Board Evaluations assess Board effectiveness. A key aspect of effectiveness for a Board is judgement and certainly in the context of an Evaluation Fidelio will consider - and assess – judgement from a number of different perspectives, including:
Decision-making capability
Cognitive diversity
Self-awareness as a Board
Ability to navigate complexity
Alertness to shareholder and stakeholder expectations.
As regulation and governance requirements for Boards increase, we frequently hear the concern expressed that Boards are expected to comply and there is no tolerance for explanation. If true, where does judgement fit in?
Fidelio’s recent “A Seat at the Table” Board Development Programme focused on the role of Chair and in that context we explored why relatively few companies choose to explain rather than comply.
Comply or explain is an important building block of UK corporate governance and has been adopted by a number of other codes internationally. Yet Boards and Chairs for the most part opt to comply.
The judgement muscle is critical for Boards and for companies. Shareholders and stakeholders benefit from effective governance. This implies Boards with a good understanding of governance and what underlies expectations. At times and in limited circumstances, the right course of action for the company may involve non-compliance with the Code. It would be to the detriment of both shareholders and stakeholders, if Boards lost the discretion to explain.
Fidelio is committed to developing high performing Boards and leadership teams characterised by sound judgement and the willingness to be guided by that judgement.
To continue reading ‘Comply or Explain: The Judgement Muscle’, click here.
