Monday, 20 April 2020

Independent Board

Different Ideas and Visions

Hamid-Reza Khoyi writes:

More and more SME companies decide to have independent board members on their board. An independent board member brings different ideas and visions from any shareholder representatives.

It is essential to choose the composition of the board well, so that you can have people from different backgrounds to benefit from. This allows you to make the most of the different knowledge and sensitivities within the board during discussions. A move that could be fundamental and successful.

Another very important aspect in the composition of the board, is to choose members who have enough time to devote beyond their competence. Time not only for ordinary activities of normal administration, but especially in situations of crisis / difficulty. In these situations, weekly meetings and daily telephone conferences are not the exception and could make a difference.

First Tasks of the Independent Board

One of the first tasks of the board is to develop and understand the strategy and vision of the shareholders.

This must be integrated with stakeholders' expectations in order to be able to consider all parties equally and develop a corporate strategy with the right balance between shareholders' and stakeholders' expectations.

The above must be integrated with a careful risk analysis, which will determine the strategy and measures to be implemented by the Board of Directors. It should be remembered that the Board of Directors is the responsible body of the company.

On a practical level, I would like to point out that it is important to plan the meetings of the Board of Directors well, planning them over a 12-month period and if there are specific and recurring issues, such as the preparation and approval of the Budget, as well as the annual accounts, to foresee them in the planning of the meetings over the year. Each and every meeting of the Board of Directors must be carefully and thoroughly prepared so that all participants can arrive at the meeting properly prepared and discuss the various issues in an efficient manner and thus be able to make the necessary decisions. I strongly recommend that you always have a hardcopy of the basic documents that can be consulted at meetings, such as articles of association, regulations, annual accounts, latest minutes, etc., as well as any scheduled and/or suspended activities.

Activities of the Independent Board

Activities and suspensions shall be numbered (single numbering without reuse) and entered in the minutes and in the treaties until they are processed or cancelled.

Before or after meetings, it is always advisable to provide for a quarter to half an hour of informal and private meetings, exclusively between the members of the board of directors, i.e. without the management of the company and without the secretary. This is to allow for an informal discussion on certain aspects without the presence of the management. In particular, this makes it possible to discuss, if necessary, the role of the CEO, avoiding having to request his exclusion from the meeting and thus making it clear that reference is being made to his role, unless you obviously wish to be aware of it.

In any case, your decisions should be communicated directly to the person concerned.