The website stateboards.ie is the channel used by the Public Appointments Service to both inform the public of vacancies on State Boards and to collate expressions of interest in those roles for the Minister. The Public Appointments Service is the centralised provider of recruitment, assessment and selection services for the Civil Service, Local Authorities, the Health Service Executive, An Garda Síochána and other public bodies. The Public Appointments Service also ‘aims to provide an open, efficient and effective gateway and process to identify top quality people for consideration by Ministers for appointment to State Boards’.
There are a number of typical competencies that may be deemed relevant to a position on a State Board. However, different competencies may apply to any particular vacancy, and these will be outlined in the documentation associated with each such vacancy. The typical competencies include:
Analytical Strategic Perspective
- An ability to take a broad future focused perspective on issues
- An ability to understand and anticipate the effect of environmental and economic issues on an organisation
- The ability to critically analyse information to identify the most relevant and critical issues.
Integrity and a Focus on Governance
- A strong sense of ethics and integrity
- Has a good understanding of what may constitute or be seen as a conflict of interests and acts to avoid or address issues of conflict of interest
- An appreciation of the state and the public as key stakeholders
- An understanding of good governance practices.
- An ability to work effectively with others as part of a team
- An ability to work with people with different perspectives to identify common ground and mutually acceptable solutions to problems.
Contribution and Effort
- A clear focus on the responsibilities of their role as a board member
- A strong commitment on ensuring they add value and positively impact on the organisation
- The resilience to adapt to changing circumstances
- The tenacity to persevere in challenging situations
- Acts as a role model for Board representation
- Comfortable operating within a Digital environment.
- The ability to communicate clearly orally and in writing
- The ability to ask relevant and pertinent questions.
- An ability to understand high level financial data
- An appreciation of budgets and good financial management practice
- The acumen to manage a business effectively.
Issues to Consider
In addition, if you are considering applying for a position on a State board, it is worthwhile thinking about the following:
First and foremost, critically ask yourself if you have the skills required by the board and the right experience as set out in the specification for the role. While you may be a highly experienced executive or board member, does that experience fit with the expectations for the particular position you are applying for? Make sure to take the time to tailor your application to the requirements of the role, highlighting the areas of your career history that are most relevant.
Conflict and Challenge
As is the case with any board position, and in the interests of transparency, you should not be conflicted. If appointed, your fiduciary responsibility as a board member is to the State body, including the Government as a shareholder and, principally, the Irish taxpayer.
State board members are collectively responsible for the long-term sustainability of State bodies and non-executive board members should provide independent challenge to strategy, performance, resources, key appointments, and standards of conduct.
Ask yourself if you are willing to voice your views, to constructively challenge executive management and to robustly debate board decisions.
Prior to applying for, or accepting, a board position, it is important to consider whether you have sufficient time to devote to the role. Serving on a State board, often for a relatively low level of remuneration, can be demanding of your time, particularly in the event of a crisis whereby the board may have an active role. Attendance at board meetings is only one aspect of the role, with advance preparation, committee meetings, stakeholder engagement, and so on, all expected.
While many people on State boards are there out of public duty, it is critical that you have the time to expedite that duty effectively.
Responsibility and Scrutiny
All directors must act honestly and responsibly, with a high degree of integrity. The responsibilities of State board members are wide and varied and subject to a high level of scrutiny. It is important to assess your ability to meet those responsibilities in the interests of your personal reputation and that of the State body.
Code of Practice for the Governance of State Bodies (2016)
The publication, Governance for Directors on State Boards, produced by the IoD in association with Mazars, is based on the principles of the revised Code of Practice for the Governance of State Bodies (2016) which is ‘designed to ensure that both commercial and non-commercial State bodies meet the highest standards of corporate governance.’
Diversity in the boardroom is critical to the effective functioning of a board and to the overall performance of a business. Too financially orientated and the board may lack the sales or marketing expertise to drive the business forward. Too similar in terms of background, education or experience, and the board may have a narrow focus, potentially leading to a group-think mentality. A higher male to female ratio, or vice versa, and the board is likely to lack the gender balance needed to bring differing perspectives and insights.
When considering diversity in the boardroom and how to improve it, boards should take the following into account:
Move beyond gender
Board diversity is often viewed through the prism of gender alone. However, it is goes far beyond just gender.
Boards should be thinking about diversity in the widest sense including race, ethnicity, education, skill set, geography and socio-economic background and striving to create a high-performance environment, which is reflective and representative of the wide-ranging interests of stakeholders.
Mind the gap
The first step in addressing board diversity is to identify where the gaps lie through the development of a skills matrix. By looking at the profile of people around the board table and determining what each director brings in terms of competencies and perspectives, a board can consider what capabilities, experiences and viewpoints are lacking and what is required to provide leadership of the business and challenge to management.
Boards should aim to achieve an appropriate balance in terms of gender, skills, experience, qualifications, and so on, and that starts by critically assessing the current structure of the board. Thereafter, the make-up of the board should be regularly reviewed to meet changing requirements.
Finding the right match
When seeking to address gaps on the board, is it important to develop a profile of the ideal candidate, defining what skills and personal qualities are needed. Being clear from the outset will better position the board to find the right candidate and to make the right appointment.
Look outside the box
Fundamental to improving diversity are wide criteria for selection which look beyond the board’s own network of contacts. The process should be handled professionally and, ideally, independently, with boards using experienced search agencies who can access a wide and diverse pool of candidates.
Putting policies in place
The board, as a whole, needs to take responsibility for diversity and show leadership in driving the diversity agenda. Every board should have a diversity policy which clearly outlines its position and objectives with regard to diversity. This policy should set the tone in terms of achieving and maintaining diversity on the board and should be a ‘living’ document, against which performance is measured and reviewed on a regular basis.
Find out more in the IoD research report on Diversity in the Boardroom 2019 or, to discuss sourcing a director for your board, contact the IoD’s Boardroom Centre.
The key purpose of a board of directors is to ensure an organisation’s prosperity by collectively directing the organisation’s affairs while meeting the appropriate interests of its shareholders and other relevant stakeholders, and complying with all necessary legislation and regulation. High standards of governance, transparency and accountability are expected of all organisations, with charity and not-for-profit organisations being no exception.
Even though a board may serve on a voluntary basis, the directors, officers or trustees of charitable and not-for-profit organisations are obliged to make themselves aware of the organisation’s obligations and to ensure that it operates effectively and efficiently and that they behave with integrity. Legislation does not distinguish between those directors who are volunteers and those who are remunerated, with the same duties and responsibilities applying in terms of compliance with corporate governance requirements and legislation, such as the Companies Act 2014 and Charities Act 2009.
The Charities Regulator was established in 2014 and is an independent authority. It is Ireland's national statutory regulator for charitable organisations and a key aim is to increase public trust and confidence in the management and administration of charitable trusts and charitable organisations, and to promote compliance by charity trustees with their duties in the control and management of organisations. Furthermore, the Charities Governance Code explains the minimum standards charities should meet to effectively manage and control their organisation.
Boards of charitable and not-for-profit organisations have a role to play in contributing to the wider rebuilding of trust in Ireland’s not-for-profit sector by employing and practising the highest standards of corporate governance, relevant to the size of their organisation. Good governance practices will not only increase transparency by informing the public and funders about how the organisation is being run, but will also contribute to managing risks to the organisation, achieving goals and optimising the use of all resources.
This document outlines a number of key considerations for directors and boards of charity and not-for-profit organisations in Ireland.
The changing environment - the demand for more transparency in the not-for-profit sector
- Ireland’s not-for-profit organisations must respond to the greater public expectation for transparency by ensuring that easily accessible information is available publically on how the organisation is governed, including publishing its annual report, and listing names of board members
- Not-for-profit organisations need to be able to justify the value they create in terms of outputs, versus the inputs of salaries and administration costs. Organisations also have a key role to play in aiding public understanding of the costs associated with fundraising and administration
- Any person who consents to act as a director or officer of an organisation must be aware that they undertake onerous duties and responsibilities, and that legislation does not distinguish between directors and officers who are volunteers and those who are remunerated – the same duties and responsibilities apply
- It is the organisation’s responsibility to ensure that it identifies and complies with all relevant legal and regulatory requirements e.g. the Companies Act 2014, the Charities Act 2009.
Getting the board right - composition, skills, diversity and rotation
- Boards should be structured so that they provide a balance, not only in terms of skills and experience but also with respect to age, gender, ethnicity, background and physical abilities. The constitution of an organisation should be regularly reviewed to ensure that there are provisions in place to encourage diversity of board membership
- There should be an open and transparent process of appointment for new board members and board members should fully understand their duties and responsibilities and have a clear expectation of the time commitment that will be required, before accepting the role
- Boards should regularly examine the procedure for the rotation of various positions to allow for the introduction of new board members. There should be an established ethos within the organisation of board renewal
- Identify any weaknesses on your board, for instance, a skills gap or lack of expertise with regard to corporate governance. Such weaknesses, once identified, can be easily addressed through appointing directors who possess the required skills and through the provision of suitable training for board members, in line with the size and complexity of the organisation.
Getting the most from your board
- The role of the board will vary depending on the size of the not-for-profit organisation. However, certain matters must be addressed by the board, regardless of size:
- Defining the mission statement, ethos and constitution of the organisation
- Developing a high ethical standard within the organisation and ensuring that everyone involved acts with integrity at all times
- Encouraging a culture of openness, responsiveness and accountability
- Developing a strategic plan
- Safeguarding the organisation’s assets
- Monitoring the efficient use of resources
- Financial planning, including liaising with funding providers and identifying new sources of funding
- Encouraging the best possible service provision in line with the constitution of the organisation
- Ensuring compliance and keeping up-to-date with changes
- Setting the risk appetite for the organisation
- Communicating with stakeholders and the public – and being open and accountable.
- It is essential that all board members demonstrate active commitment and participate fully at board meetings. Board members must also have a clear understanding of the role and the responsibilities, demonstrate leadership qualities and the ability to constructively challenge other board members and the CEO. Maximising board effectiveness - training, education & evaluation
- Basic induction training should be provided to all board members and, depending on the size of the organisation, further specific training may be relevant for the chairperson and those holding sub-committee roles
- All boards of not-for-profit organisations, regardless of size, should:
- Clearly define the role of board members – including distinguishing between the role and responsibilities of the chief executive and the role of the chairperson
- Ensure that key positions such as chairperson, vice-chairperson and treasurer are always filled
- Design an induction programme for each key position and for the board as a whole
- Document the duties, responsibilities and tasks undertaken by each key position holder
- Adequately plan for succession and ensure handovers take place
- Keep an attendance sheet for each board meeting
- Circulate board papers, including the agenda, minutes of the previous meeting and management accounts in good time before meetings
- Consult with specialists, as appropriate.
- A board should regularly review and assess its performance, and that of its sub-committees, where relevant, and utilise the results to instigate positive change and innovation. More complex organisations should consider undertaking an external board performance evaluation, by an independent assessor. Keeping the board focused – strategy and risk
- The board should develop a strategic plan for the organisation and monitor and evaluate this plan annually with the CEO. The performance of the organisation should also be assessed and monitored against the strategic plan. KPIs should be developed for the achievement of the plan and for evaluating management’s performance
- Sustainability is the greatest risk facing most not-for-profit organisations. Organisations need to balance managing operations effectively and efficiently while also ensuring compliance with legislation and corporate governance requirements so that sustainability is not jeopardised
- Effective risk management is integral to good organisational management and all organisations should undertake a risk assessment which is aligned to the strategy of the organisation, on a proportionate basis.
Key questions all boards should be asking:
- Where does organisational funding come from and what are the factors which would cause it to decrease?
- What are the essential resources needed to continue to operate?
- What are the reputational risks to the organisation?
- What legislation should the organisation be complying with and what procedures are in place to ensure compliance?
- What plans are in place for board rotation and succession?
- What would cause a decrease in volunteer numbers?
- Are the demands for the service increasing and what plans are in place to meet these demands?
- What controls are in place to ensure that all expenditure is approved and valid?
- Larger organisations should undertake more detailed risk assessment procedures, focusing on the four key areas of strategy, operations, reporting and compliance
- Organisations in receipt of HSE funding must ensure compliance with the HSE Code of Governance and registered charities will need to ensure compliance with the Charities Act 2009. Organisations involved in fundraising should ensure compliance with the Statement of Guiding Principles for Fundraising. The Charity Regulator’s Guidelines for Charitable Organisations on Fundraising from the Public is also an essential reference
- Risks reviews and risk registers should be updated annually. Restoring credibility - top governance priorities for the not-for-profit sector
- Where relevant, organisations should ensure that they have completed their entry on the Charity Regulator’s Register of Charities and submitted their Annual Report
- Organisations themselves can contribute to restoring credibility by encouraging and improving on best practice operations including:Reviewing current governance practices and identifying areas for improvement
- Increasing transparency by informing the public about how the organisation is run
- Adopting the Charity Regulator’s Charities Governance Code, if not already in place
- Ensuring that the board selection process is formalised, with adequate regard for skills requirements, training and board rotation
- Training – ensuring that all board members are fully aware of the responsibilities associated with their role and receive adequate induction and training opportunities
- Identifying major risks to the organisation and determining ways of managing those risks.
The focus on tax has hugely intensified in the past number of years with a swathe of global tax changes coming from the EU and OECD. Tax is now recognised as a key risk and compliance issue in the boardroom and company boards must be able to formulate and communicate their tax strategy to all stakeholders.
Directors must be confident and capable of asking the right questions in relation to their organisation’s tax strategy and to constructively challenge the executive with regard to the approach taken.
Directors should consider the following:
- Is the agreed overall tax strategy aligned with business goals?
- Is the organisation’s tax risk appetite clearly defined?
- Is the tax strategy underpinned by:
- A tax risk management framework?
- A tax control framework to consider that all taxes are paid and filed on time in all jurisdictions and that tax liabilities are properly provided for?
- Is the audit / risk committee properly focused on tax?
- Does the organisation have a tax communications strategy for both external stakeholders and staff?
- Is the tax function adequately resourced with the right expertise?
- Is tax included in the induction programme for new board members?
- Is the organisation BEPS ready?
- Where are the value drivers located – people, risks, substance?
- Where are the global profits located?
- Do these match?
- How much tax has been paid?
- Tax disputes
- Are there any major areas of disagreement with a tax authority?
- Is the board satisfied with the way these disputes are being handled?
- Have potential tax liabilities been adequately provided for?
- Has the board considered the reputational issues?
- Does the organisation regularly review what competitors and peers are doing in relation to tax?
With an increasing number of issues coming under the board’s remit, directors are expected to have sufficient knowledge and understanding across a wide range of areas, in addition to their legal responsibilities and governance duties, and as such, to ask the right questions and interrogate their organisation’s strategies.
Our thanks to the Irish Tax Institute for providing these key tax questions for directors on the subject of tax in the boardroom. To find out more about the Irish Tax Institute visit www.taxinstitute.ie.
With businesses focused on daily operations relating to sales, finances, marketing, and so on, there can often be little time for management to devote to the bigger picture or to step back and assess the long-term strategy of the business. This is where a board of directors is invaluable to bring strategic focus, direction and objectivity.
When putting a board of directors in place, be it with a combination of executive and non-executive directors, or for smaller businesses, separating management and board meetings with the addition of one or maybe two non-executive directors, there are a number of aspects to consider to create a board that is effective and fit for purpose.
The right composition
Getting the right composition on a board is critical. A range of skills and expertise is essential to board effectiveness and to avoiding a group-think mentality. Diversity in terms of business experience, industry expertise, gender and/or professional qualifications, can broaden a board’s perspective and lead to more valuable discussion and interaction.
It is also important that the composition of the board reflects, and is sympathetic to, the needs of the company’s stakeholders, including its customers and suppliers.
Culture and dynamics
The culture of the board should inform the culture of the business. A business striving to accelerate growth, enter new markets or diversify, needs a board that can keep pace with business plans and provide the strategic direction needed, bringing specialist skills and an independent eye.
Dynamics around the boardroom table must also be considered. Does the board encourage open discussion and debate where all views are heard rather than being dominated by some individuals? The culture of the board can have a significant bearing on its performance, positive and negative, which in turn can impact the company.
Appointing the right board, with the right people in place, can have a very positive influence, often providing management with the impetus to become more strategic in focus as well as questioning some of the core assumptions of the business. The board should bring independent oversight and is expected to provide constructive challenge and robust debate. Hence, businesses should aim to find the most capable, dynamic, engaged and committed board members who are willing to ask the difficult questions. Sourcing a non-executive director should be approached as seriously as recruitment for key executive positions.
More than rubber stamping
A board does not exist merely to rubber stamp management decisions or to tick the governance box. An effective board is a highly important component of a company’s armour and management should tap into the wisdom and knowledge that a board can offer and fully leverage its expertise. For any business, the board should be an overseer of strategic activity, while acting as an advisor and a sounding board, offering insight, expertise and challenge, with the long-term interests of the business in mind.
The Companies Act 2014 sets out in statute the fiduciary duties of a director of a company that is registered in Ireland. The Act consolidates the duties and responsibilities of directors by setting out a non-exhaustive list of eight fiduciary duties owed by directors to a company.
If you are a company director, it is vital that you are fully aware of your responsibilities and have a clear understanding of your legal obligations. In addition to fiduciary duties, directors also have many other statutory duties and responsibilities.
Principal Fiduciary Duties of Directors – Section 228, Companies Act 2014
- To act in good faith in what the director considers to be the interests of the company;
- To act honestly and responsibly in relation to the conduct of the affairs of the company;
- To act in accordance with the company’s constitution and exercise his or her powers only for the purposes allowed by law;
- Not to use the company’s property, information or opportunities for his or her own benefit, or that of anyone else, unless (a) this is permitted expressly by the company’s constitution or (b) the relevant use has been approved by a resolution of the company in general meeting;
- Not to agree to restrict the director’s power to exercise an independent judgement unless (a) this is expressly permitted by the company’s constitution or (b) the case concerned falls within limited exceptions;
- To avoid any conflict between the director’s duties to the company and the director’s other (including personal) interests, unless the director is released from his or her duty to the company in relation to the matter concerned, whether by the company’s constitution or by a resolution of the members in general meeting;
- To exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both (a) the knowledge and experience that may reasonably be expected of a person in the same position as the director and (b) the knowledge and experience which the director has; and
- (As mentioned above) to have regard to the interests of the company’s employees in general and its members.
To find out more about the Companies Act 2014 and how it affects you in your role as a director, read our information updates, produced in association with McCann FitzGerald.
The fourth edition of the Directors’ Handbook, produced together with McCann FitzGerald, is now available for a fee of €10 per copy (incl. p&p). Incorporating directors’ duties under the Companies Act 2014, the revised Directors’ Handbook is a valuable resource and comprehensive guide to being a director in Ireland.
The current business environment places greater scrutiny than ever before on the actions and decisions taken by boards of directors. The onus is on all directors to ensure that legal and regulatory responsibilities are met and that decisions taken by the board are always in the best interests of the company.
Boards must be prepared for a range of challenges from anticipating the unexpected and planning accordingly, to managing risk and reputation, whilst continuing to seek and capitalise on opportunities as they arise.
Legal and regulatory responsibilities
Regulation is constantly evolving and directors must keep abreast of any changes in the legal or regulatory environment that may impact upon their organisation, most notably the Companies Act 2014. It is not acceptable for directors or boards to claim that they were not aware of their responsibilities; the onus is on all directors to know and understand their duties.
Expect the unexpected
One of the greatest lessons that boards have learned in recent years is to expect the unexpected. It is the role of the board to challenge executive management, to ask the difficult questions and to anticipate risks to the organisation. When it comes to good governance, it is best to ensure that the i’s are dotted and t’s crossed.
Balancing risk and strategy
The board has a key role to play in ensuring that the strategic direction pursued by an organisation will achieve long-term value, while putting in place appropriate risk management structures and processes to strengthen and protect the organisation. Risk management should encompass everything from operational, strategic and financial risks to risks from the external operating environment.
Stakeholders and sustainability
With a surge in shareholder activism and the dominance of social media, boards need to be cognisant of the impact of decisions upon all stakeholder groups. From executive remuneration, to corporate social responsibility and environmental and sustainability projects, organisations are publicly answerable for many more policies pursued than ever before.
Communication is integral to how a company creates and protects its reputation, how it grows and how it manages that growth. The strategy that an organisation pursues will have an influence on its corporate reputation and so directors must be mindful of the consequences, unintended or otherwise, of decisions taken at board level. The tone and culture of an organisation comes from the top.
The primary focus for many small and medium sized businesses is on managing the day-to-day business to achieve profitability and dealing with challenges that arise. Corporate governance may not be first on the list of priorities.
Yet by implementing governance frameworks, SMEs can make their business more resilient and better able to anticipate risks and changing circumstances which, in turn, can help to generate real business benefits and improve performance.
There are a number of governance initiatives that can offer significant value for a business. It is not expected that all would be implemented at once, but rather as the needs of the business demand, enabling companies to start small, with minimal investment, and continue to build incrementally.
- Create a single document that outlines your company’s strategy
- Separate board meetings from management meetings
- Add a non-executive director to your board and formalise the role of chairperson
- Establish an audit committee and give it a formal role distinct from management. Under the Companies Act 2014, private companies meeting certain size criteria (turnover >€50m and total assets >€25m) are required to establish an audit committee
- Document the managing director’s key responsibilities, linking remuneration to long-term performance and ensuring there is a succession plan in place
- Put in place a risk management process that identifies, categorises and assigns responsibility for all major risks and review regularly
- Review management and financial information to assist with key decisions
- Create a flowchart for business processes, adding narrative explanations where appropriate; identify the risks related to the processes and the controls that mitigate those risks
- Implement an internal audit function to review critical processes and ensure internal controls
- Collate all company policies into a single policy database, making sure it is comprehensive, clear and properly communicated to all staff and stakeholders
The priority of each of these initiatives will be influenced by the size of the company – for a medium to larger sized company, the complexity and scale of business processes should increase the emphasis on risk, internal control and internal audit.
If you aspire to join a board of directors there are a number of steps that you should take prior to, and when preparing for, your transition to the boardroom. Choosing to become a director is not a career path that should be taken lightly; it needs care and consideration and should be well thought out. The role carries onerous legal responsibilities and so you must be confident that you have the appropriate skills, knowledge and expertise to execute your duties effectively.
Understand your duties
Of greatest importance for any aspiring director is a solid understanding of the duties and responsibilities of the role. Directors are expected to act, at all times, with honesty and integrity, to uphold high corporate governance standards and to meet their legal requirements under the Companies Act 2014 and all relevant legislation and regulation. As such, undertaking specific training for the role is highly recommended.
Consider your value
It is important to ensure that you are the right fit for the board and that you know what your value is and where your strengths lie. What specialist skills can you bring to meet the needs of the board and how can you positively contribute to both board effectiveness and organisational performance?
Getting your CV right
Your board CV should include a personal statement and should be tailored for each board position to outline what specific skills you can bring to the board in question. Focus on your key competencies and areas of speciality and provide details of relevant experience and any specific governance or director training which you may have undertaken.
Do your research
If you have already been asked to join a board, make sure you do your research before accepting the position. Before joining any board, you should carry out due diligence and satisfy yourself that there is no potential for conflict of interest. You should find out about the financial position of the organisation, its ethos and values, the dynamics of the board and how it operates, the time commitment involved and whether there is a board training and induction programme in place. Make sure that Directors’ & Officers’ insurance cover is in place.
Build your network and your knowledge
Joining industry associations and business or online groups can assist you to build your network of contacts and to leverage the knowledge of your peers. Be open to learning from those around you and specifically from those who already have experience at board level. They will know better than anyone the pro and cons of holding a board position.
Find out more about the role and responsibilities of directors in the Directors’ Handbook, produced by the IoD and McCann FitzGerald and consider undertaking director training to build your knowledge and skills in preparation for the boardroom.
What is the difference between an executive and non-executive director?
Under companies’ legislation, there is no distinction between an executive and a non-executive director. The non-executive director’s role can be seen to balance that of the executive director. Executive directors have an intimate knowledge of the company and generally provide an entrepreneurial spur, whereas the non-executive director is generally expected to have a wider perspective of the business community at large and often has more to say about prudent control.
Who can be a non-executive director?
Non-executive directors should have relevant experience and possess the specific skills, expertise and experience required by the board they have been asked to join. An appropriate level of training on the role and responsibilities of a director should also be an important factor when selecting a non-executive director.
What is the role of a non-executive director?
Non-executive directors are usually chosen because they have a breadth of experience, specific skills and can bring specialist knowledge to the board. Of greatest importance is their independence from the management of the company and any of its interested parties. Non-executive directors should take responsibility for monitoring and challenging the performance of management, especially with regard to progress made towards meeting the company’s strategic objectives.
Why appoint a non-executive director, what are the benefits?
Non-executive directors offer a wide range of benefits to a company. Because they are not involved in the day-to-day running of the company, they can see issues in their totality and bring a fresh, diverse and external perspective to board discussions and decision-making. Non-executive directors can also strengthen a board by offering independent expert counsel and advice to the board as well as providing a bridge to potential investors or stakeholders.
How long should a non-executive director be expected to serve on a board?
It is generally recommended that non-executive directors should stand for re-election every three years and, in order to maintain independence, a non-executive director should generally not serve on a board for longer than nine years. In some instances, non-executive directors may be subject to annual re-election.
How do I go about finding/recruiting a non-executive director for my board?
For businesses considering appointing a non-executive director there are formal and informal channels in place. One of the best ways to go about sourcing a non-executive director or chair is to use an independent, dedicated service, such as the IoD’s Boardroom Centre.
How much should a non-executive director be paid?
Fees for non-executive directors vary greatly and depend on a range of factors including the time commitment expected, the level of involvement with board committees, the size and turnover of the company and the sector in which the company operates.
To find out more about non-executive directorships or to source a non-executive director for your board, contact Thora Mackey, Head of the IoD’s Boardroom Centre.
For small businesses, the need to hold separate board meetings may seem like a lot of extra work on top of the existing demands of running a business. However, separating management and board meetings is essential from both a practical and a governance point of view. The board, which should ideally include non-executive directors, is vital as a means of constructively challenging decisions by executive management, devising strategy and ensuring that the objectives of the company and management are aligned as well as focusing on the long-term viability and growth of the business.
How often should I hold board meetings?
It is very important to hold separate board and management meetings. There should be a formal agenda for each and reasonable notice of board meetings should be given to the company’s directors. It would be typical for most small and medium sized businesses to hold a board meeting once every quarter, though some companies may hold between four and six meetings per year or more, depending on the company’s requirements. It is also important to have the ability to bring the board together at short notice if there is an urgent matter that needs to be considered by the directors.
Are all directors required to attend board meetings?
The required attendance by directors at board meetings is generally dictated in the constitution of the company, which should set out a quorum required for board meetings.
Attendance at board meetings is part of the responsibilities which directors accept when they are appointed, so it is a measure of their commitment to the board. It would be typical for a majority of directors to be in attendance at board meetings, though many companies now allow for directors to participate via telephone or video-conferencing, especially since Covid-19. The names of those present and absent at board meetings should be recorded in the minutes.
What items should be included on a board meeting agenda?
A typical agenda for a board meeting would include the following:
- Declaration by directors present of a conflict of interest with any item on the agenda
- Minutes from the previous meeting
- A strategic update including an update on trading conditions and progress against objectives
- A financial update including key performance indicators, management accounts and financial reporting
- An operational update from the executive including high level detail on the performance of products etc
- Updates on any existing projects and details of upcoming projects
- Legal and / or regulatory updates, if required
- Risk should be included as a standing item on the agenda so that potential threats to the business are monitored and reviewed regularly and measures are in place to mitigate such risks.
It is advisable to include matters concerning the future of the business at board meetings such as: succession planning, company-wide policies, business planning and the long-term strategy.
What matters are reserved for the board?
There are generally a number of matters reserved for the board which will be laid out in the company’s memorandum and articles of association - the constitution.
Typically, these will include:
- Strategy and management
- Financial reporting and controls
- Internal controls
- Board membership and appointments
- Executive remuneration and evaluation of performance
- Delegation of authority
- Corporate governance matters.
Accurate minutes of all board meetings must be kept and entered into the minute book. The minutes should set out the matters considered at the meeting, and any resolutions passed or decisions made, and should be signed by the chair of the meeting once they are approved by the board as being an accurate reflection of the meeting.
Joining a board is a serious undertaking and carries considerable responsibilities for the director. If you have been offered a non-executive position on a board, it is vital to do your research on the company and its performance, the composition of the board and how it operates and what will be expected of you in your role as a non-executive director.
Below are some areas to consider and questions you should ask before accepting a non-executive directorship:
Ethos and organisational values
It is important to ensure that you are a good fit for the business and the board. Find out about the company’s organisational values and ethos and make sure that you are happy to have your name and your reputation associated with it.
Ask for copies of financial reports, strategic plans and budgets and a copy of the company’s board manual. Review the company’s latest annual audited accounts and ask for information on the company’s risk policy and corporate governance practices.
Ask for a copy of the company’s Directors’ & Officers’ (D&O) insurance policy and have it reviewed independently. It is advisable to speak with independent external advisors, such as the company’s auditors and to ensure that you are aware of any legal matter which might be outstanding or ongoing.
Job description and suitability
Ensure that you will be provided with a formal letter of appointment and a job description outlining your specific role and responsibilities and find out about any board committees that you may be expected to sit on. Are you confident that your appointment is a good fit for the board and for you – do you bring the right skill set and experience to contribute in an effective way? Does the board use a skills matrix when appointing directors?
Training and induction
Find out if there is an induction process and ask the chairperson to outline this for you. It is also important that formal training is provided both on the role and responsibilities of directors and in relation to the operations of the company.
Find out how often the board meets and for how long – ask to see recent sets of minutes and board papers. How long is the term of office and what is the policy in relation to remuneration and the reappointment of directors? Does the board have a policy on handling conflicts of interest should they arise?
Find out as much as you can about the dynamics of the board. For example, what is the leadership style of the chairperson, does the board have a diverse mix of backgrounds and skills and do individual directors and the board undergo external performance evaluations?
By accepting a non-executive directorship you are agreeing to the many onerous responsibilities which the role brings. It is therefore vital that you have as much information as possible before accepting a position so as to make a properly informed decision.
To find out more about non-executive directorships or to source a non-executive director for your board, contact Thora Mackey, Head of the IoD’s Boardroom Centre.
A company’s board of directors is responsible for making significant strategic and financial decisions. But how can you be sure that your board is performing in the best possible way for your business. Below is a step-by-step guide to getting the most out of your board:
Set goals and responsibilities
Be clear that you and your board set business goals and assess whether your board is doing enough to help you achieve those goals. Ensure your board is aware of your key business objectives - it should set the strategy designed to meet those objectives, monitor financial performance against the company’s budget and ensure that the company is compliant with legislation.
The board should have a clear set of responsibilities which outline its purpose and role. Weigh up whether your board is meeting those responsibilities and whether it would benefit from fresh faces.
Balance the boardroom
A board should have a balance between executive and non-executive directors. Ensuring a sufficient level of balance and diversity on your board, in terms of the skills, experience, expertise and independence of directors, makes it more capable of understanding potential risks and identifying the impact of such risks on your business and its various stakeholders. Diversity of thought, experience, expertise and perspective ensures a balance of opinion and a broad mix of contributions as part of the decision-making process.
It is worthwhile tapping into the vast wisdom and intellectual power of your board. Use the experience and expertise of board members who can bring specialist knowledge and insights to your organisation. Seek their advice and input on key strategic decisions.
Identify board weaknesses
Identify any weaknesses on your board, for instance, a skills gap or lack of expertise with regard to corporate governance or directors’ responsibilities. Such weaknesses, once identified, can be easily addressed through appointing directors who possess the required skills and through the provision of suitable training for board members.
Make time for board meetings
Make sure that directors are briefed before board meetings and receive board papers in good time, so that they have a grasp of the issues before they are discussed. Board papers should include the agenda, minutes of the previous meeting and management accounts.
Evaluate board performance
Undertaking an external board evaluation, by an independent assessor, enables your organisation to gain a valuable insight into the effectiveness of your board and to assess how it is operating in key areas such as strategy, business principles and stakeholder management, risk management and internal control. A board evaluation can help you to identify board strengths and to pinpoint areas for improvement.
Further information on the role of the board is available in the Directors’ Handbook, produced by the IoD and McCann FitzGerald.
As both corporate governance regulation and company legislation continue to evolve, company directors in Ireland must keep up-to-date with their legal obligations and responsibilities.
The role of the director carries with it onerous responsibilities and ignorance of those responsibilities is no defence. The onus is on all directors to ensure that they are fully appraised of the requirements of the role, at all times.
Company directors should follow the below checklist in addition to their statutory duties under the Companies Act 2014:
Key things that a director must do
- Act in the best interests of the company
- Act honestly and diligently and keep good records of how the company is directed and controlled
- Take good advice whenever necessary
- Keep knowledge up-to-date
- Show leadership and discharge directors’ duties
- Disclose conflicts of interest
- Treat staff and individuals with respect
- Ensure a culture of good communications
- Be informed and make sound judgements
- Attend board and committee meetings and engage in discussions.
Key things that a director must not do
- Act in the interests of anyone other than the company
- Act dishonestly or recklessly
- Be involved in wrongful or fraudulent trading
- Take bribes or make personal gain (other than agreed remuneration and expenses)
- Withhold information that is relevant to the board’s decisions
- Break the law
- Make assumptions or fail to challenge
- Allow the company to trade while insolvent
- Act for competitors.
Further information about your role and responsibilities as a director can be found in the Directors’ Handbook, produced by the IoD and McCann FitzGerald.