• Lock up undertakings
• Roadshow presentation

We will guide you in the selection of the relevant professionals who can provide relevant services around the above activities

COMMERCIAL AND FINANCIAL DUE DILIGENCE

• Detailed operational, commercial and strategic plan for the business
• Business development opportunities
• Detailed budgets and forecasts

At this preliminary stage this only needs to be provided at a high level and in summary form

LONG FORM REPORT

• Nature and scope of business
• Adequacy of accounting systems and internal controls
• Past record of forecasting of results and working capital requirements
• Appropriateness of accounting policies

SHORT FORM REPORT

• Financial Statements and Cash flow for 3 years
• Accountants to confirm that accounts are fair and reasonable

WORKING CAPITAL REPORT

• Statement is required in prospectus / admission document that company has sufficient working capital for the next 12/15 months
• Detailed review of monthly working capital requirements and compliance with relevant covenants together with sensitivity analysis

Not required at this preliminary stage

SHORT, MEDIUM, LONG TERM THE PROS/CONS OF DIFFERENT SCENARIOS Of AN IPO

Short Term (PROS) 18 Months

• Providing access to Capital for growth – Raise finance for further developments as Company grows
• Placing an objective market value on the Company’s business
• Increasing the Company’s ability to make acquisitions (Available Currency)
• Create a market for Company’s shares and broadening the shareholder base
• Encourage Employee commitment and incentivising their long term motivation e.g. share options
• Creating heightened public profile
• Always under promise and over deliver

Short Term (CONS)

• Dealing with increased disclosure and greater Regulatory obligations
• Additional costs associated with new audit fees, investor relations, NEDs, etc.

Medium Term 3-5 years

• Stable Management team pulling in the same direction
• Stay focused on Plan
• Maintain momentum – with shareholders following IPO
• Be transparent – To obtain the long term support of all shareholders
• Consistently meet the delivery or growth plan
• Do not become obsessed with share price

Change Board / Chair at what point and why?

Long Term 5 year +

Investors looking for:

• A committed and experienced management team
• Commitment to strong corporate governance procedures
• A viable Corporate Culture
• Sustainable Competitive position
• Growing business operating in an expanding market, locally and / or internationally
• Visibility and quality of earnings
• In summary: Quality, Good Governance and Value

HOW TO ENHANCE SHAREHOLDER / STOCK VALUE

• Once transformation into a Public Company is complete, it is just the beginning, and company then needs to meet the ongoing obligations of public markets
• Management needs to execute strategic initiatives and transactions
• Invest in good people and continue to evaluate the performance of the Board and management team
• Under promise and over deliver – Turnover, Profits, etc.
• Engage with investors effectively through a clear communication plan
• Manage Risk and Promoting good Corporate Governance , will add value
• Do not over-value the business. This is less important at IPO time.

WHAT ARE THE PITFALLS WHICH CAN RESULT IN A FAILED FLOTATION AND HOW TO AVOID THEM

• Management – Comply with rules, culture, etc
• Need to be sensible when valuing Company
• Investors will not invest in Companies where the Revenues or Assets are not substantiated
• Need a clear vision with credible management team committed for the long term
• Cannot raise all the funds needed
• Down turn in economy and stock market
• Fraudulent information
• Intellectual Property Rights – issues relating there too

FINANCIAL DUE DILIGENCE

The Business Plan prepared by the Company

• Detailed operational and strategic plan for the business
• Business development
• Detailed Budgets and forecasts

Long form report prepared – by the reporting accountants who records the results of the financial due diligence

• Nature and scope of business trends
• Adequacy of accounting systems
• Forecasting, working capital, accounting policies

Short Form Report

• 3 year Financial statements (Audited)

Working Capital Report – 18 Months

Legal including verification of, Material contracts, Underwriting Agreements

WHAT ARE THE CORPORATE GOVERNANCE, RISK MITIGATION?

RISK MITIGATIONS (who is responsible for reviewing Risk mitigation issues)

• Auditors
• Reporting Accountants
• Lawyers
• NOMAD (Nominated Advisors)

All above would assist in ensuring that the information is correct and ensure due care with risk mitigation

The end result being the admission document which is the responsibility of the NOMAD to the Stock Exchange, ensuring everything is correct and verified.

STRUCTURE AND REQUIREMENTS OF AN EFFECTIVE BOARD

Well functioning Board is led by the Chairman

CORPORATE GOVERNANCE FOR GROWING COMPANIES

WHAT ARE THE OBJECTIVES OF CORPORATE GOVERNANCE?

Corporate Governance is the system of processes, activities, standards and reporting to facilitate and deliver growth in long term shareholder value by reducing risk while maintaining a flexible, efficient and effective management framework within an entrepreneurial environment.

It represents a dynamic relationship between shareholders, the Company and the Directors, influenced by a number of external factors including regulation and social responsibility.

It reduces the risk of uncommercial and inappropriate bad decisions being made.

SUPERIOR STRATEGIES FOR BUSINESS GROWTH: QCA Code

THE PRINCIPLES OF THE QCA CODE

• Establish a strategy and business model which promotes long term value for shareholders
• Seek to understand and meet shareholder needs and expectations
• Take into account why the stakeholder and social responsibilities and their implications for long term success
• Embed effective risk management, considering both opportunities and threats throughout the organisation
• Maintain the board as a well functioning, balanced team led by the chair
• Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities
• Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
• Promote a corporate cultures that is based on ethical values and behaviours
• Maintain governance structures and processes that are fit for purpose and support good decision making by the board
• Communicate how the company is governed and is performing by maintaining a dialog with shareholders and other relevant stakeholders

1. WHAT ARE THE OBJECTIVES OF CORPORATE GOVERNANCE?

1. Corporate Governance is the system of processes, activities, standards and reporting to facilitate and deliver growth in long term shareholder value by reducing risk while maintaining a flexible, efficient and effective management framework within an entrepreneurial environment.
2. Corporate Governance represents a dynamic relationship between shareholders, the Company and its Directors, influenced by a number of external factors including regulation and social responsibility.
3. Good Corporate Governance should reduce the risk of uncommercial and inappropriate bad decisions being made.

2. Mandatory Corporate Governance

Mandatory Corporate Governance for larger Companies has been with us in the UK for some time now. The Cadbury guidelines were introduced in 1992 and have evolved and developed into the UK Corporate Governance Code which must be followed by all premium and listed Companies in London’s main market.

3. The corporate governance code

In terms of AIM Rule 26, the corporate governance code that an AIM Company applies, or if no code has been adopted, must be stated together with an explanation of what corporate governance arrangements that company has.

Aim Companies that do not adopt the code, normally adopt the “principles” based alternative known as the QCA guidelines, developed by the Quoted Company Alliance.

4. The challenge for many is that the QCA guidelines

Like the code, the QCA guidelines are an influence for everything that the growing Company should seek for itself, specifying good practice which should promote the development and growth which it naturally seeks. The challenge for many is that the QCA guidelines is less prescriptive in nature than the code, which therefore could present dilemmas of judgement for an inexperienced Board of Directors.

5. Corporate governance has five main underlying principles

For growing companies, corporate governance has five main underlying principles:

• LEADERSHIP
• EFFECTIVENESS
• ACCOUNTABILITY
• REMUNERATION
• RELATIONS WITH SHAREHOLDERS

6. Governance as a collective responsibility

Governance is the collective responsibility of the whole Board and the main accountability falling upon the Chairman. At its heart. Governance is about creating long term Company value, and reducing the risks that the Company faces. Corporate Governance is about making a better Company.

7. Ten operational principles in the QCA guidelines

There are ten operational principles in the QCA guidelines, which will enable Companies to deliver growth and long term shareholder value.

1. Establish a strategy and business model which promotes long term value for shareholders
2. Seek to understand and meet shareholder needs and expectations
3. Take into account why the stakeholder and social responsibilities and their implications for long term success
4. Embed effective risk management, considering both opportunities and threats throughout the organisation
5. Maintain the board as a well functioning, balanced team led by the chair.
6. Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
8. Promote a corporate cultures that is based on ethical values and behaviours
9. Maintain governance structures and processes that are fit for purpose and support good decision making by the board
10. Communicate how the company is governed and is performing by maintaining a dialog with shareholders and other relevant stakeholders

8. ADOPTION

1. How the above principles are adopted depends on the size, sector, company culture, etc.
2. The terms of complying with the QCA guidelines, the notion of “COMPLY OR EXPLAIN” must be borne in mind. For example, there is an expectation that a well governed company has at least two Non-Executive Directors on the Board. If you have two NEDs then you have complied. If you have no NEDs then you need to EXPLAIN why this is the case, and what the plans of the company is to recruit appropriate and suitable candidates.
3. It is necessary to take each of the twelve guidelines and for the Board together to take the measures needed to comply, or explain non-compliance. Each guideline requires an action plan to ensure that all twelve principles will eventually be implemented.

9. CONCLUSION

If you are planning to list your company on a public market, you should be looking at implementing corporate governance straight away. Without introducing a corporate governance regime, you will not get a listing. Also, better governance equals a higher market value.

Role Of The Non-Executive Director In Difficult Markets And Economic Uncertainty And What Keeps Him Awake At Night

1. My definition of a good Non-Executive Director is one that ensures that the business is well run but does not run the business.
2. Qualities which are needed to be a good NED:
   • Good interpersonal skills and ability to manage conflict
   • Sound judgment
   • The ability to influence through clear communication
   • Integrity
   • The conviction to say things that need saying and, as a last resort, to vote with your feet
   • To be commercially aware and to have board room experience!
3. Combined Code: The provisions of the Combined Code which sets out standards of good corporate governance, and the QCA Corporate Governance Guidelines, which assists in educating its members on best practice relating to NEDs – should be regarded as a benchmark for the standards required.
4. Other attributes and duties of a good NED:
   • The NED should be providing a helicopter view of the company and should not get entangled in the day-to-day operations.
   • He or she should be constantly challenging the MD and Executive Board by asking the apparently simple questions about the business.
   • Advise on strategy. A business without a strategy is a business without a direction or purpose.
5. In these difficult economic times and markets one reads of more fraudulent actions by companies and their executives and more hiding of price sensitive information etc.
6. For this reason NEDs should ensure more transparency with the executives, timely financial information and ensuring that internal control procedures are continually being reviewed.
7. Today, NEDs in the board room face an increasingly tough and challenging job.
8. New legislation under the Company’s Act has ratcheted up the threat of legal action. Activist shareholders are all too ready to put NEDs under fire. This has made the role of the NED even more crucial and onerous.
9. Also, the NED sits around the table on an equal footing and with the same legal obligations as those who run the company on a full time basis.
10. Therefore, in these difficult economic times the focus of the NEDs should be on the various risks facing the business.
11. There should be an emphasis on:
    • Internal controls
    • Cash management/receivables
    • Gearing of balance sheet
    • Ensuring bank covenants are not breached
    • Keeping customers and protecting markets
12. Non-financial risks should also be reviewed, e.g.:
    • Retaining key personnel
    • Litigation
    • Environmental
    • Health and Safety etc.
13. The NEDs should ensure that the Executive Team fully understands the issues of the day and that they are complying with the Board’s decisions at all times.
14. As they say you cannot beat experience and grey hair, as well as having the “scars and the T-shirt” and, hopefully, one can impart one’s experience of difficult times to the Management Teams.
15. You might know of Sir Digby Jones who was once head of the CBI. He was a Non-Executive Director of a company called I-Soft and was criticised years ago in the press. He said “We cannot be seen as Board Room policemen. NEDs can add value in so many ways but investigative policemen they are not”.
16. In my opinion there should be a balance of being a policeman – ensuring there is good corporate governance and adding commercial value to the enterprise.
17. However, no-one has yet come up with a better way of dealing with the fact that the owners of businesses – the shareholders – have to hand control over to professional managers. Therefore, if corporate governance fails, capitalism fails. We therefore need to make corporate governance work.
18. The Combined Code and Corporate Governance which sets out standards of good practice in relation to issues such as board composition, remuneration, accountability, relations with shareholders is seen in much of the world as the best model of corporate governance. The problem is not with the Code but the way it is applied.
19. Too often, people who should know better treat corporate governance as a matter of compliance with rules – but it is not. The banks that have run into trouble complied and got ticks in all the boxes – so what?
20. Good governance is a complex mix but in simple terms it is dependent on two main things-the first is Board Room behaviour – are the difficult questions being asked? Is there effective challenge or is there an over-dependence on the Management’s view?
21. The second, is making sure that the Board has a clear line of sight. If the Directors cannot see what is happening inside the business and are not getting good information, they will not know what questions to ask.
22. If the risk-management processes are not organised in a clear and methodical way then a handful of part-time non-executives do not stand much chance of overseeing them.
23. These two things, boardroom behaviour and connectedness to the organisation are inter-dependent. Therefore, there will be no real challenge for the Board Room unless the company makes it possible, which means that the Management needs to want it to happen.
24. In these difficult markets and economic times, I would like to share with you some of the concerns which keep me, as a Non-Executive Director, awake at night:
    • It is impossible for a NED to know everything about a company in an average of 26.5 days per year. The issue here is therefore how does one accelerate both industry and company knowledge?
    • As Chairman of the Audit Committee, the depth and detail of the Audit Committee Agenda and getting to grips with risk assessment is particularly challenging.
    • Geographic diversity and cultural differences in many companies gives one cause for concern.
    • Technology and security risks in today’s world is a worry.
    • Reputation risk – given that NEDs have to rely on others in the company and its control mechanisms, to keep matters under review, the fear of “what is not known” is an issue and a worry.
    • Legal proceedings against directors can result in reputational damage that can, in many cases, be irreparable. I always try to have a legal representative at Board level to advise all directors on issues as they arise.
25. There are many challenges therefore being a Non-Executive Director, especially in an economic downturn.

Although we should not be policemen, NEDs need to be more vigilant and clearly understand our fiduciary duties, and need to clearly identify major risks of the company on whose Board we serve.