Governance

A Pocket Guide For New Board Directors

Each year more talented young men and women from the UAE and the Arabian Gulf Region are being invited to join boards of directors. However, without previous experience, newly appointed directors are not always sure how to add real value and contribute to the success of a company or organization from their new seat at the boardroom table. This is particularly the case for those transitioning from executive management to board level for the first time in their careers.

With that in mind, the following five guidelines on the best ways to make a positive effect could come in handy for those considering accepting their first board appointment:

1. Choose Wisely

Just because you have been offered a seat on a board does not necessarily mean you should accept it. Before joining any board, ensure that you have the necessary skills, experience and level of interest to add value to that particular organisation. That could mean expertise in the sector relevant to the organisation or qualifications in a particular discipline, such as law or finance, which it could benefit from. According to a survey of more than 800 board directors published by PwC in September, “financial expertise” was the most important asset a potential new director could bring to the table, ahead of relevant industry knowledge. That said, it is increasingly recognized that the best boards are those which encompass a variety of disciplines which can offer a depth and breadth of insight, perspective and experience that non-diverse boards cannot. When I mention diversity, I’m addressing more than age, ethnic and gender diversity, but also competencies, philosophies and life experiences as well, and so keep this in mind while assessing your value-add to the board of a particular organization.

2. Do Your Homework

Be sure to gain as much knowledge as you can through reading, researching and talking to other directors in order to gain a complete understanding of the organisation in question and its related industry sector. In particular, you need to be aware of the external risks and trends that could impact this organisation in the future, in order that you can ask the right questions and make informed contributions during board discussions. As a new director you will undoubtedly have some catching up to do, but on the positive flipside you will be uniquely placed to bring new insights and fresh ideas into the room.

3. Understand Your Obligations

There is no such thing as a free lunch, even for board directors. According to the US-based National Association of Corporate Directors, directors of public companies spent an average of 219 hours on each board they belonged to last year. That is more than a month’s work in regular business hours!

Board directorship also carries important legal responsibilities. For example, the UAE’s new draft Commercial Companies Law – published in May last year and expected to come into force soon – contains penalties of Dh500,000 and higher for board directors that engage in practices such as misrepresenting a company’s true financial position or disclosing confidential information. It is therefore important that as an aspiring board member you are well aware of what is to be expected of you, and in all cases you should request to see and review the organisation’s board of director’s governance handbook, which should include most of this information.

4. Ask The Right Questions

According to a report on board leadership published by McKinsey in February, corporate governance suffers most when board directors “spend too much time looking in the rear-view mirror and not enough scanning the road ahead”. As a new director it is important for you to help identify risks on the horizon and scrutinize company strategy to ensure it is built to withstand both foreseeable and unforeseeable events. Challenging the assumptions of senior executives and experienced board members can be intimidating for new directors, but spirited discussion at the boardroom table is preferable to allowing untested strategy to fall victim to the less forgiving forces of the market.

5. Draw Upon All Of Your Knowledge

Think hard about all of the diverse insights and experience that you can draw upon and don’t underestimate the value of a youthful perspective. For example, according to PsC’s survey, 41 per cent of directors say they were “at least moderately engaged in overseeing the company’s monitoring of social media for adverse publicity”, compared to 31 per cent in 2012. As the importance of social media, and other digital platforms, to corporate reputation continues to rise, younger directors may increasingly find themselves at an advantage in the boardroom having grown up around these technologies.

Serving on any board is both a privilege and a rare opportunity to develop your skills, experience and perspective. As higher numbers of qualified Emiratis enter the workforce and begin their careers, it is likely that many of them will be invited to join the boards of public and private enterprises in the future. Above all, the most important thing for new directors to understand is that directorship should not be viewed as a destination in your career, but as a new stage that brings with it both significant rewards and responsibilities.

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