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IoD Research Finds New State Board Appointments Process Delivering Tangible Improvements, But Challenges Remain

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70% of State board members say the appointments process is fair and transparent compared to just 26% of the same opinion in 2012

  • 65% say new regime has increased transparency and improved confidence in the appointments process to State boards

  • 77% consider their State board to be sufficiently diverse

  • Almost two thirds of State boards have achieved the 40% gender target

  • Over half say that there are areas where their board requires additional training

  • A third want more defined independence for State boards from the political system

  • 68% of State board members consider remuneration unreflective of work involved

One year on since the publication of new guidelines relating to the appointments process to State boards, an IoD report released today, State Boards in Ireland 2015 – Views from the Boardroom Table, has found that a majority of State board members now believe the process of appointment is fair and transparent and that the involvement of stateboards.ie has had a positive effect on improving confidence in the appointments process.

The report follows earlier research carried out by the IoD in 2012 with its members serving on State boards and examines the appointment and selection process, skills, diversity and training as well as board performance and political influence.

There has been a significant shift in attitudes around transparency in the appointments process with 70% of State board members now of the view that the process is fair and transparent, compared to just 26% in 2012. Views on whether State board vacancies are advertised widely enough have also changed considerably with just 27% of the view that they are not advertised widely enough, compared to 64% in 2012.

Is the new regime working?

Almost two out of three (65%) of those surveyed believe that the Public Appointments Service’s role in advertising and shortlisting candidates for State boards positions, through stateboards.ie, has increased transparency and improved confidence in the appointments process to State boards in Ireland, and over half (53%) of directors surveyed who have applied for a State board position through stateboards.ie consider the process to be either ‘excellent’, ‘very good’ or ‘good’.

There has also been a decrease from 65% in 2012 to 41% in 2015 in those who indicated that they were they were appointed to their State board position through a direct approach by the Minister / Minister’s representative, while 31% applied via the Public Appointments Service. It is hoped that this trend will continue in the coming years, as the new process of appointments to State boards becomes more established, and legacy issues that may remain on some boards are addressed.

Some concerns regarding the new process do, however, remain and, in further commentary provided, respondents highlight issues regarding the fairness and transparency in the final stages of the process, specifically at the point when a shortlist of candidates is provided by the Public Appointments Service to the relevant Minister for consideration, and delays in the time period between shortlisting candidates and their ultimate selection and appointment by the Minister.

Skills and diversity on State boards

Over 3 in 4 (77%) of those surveyed consider the State board on which they sit to be sufficiently diverse compared with under half (49%) in 2012. A significant majority (83%) also consider their board to have the right mix of skills, knowledge and experience, compared to 51% in 2012. Looking specifically at gender diversity, almost two thirds (65%) of respondents say that their board has achieved the 40% gender target set out in the Programme for Government.

Board diversity, not limited to gender diversity, brings a range of perspectives to discussions, helping to avoid group-think mentality, and it is encouraging to see positive developments in this regard.

Many respondents did, however, outline concerns regarding vacancies on their boards which have resulted in significant skills gaps in certain areas and this is possibly linked to the time delays identified in the final stages of the new appointments process. Board vacancies can have a considerable negative impact on overall board performance and such vacancies should be identified and addressed through proper succession planning to limit the effects of such gaps in skills and experience.

“It is extremely encouraging to see that within a year of the introduction of the much heralded appointment process that significant positive experiences are being felt. The effects of the new guidelines on State board appointments announced by Minister Howlin last year appear to be filtering through and resulting in real change in the composition of State boards in Ireland and their overall performance,” commented Maura Quinn, Chief Executive, Institute of Directors in Ireland.

She continued: “However, there are still areas for improvement, especially in terms of addressing succession issues for board appointments in a timely way to avoid board positions being left vacant and perceived time delays in the final stages of the new appointments process in Ministers ultimately selecting and appointing candidates.

It is vital that these issues are given due consideration during the review process of the new regime, which the Government has committed to undertaking eighteen months following its commencement.”

Training and development needs

While 89% of respondents say that they received adequate induction training on their appointment to the board and two thirds (66%) of directors surveyed have themselves undertaken formal director training, only half of respondents say that there are comprehensive training programmes available to all board members to refresh their knowledge and skills. Just over half (51%) of respondents also say that there are areas where their board requires additional training / development, especially in areas of general corporate governance, best practice in board roles and responsibilities and the legal and governance responsibilities of directors.

It is concerning that over half of respondents have identified such key areas for further training / development and State boards would greatly benefit from a more formalised approach to training opportunities for board directors, especially given the codification of directors’ duties for the first time under the Companies Act 2014, and the benefits that such training would have on the overall performance of the board.

Board performance, political involvement and remuneration

When questioned about the level of political involvement in relation to the operation of State bodies, 93% of respondents believe it to be at an appropriate level and are satisfied that there is no undue influence from Government, compared with 82% in 2012. 9 in 10 respondents also consider that their board communicates effectively with the relevant Minister / department.

One third (33%) of respondents, however, do not believe that there is sufficient defined independence from the political system for boards of State organisations in Ireland with further commentary suggesting that their dependence on department funding and expenditure decisions can inhibit the board’s independence and ability to make decisions quickly.

Over half (53%) of respondents do not believe that there has been sufficient rationalisation of State agencies during the Government’s term in office and opinions also diverge on the effectiveness of the Code of Practice for the Governance of State Bodies 2009, with over 2 in 5 respondents (42%) either unsure or consider the Code to be unfit for purpose in terms of providing guidance on best practice.

With regard to remuneration for non-executive directors on State boards, views are far more defined, with over two thirds (68%) of respondents of the view that remuneration is not reflective of the work involved. This represents an increase from 54% since 2012. Time commitment, reputational risk and work levels involved were cited by many respondents as the primary reasons for this.

Commenting further on the findings, Maura Quinn said: “While those who serve on State boards rarely do so solely for financial reward, it is a concern and not surprising to see an increase in those who consider the fees paid as being unreflective of the level of work involved. The extent of public scrutiny of State boards in recent years following failures in transparency in how appointments were made is likely to have influenced this and it is hoped that as the new regime becomes more established, that public trust in the process will be increased.

“There is also clearly room for improvement in other areas of how State boards operate and from a governance perspective it is clear that many State board members would welcome the revision of the Code of Practice for the Governance of State Bodies, which was signalled by the Government to take place this year. It is essential that State boards have a solid road-map to use as guidance on best practices and we very much welcome the proposed review and hope that the Code remains a ‘living document’ which is regularly updated and evolves in tandem with best practice in governance.”

Download the Report