To assess one’s financial discipline, the central bank, requires anyone nominated on the board of a financial institution, to among others, submit their personal statement of financial position or a personal balance sheet in old speak.
The fact is a person who is financially secure is more likely to add value to the organization than one who is not. Imagine a board member who is motivated to attend board meetings because of the allowance paid for attendance? Some profit-making organizations have clear board selection criteria and board member remuneration communicated. Board members on not-for-profits organizations, on the other hand, are volunteer members. The role does not attract any remuneration apart from the sitting allowance paid for every attendance. Some organizations pay up to Ugx. 780,000 (US $200) per board sitting. This is not small money.
The executive would want a board that cannot ‘bite’ so as to say. I have sat on a board where the CEO will provide benefits like mobile gadgets, travels, and free tickets to games as a scheme to get board members close. The risk of a board member being influenced so as to benefit from such freebies from the organization is high for members without financial stability. Of course, it does not mean that someone who is well-off financially cannot fall for free offers from the executive. It also depends on members’ ethics and integrity.
How do you assess the ethical behavior of a member? What are the values, professionalism, and background of your board member?
Personal behaviors. How does the member conduct himself? How does a member carry out the roles of oversight? The culture of an organization is influenced by the conduct and behaviors of individual members. Take a case of a board member who asks the executive to find a job for his or her son in the company on which they serve as a board member. How can the board member become independent of the executive in such circumstances?
A CEO at one of the companies I once served as a board member confidence in me for help. “One of the board members has been pushing me to give the vacant Internal Audit job to his daughter, who has just graduated with a Bachelor of Commerce degree. She is not qualified for the post. Even if she were, I don’t think this is in order. Since you sit on the audit committee, please let the members know the conflict of interest.”
The remedy for conflict of interest is full disclosure, right.
In this case, the member in question happened to sit on the appointments committee of the board. He had successfully got the daughter shortlisted for the final panel interview. This being ahead of the audit position, the audit committee members were invited to join the appointments committee for the panel interviews. The reason the CEO had reached to me for help.
The father of the lady opened the session by declaring an interest. “One of the interviewees is my daughter. We need to hire people we know very well. She is a good girl. I hope you consider her for the position.” We assessed the candidates objectively against the minimum job requirements in terms of skills, qualifications, and experience. She did not make the cut and lost out to a more senior and experienced candidate.
But how do you work with a member like that on the board? How can staff respective such a board member, and the board as a whole if they got to know such schemes by board members to plant their relatives in the business they are invited to serve as board members? A board member must be and be seen to be independent.
Professionalism. Many leaders ask University professors, peers or successful entrepreneurs for names of their professional advisors for consideration for appointments on their boards. If a successful professional or leader refers to someone, they are expected to be outstanding. For this reason, referrals are the number one method for new board appointments. Another method is where the company writes to the respective professional bodies to provide two or three names of members in good standing for board appointment consideration. A member identified through this approach is highly likely to be professional.
An effective board must be composed of members with impeccable integrity who are beyond reproach. Establish a strong selection and vetting exercise with a focus on appointing members of high moral standards. Like a pilot, board members make decisions that could make or break so many people’s careers. Such people must be carefully selected.
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