A majority also acknowledge that directors have learned from the governance failings of the past. Such sentiment is encouraging and indicates that we are making headway. However, as the economy recovers, it is important to ensure that the lessons learned are not forgotten and that we remain committed to improving corporate governance standards as the business landscape in Ireland continues to evolve.
Knowledge is key for directors in Ireland, especially given significant regulatory changes in recent years. Directors need to know exactly what their legal and fiduciary duties are and must execute those duties and responsibilities fully. There is little doubt that increased regulation has contributed to improving governance standards, particularly in the financial services sector, where it has been rigorously applied. Education and training has also played an important part in improving standards and there is a recognition now that training is essential for board and director effectiveness.
There is a sense among those directors surveyed that the profile and composition of boards in Ireland has changed in the wake of the economic downturn, with directors now being better qualified for the role, more new faces appearing around the boardroom table and a greater number of directors from a wider variety of backgrounds and disciplines serving on boards in Ireland.
However, there is still some way to go in terms of achieving real diversity and transparency on boards. Many still label boards in Ireland as ‘male-dominated’ and lacking sufficient diversity and a concerning 70 per cent claim that a ‘who you know’ culture remains a factor in how people are appointed to boards in Ireland.
At the core of improving standards of corporate governance in this country is a need to address the issue of transparency in the appointment process and to ensure that boards are appropriately skilled and representative of stakeholder interests. A diverse board, with a transparent appointment process, will boost overall board functioning and consequently create greater confidence in organisational leadership.
Most directors concede that on the issue of gender diversity on boards, there has been only a marginal improvement in recent years. Yet while gender is the topic of choice in terms of discussing board diversity, it is just one aspect, albeit important. Diversity in skills, experience and background is also critical. Diversity is about having people on a board with different perspectives, who are not afraid to challenge and thus, will be less likely to succumb to group-think.
If we can achieve greater diversity on boards in Ireland with a broad reach of expertise and depth of knowledge across a whole range of business disciplines, then boards will be better placed to anticipate challenges and in turn, companies can better safeguard their own future.
By Maura Quinn, Chief Executive, Institute of Directors in Ireland.
