Further questions for UK Boards:

Following on from our brief article published on 12 September 2017, on “Questions for UK Boards”, we have the some further questions for UK Boards:

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If the FRC maintain or assert that you have to act with Entrepreneurial Leadership, (see this Guidance-on-Risk-Management-Internal-Control-and-Related-Reporting document for the background or our first article) how do you reconcile this with your ‘General Duties of Directors’ as required under section 172 of the Companies Act 2006:

The Act states:

Section 172: Duty to promote the success of the company

 (1) A director of a company must act in the way he considers, in good faith, would

be most likely to promote the success of the company for the benefit of its

members as a whole, and in doing so have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term, [our emphasis]

(b) the interests of the company’s employees,

(c) the need to foster the company’s business relationships with suppliers,

customers and others,

(d) the impact of the company’s operations on the community and the

environment,

(e) the desirability of the company maintaining a reputation for high

standards of business conduct, and

(f) the need to act fairly as between members of the company.

Focusing specifically on sectiom 172(1))(a) (as highlighted above):

  • What factors or methodolgy do you consider as part of the ‘likely consequencesconsideration that you as Board member must apply in the decision-making process?
  • Do you apply or depaly some form of risk-based   assessment methodology?dice-tax

This is not a check box exercise, however, you need to reconcile the general duties with being entrepreneurial, within the context of the Companies Act and Corporate Governance principles, right?

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Do you have a tool, methodology, process or mental model to apply in order to assess potential scenarios and outcomes?

In the next article in this series, we will draw on inspirartion from the Value-Based Management school of thought on applying a bit more science and rigour to decsion-making and balancing ‘duties of care’ with exploring your inner Entrepreneurial spirit.

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©2017 Rohan Badenhorst

Questions for UK Boards

Subject area: “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting”

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In the very eloquently and succinctly FRC (Financial Reporting Council) titled guidance paper called “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting” (FRC, September 2014), setting out the background to the paper and guidance, we came across this interesting turn of phrase: “…to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed” [our highlighted words].

 

Therefore, according to the FRC they expect Boards of all companies, subject to this code, to be ‘entrepreneurial’?  Just stop and think for a moment whether every single Board meeting you attend as a director of a public or private limited liability company has an element of entrepreneurial spirit in its proceedings or on the agenda.  If not, why not?  This very seemingly austere, formal (and formulaic) governance process should be married and reconciled with being entrepreneurial…?

How do we foster and encourage this ‘status quo’ challenging or disruption creation spirit in formal settings like board meetings; or is it only in the execution or the executive director’s duties that they display this ethos?  And what about the Non-executive directors? What is their role in fostering the ‘entrepreneurial leadership’?

 

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The background paragraphs go on to state that “Good stewardship by the board should not inhibit sensible risk taking that is critical to growth.”

Therefore, the counter balance to enthusiastic entrepreneurialism is therefore a measured risk-based approach in underpinning that growth target strategy?

Do you have a framework or measured risk-based approach or methodology in place to serve as the bedrock of your strategic management processes?  If not, where do you start?

©2017 – Rohan Badenhorst