Boardroom standards in Britain have been under scrutiny since the recession when a flawed corporate culture was held at least partially to blame for the downfall of the economy and some very large companies.
And despite the extra focus on boardroom standards, it appears there is still a lot of work to be done, with the current Co-op situation acting as a timely reminder of the need for strong corporate governance.
It has been suggested that the most significant problem with many boards is their lack of diversity. Particularly in the financial sector, boards tend to be made up of mostly men, from similar backgrounds, which lead to a ‘groupthink’ mentality, making them more likely to take risks.
In comparison, diverse boards, made up of candidates of both genders, from different backgrounds, are more creative and innovative, tend to take fewer risks and have better debt to equity ratios. As such, there is significant evidence that diverse boards are more successful, with a report by the Credit Suisse Research Institute showing that companies with women board members outperformed comparable businesses with all-male boards by 26% worldwide over a period of six years.
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Other barriers to board effectiveness include a poorly functioning committee structure, an inappropriate culture, competence gaps, no strategic plan and the fact that boards are often just too large or too small to be fully effective.
In the wake of the financial crisis, a growing number of businesses have recognised that their board suffers from one or more of these issues and have taken steps to address them.
The Leadership 21C programme launched by the Financial and Legal Skills Partnership now provides such companies with guidance and solutions to help improve the quality of their board, based on a series of Statements of Good Practice for Board Effectiveness. The programme has also led to the development of a self-assessment tool to enable all firms to quickly measure themselves against the industry good practice benchmark.
These statements and toolkits were established through work with trade associations, regulators and those from the public and private sectors.
As previously stated, one of the most significant challenges facing boards is ensuring that they are diverse and include the right mix of people.
In 2011, Lord Davies published a report looking at the diversity of UK boardrooms, recommending that all FTSE 100 boards should aim for a minimum of 25% female representation by 2015.
The most recent progress report from the Cranfield School of Management shows that women now account for 19% of FTSE 100 and 15% of FTSE 250 board positions, the highest number since 2009. However, there is still much work to be done, with just 18% of FTSE 250 companies having a clear boardroom diversity policy, despite 82% recognising the need for greater diversity.
To guarantee that the target is met, companies need to try and overcome a number of the barriers which prevent women from reaching the boardroom, including the burden of trying to combine work with responsibilities at home and the reticence of some women to put themselves forward for roles.
As part of the Leadership 21C programme, the Financial and Legal Skills Partnership has launched courses aimed at encouraging boardroom diversity by creating a strong talent pipeline of people with the right skills to progress to board level.
The Through The Glass Ceiling course is aimed at women and equips attendees with the skills and knowledge they need to work their way up to the top of a company.
Sarah Thwaites is acting CEO of the Financial and Legal Skills Partnership