Deloitte Africa Chair of the Future Forum - How Chairs can be impactful against the backdrop of the pandemic era 8 April 2022
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Deloitte Africa Chair of the Future Forum How Chairs can be impactful against the backdrop of the pandemic era 8 April 2022
Emerging governance hot topics
ESG / Diversity &
Sustainability Remuneration
Inclusion
Stakeholder- Individual Hybrid
Culture centric accountability meetings
governance
Reform and Corporate
increasing Function
purpose and
codes and enhancements
societal
regulations impact
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 2Why bother
Outcomes of effective board leadership and governance
1
The ‘right’ culture
Decisions are made and people demonstrate and experience behaviors which align to
the organization’s vision, mission, strategic priorities and stated values
Ultimately, the achievement of these three outcomes
results in the organization being: 2
• Trusted – the organization is perceived by its Good performance and continuous improvement
‘owners’ and wider stakeholders to be capable,
Successful achievement of strategic objectives and delivering the right outcomes for
reliable and as acting in their best interests
owners and stakeholders. Focusing not only on short term targets but on driving long
• Sustainable – operating in a way that safeguards term sustainable performance improvement in the Kingdom of Saudi Arabia
precious resources long into the future
3
Effective control
Robust systems and processes to manage risks within an agreed risk appetite
framework. Protecting the organization’s facilities, resources and capital, and
safeguarding people’s safety where necessary
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 3The 3 roles of a board
The time a board spends in each of these roles depends upon the statutory and legal context within
which it is operating and the lifecycle of the organization…
1. STEWARDSHIP 2. OVERSIGHT 3. ACCOUNTABILITY
• Provides strategic leadership to help ensure that the • Works to ensure it is properly informed in a timely • Engages proactively and meaningfully with owners
purpose, vision and mission of the organization are fashion and stakeholders
clear and owned
• Seeks assurance from management • Openly and clearly explains the direction,
• Defines and visibly role models the values of the performance and conduct of the organization
• Holds management accountable
organization and proactively develops its culture and
• Openly and clearly explains the impact that the
furthers its sustainability • Monitors compliance with obligations at various
board has had and the effectiveness of its
organizational levels
• Helps build a highly effective management team governance arrangements.
• Oversees the risk framework and major risks
• Engages in self-evaluation, learning and development
• Helps to ensure governance arrangements are
• Advises on locally and culturally accepted norms and
effective and adhered to.
practices
• Helps to develop effective governance
arrangements.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 4Board Impact Framework
There are 4 levels of board impact, with level 2 only being achieved by the most effective boards…
Level -1 Level 0 Level 1 Level 2
The board consumes a lot of time and The board simply ratifies what The board is effective in its oversight and In addition to being effective at oversight
resources, distracting management from management put before it and adds little accountability role; stopping bad things and accountability, the board is effective
doing valuable work or no value from happening in its stewardship role; enabling great
things to happen
• There are lots of requests by the board for • There is little or no scrutiny by the board • Management know that they will be • There are clear examples of executive
further information and analysis that do not and its committees and/or the quality of effectively and constructively held proposals changing for the better as a result
add value, require a lot of time and scrutiny is poor. accountable so they prepare well for board of board-level dialogue.
resources to service and restrict and committee meetings.
• Most, if not all, agenda items requiring a • The board spends most of its time focused
management from moving forward.
decision by the board are approved first • The board is predominantly focused on on matters of stewardship, including
• Without just cause, the board is heavily time. There is also an overreliance on performance against KPIs and operational organizational purpose, direction and
focused on operational detail and is overly approving board business via email. risks, as well as matters of compliance, strategic execution, appetite for risk,
directional, therefore, blurring regulation, and control. sustainability, culture, and talent.
• The engagement that the board has with its
accountability for results.
owners and stakeholders is minimal and • Board and committee agendas are shaped • The board sets its own agenda with support
• The style of some board members is tends to be reactive and defensive. by management with minimal or no input from management.
combative, resulting in executives not being from board members.
• There is poor attendance at board meetings • The board and executives work respectfully
transparent with the board and appearing
by some board members and/or board • Management describe a hierarchical together, with executives seeking advice
defensive in meetings.
meetings are cancelled at short notice. relationship with the board; a strong sense and helpful connections from board
of ‘reporting to’ the board. members outside of formal meetings.
• Relationships with stakeholders and owners • The board is visible and proactively engages
are good but tend to focus mainly on with owners and stakeholders, including
reporting against KPIs, risk management management, to determine strategic
and mandatory updates. priorities and to seek their feedback on how
governance can be improved.
• The board has informal ‘retreats’ and ‘away
days’ with good attendance and
engagement from board members.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 510 characteristics of high impact boards
High impact boards…
…are led by highly effective chairs who are meaningfully engaged and
1 committed to the business, have excellent interpersonal skills and enjoy a
healthy relationship with the CEO
… are mindful of, and seek to manage, various board-level polarities 6
…focus on their role and regularly reflect on their effectiveness, including
2 having honest conversations about the impact they are having on the business
and beyond (primarily via the c-suite)
…receive robust assurance from the board’s sub-committees in relation to
‘operational oversight’ 7
…are diverse, inclusive and cohesive as a group. Board members spend …have sufficient exposure through formal and informal channels to those who are
3 sufficient time together outside formal meetings and experience the board as a
safe place to be
‘running the business’, being impacted by the business, and to whom the board is
accountable
8
4 …understand that the board cannot be effective unless each individual board
member is also effective in their role as a corporate director
…have members that consistently reflect on how they know what they know, are
aware of what they don’t know and do not lose sight of important matters 9
…have an agenda that is predominantly focused on what really matters to the …have a CEO who regards the board as a valuable source of experience, insight
5 business, including discussing why the business is successful. The agenda
allows for iterative dialogue
and foresight and provides unfettered access to information, executives and the
wider business
10
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 6Deloitte Impactful board members
Board members that have a positive impact of their boards, and consequently their organizations, Business
credibility
exhibit all 3 of the key attributes set out in the framework below:
Contextual Personal
understanding style
Contextual Business Personal
understanding credibility style
The board member has a good understanding of the The board member is highly competent and credible. The board member has the right character and is emotionally intelligent.
business and the context within which they govern. They… They…
They… • have expertise in an area that is aligned to the • are approachable, visible and civil
• invest sufficient time getting to know the organization, purpose and vision of the organization, as well as the • embody the values of the organization and are passionate about their role
the people in it and the sector or sectors it operates in opportunities and risks that it faces and the business
• are knowledgeable about the core business, including • understand the principles of corporate governance, • operate with high integrity and authenticity, including having the courage
the key products and services offered and the the role of a board and their responsibilities as a board to speak out even if they are the only dissenting voice
organization’s sustainable and competitive positioning member and how to discharge these effectively • are objective, impartial, selfless and are not overly concerned with their
• understand how the business is structured and • are forward looking and do not delve into operational own reputation
operates, and have a good sense of the prevailing detail without justification • actively listen to what is being said and ask questions rather than make
culture and leadership style of the organization • engage positively and actively across the entire statements or tell people what to do
• work from where the business and market is at spectrum of board business, not just their own area of • are able to communicate concisely and clearly using minimal jargon
currently rather than from where they believe the expertise
• know when to trust and support management and when to challenge and
business should be based on their previous • are well networked and can draw on their network hold them to account
experience. They understand, and are sensitive to, the when needed for the good of the organization.
• regard failures as an opportunity to learn and do not seek to blame people
national culture and local customs
• are appropriately persistent and determined until they are assured
• understand the regulatory, legislative and geopolitical
environment within which the business operates • know that they do not have to say something on every subject or repeat
what others have already said
• know who the key stakeholders of the business are
and consider them appropriately in decision making. • actively champion board decisions, even decisions that they may not
entirely agree with.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 7Appendix: © 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 8
Diversity & Inclusion
Companies recognize their responsibilities in not just focusing on diversity but in also influencing an inclusive culture
Client implications
Diversity refers to the presence of people who, as a group, have a wide range of characteristics
to include: skills, experience, gender, independence, age, geography and ethnicity.
• Companies are focusing on increasing
Inclusion is about creating an environment in which all individuals feel valued and connected diversity at the board, C-suite and employee
levels through a series of initiatives and
setting quotas
• Increased time on the Board and Executive
agenda on the topic
Main drivers • More engagement with stakeholders and
investors regarding the company’s goals and
• Historical lack of diversity in the Boardroom policies on Diversity and Inclusion
• In the UK, the FCA is currently considering amending listing rules to require disclosure of Board gender
diversity 1 • Seeing targeted programmes and training
aimed at specific groups of individuals to
• Starting to see an increased focus on racial and ethnic diversity.1
increase diversity at senior levels
• Board diversity and inclusion can lead to better decision making and financial performance 2
• Government issued reports e.g. Better Balance, Parker Review, Hampton Alexander etc. • Need to introduce metrics and reporting to
• Focus on pay equity is increasing e.g. gender pay gap (e.g. UK, France) and gender representation at a provide gender pay disclosure.
senior level (e.g. France, Norway)
• Investors and regulators expect material improvement in disclosure.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 9Stakeholder-centric governance
Organizations are now expected to consider all stakeholders in its decision making
Client implications
The traditional view is that companies are managed in order to maximize shareholder wealth. Over
the last few years, there has been a shift towards stakeholder-centric governance, whereby
• Board seeing importance of stakeholder
management are now expected to consider all of its stakeholders when making decisions 3.
mapping - setting out expectations and
ownership for engaging with stakeholders
• Increasing levels of engagement between the
Board, Executives and employees
• Companies are shifting their focus on
Main drivers improving disclosures of stakeholder
engagement
• The rise of corporate social responsibility is growing in tandem with stakeholder-oriented governance
• Boards are expected to be able to consider
and disclosure
various stakeholders (to include employees,
• The UK Corporate Governance Code and section 172 UK Companies Act: “director of a company must suppliers, customers and the community) as
act in the way he considers, in good faith, would be most likely to promote the success of the company part of decision-making
for the benefit of its members as a whole...’
• Development of tools to support board
• Continuous failures in governance - Wire Card, Carillion, Sports Direct decisions - cover sheets, reporting
• The COVID-19 crisis has accelerated the shift improvements.
• There is an increasing level of public interest and expectation is that companies will work benefit
employees, customers, investors, supply chain partners, and the broader community.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 10Individual Accountability
Individual Accountability has become a regulatory focus area around the world as a result of the global financial crisis and
subsequent string of misconduct episodes
Client implications
Governments and regulators around the world have introduced initiatives on Individual
Accountability, to clarify the allocation of responsibilities amongst Senior Executive Functions • Regimes often place obligations on firms and
and ensure they are accountable for conduct in their areas of responsibility. senior individuals within them to set out
clearly where responsibility and decision
making lies through statements of
responsibility and responsibility maps.
• Senior management can be held personally
accountable for any breaches, if they did not
Main drivers
"take reasonable steps" to prevent or stop the
breach.
• Accountability has been a hot topic for international regulators for many years and there has been • Some countries have introduced prescribed
increased public interest in the area
responsibilities and new conduct standards
• A common complaint has been that too few senior executives have been held personally accountable which need to be implemented.
for management failings. Examples of scandals – mortgage rates, PPI mis-selling
• The introduction of new conduct standards
• Prevent senior individuals from hiding behind collective decision-making
and certification processes
• Need to reduce the level of excessive credit and market risk taking and protect consumers
• Large scale implementation projects.
• Hold individuals to account if, and when, regulatory breaches and other failures occur.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 11Corporate purpose and societal impact
There is an increasing level of focus on the role of a business in society
Client implications
A company’s stated role in society, connected to long-term value, and how the company fulfils that
role in the communities in which it operates. • Boards and Executives clarifying the
company’s purpose in a statement
• Activities to link purpose to culture – strategy
and risk management
• Business leaders to focus on the social and
environmental issues that most affect
Main drivers business performance
• Companies are integrating management of
• Increasingly, investors, regulators and wider stakeholders expect organisations to consider the impact material issues into core business processes
of the organisation on wider society. For example BlackRock’s ‘Dear CEO Letter’ • Companies are focusing on their reporting in
• The UK Corporate Governance Code requires company purpose, values and strategies to be aligned and order to articulate their values and assess
subject to Board oversight their core business processes
• Investors are increasingly focused on strategy and business model disclosures to understand how • Many companies are developing robust
strategy will deliver on the purpose as well what the company does to achieve its purpose and strategy processes to sense, evaluate, and manage
• Increasing reputational risks tensions over time.
• Importance of ESG and tackling climate change.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 12Company Secretarial / Governance Function
The role of the Company Secretary / Governance Function in organizations continues to evolve
Client implications
The importance and value of a strong Governance and Company Secretarial functions are increasingly
acknowledged and, as a result, expectations are also increasing with regards to performance,
effectiveness and ongoing innovation. • Strategic reviews of the function set up and
model
• Advanced technology enables Boards and
Company Secretarial functions to discharge
their responsibilities in new, more efficient
ways
Main drivers • We are seeing Company Secretary’s and their
teams take an increasingly central role in
• Decreasing cost and increasing accessibility of digital Board technologies supporting Boards and executives across a
• The COVID-19 pandemic accelerated Boards and Company Secretarial functions to adjust to new wide variety of topics (governance, strategy
meeting models and virtual / hybrid working and risk)
• Increasing expectations on Board members and the Board’s role leads to increased focus on Board
support • In order to meet increased demand for
governance services, many organisations are
• New regulations that directly impact Company Secretarial function’s mandate (e.g. GDPR, Senior
Managers’ Regime) hiring additional governance resources and
focusing more on developing talent.
• More focus on executive and internal governance
• Increasingly complexity of governance structures and globalization
• General digital and transformation trends impacting all functions.
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 13The role of the board & management
THE BOARD OVERLAPPING MANAGEMENT
ROLES
Stewards and oversees the organization
Supports and advises management Strategy
Runs the organization
Focuses on the longer-term Risk management
Focuses on execution and implementation
Has a fiduciary duty Decision making
Submits adequate & timely information
Approves policies Accountability
Implements appropriate systems & controls
Manages succession planning Conscience of the organization
Focuses on the short/ medium term
Manages the remuneration policy Stakeholder engagement
Maintenances adequate records
Holds management accountable
Manages auditor relationships Reviews performance of senior management
Manages IT governance, risk & compliance
Recruits and manages CEO performance
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 14Board effectiveness framework
• BOARD LEARNING AND EVALUATION – the • BOARD COMPOSITION AND TALENT – the board
board as a whole, and individual board has the right balance of skills, knowledge and
members continually review and reflect experience to govern effectively given the
on their performance, both formally and organization’s purpose, strategy and operating
informally, and can evidence environment. Board member tenure and
improvements as a result. succession planning is kept under review. Each
• CHAIR LEADERSHIP – The chair is an board member has a positive impact on the
effective leader of the board and is performance of the board.
supported by effective governance
leadership from committee chairs and
Legal & • STAKEHOLDER ENGAGEMENT – the board
communicates and engages effectively and
leadership from the CEO. Statutory transparently with its ‘owners’ and internal and
• BOARD TONE AND DYNAMICS – Board Context external stakeholders on a regular basis.
members operate effectively as a team, • GOVERNANCE STRUCTURE – the board has
striking the right balance between trust effective and efficient structures and
and challenge. processes, and clear documentation to support
• BOARD REPORTING – the information discussion and decision making .
received by board members is • BOARD AGENDA AND FORWARD PLAN – the
comprehensive, accurate, easy to board’s agenda and forward plan ensures that
understand, timely and relevant. board members are focusing on the right areas
at the right time .
© 2022. For information, contact Deloitte Touche Tohmatsu Limited. Deloitte Africa Chair of the Future Forum 15Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 334,800 people make an impact that matters at www.deloitte.com. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. © 2022. For information, contact Deloitte Touche Tohmatsu Limited.
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