Generally when wrong doing continues or is encouraged in a company, criticism is focused on the “tone at the top.” If integrity is an issue or conflict of interest is commonplace in the company, that’s also thrown back to say tone at the top is not right. If we consider the Board of a company as the body that is in-charge for governance, then they have to set the tone. What sort of people, behaviour and actions would reflect the right tone at the top or at least be acceptable? The following are some ideas..
1. A well-balanced board with diversity by skill, gender and age, selected by a nominating committee independent of the CEO and the major shareholder. They are not like a sailor boarding a ship without a rudder/compass.
2. The board is able to focus on the big picture knows how to stay out of micro managing and focuses on the big picture.
3. There is a culture or climate of trust and candor created where important information is always shared with directors before a decision, in a transparent manner.
4. The selection of independent directors should ensure there’s no conflicts of interest by way of relationships with their own businesses, consulting contracts or personal relationships.
5. A common operating philosophy of ethics and values in business is established through a code of conduct to communicate the importance of ethics and how business should be conducted.
6. The CEO works for the board and not the other way around. The board and CEO foster a culture of open dissent and open debate of strategies and what’s best for the company will be the criteria for selection.
7. Comprehensive and regular briefing of the board on strategic questions and with divisional heads who explain their operations and how they manage risks.
8. Oversight of company finances by qualified independent directors in the audit committee, free of pressure from CEO or management and with ability to hire their own experts. Every board member understands the consequences of significant accounting policies, assumptions, judgments and decisions.
9. Performance based incentive to the CEO and any executive directors is tied to longer term goals and linked to relative performance against competitors. The criteria for such assessment is communicated well in advance and the resources are made available to the top management.
10. Annual evaluation of the board’s performance to examine directors’ confidence in the integrity of the enterprise, the quality of the discussions at the board meetings, the credibility of reports, the use of constructive professional conflict, the level of interpersonal cohesion, and the degree of knowledge at board level.