Vienna, Austria – AIMS International has launched the second issue of the international study about the most efficient competencies of Board Members, including one focus section with the results of the analysis of women on Board.
The results of the study regarding Board competencies lead to believe that women and men do not view any differently the most important and critical competencies. This very aspect matters the most, therefore it can be concluded that no gender bias should exist between them when assessing the top five competencies for efficient Board members.
The only competency showing a significant difference is “Communication”. Women and men are the complete opposite. Men tend to express themselves boldly, keeping sensitivity to others aside while women use more tact and diplomacy and adapt their message. Therefore, the gender gap in Boards is mostly created by the inability of both genders to communicate.
Today, the current code of communication in a Board setting is male-dominated, and the difficulty for women is to adopt a masculine code of communication to be perceived as efficient or at the very least to fit in. To have more women present on Boards, men will need to learn to appreciate and understand the female code of communication and stop assessing Board members solely through their own male code of communication. Then, men will start to appreciate the real business value that women have to offer, beyond the communication style.
This study was conducted by AIMS International, Leaders & Co, the College of Corporate Directors in Canada and Gauthier Murtada & Partners. The following is a summary of a study which includes remarks and comments from members of the Research Committee as well as their constituents and some professional board directors. We want to foster a discussion on the topic of desired and efficient behaviors of directors, while creating a practical guide for chairmen of boards, directors, members of Governance Committees, CEOs and any other person involved in the recruitment and the evaluation of a board director. The team was headed by Richard Joly, AIMS International and Leaders & Co.
Analysis of the results
After completing the original research on Board competencies in 2012, AIMS International was interested in analyzing the differences lying between women and men regarding how they see competencies. An effort was made by the participating AIMS Partners to identify and interview more women to reach a significant number of respondents. The total number of women interviewed represents 33% of all respondents. This is a valid effort, especially if we reckon that within the ground population of all Board members, women are only representative from 10% to 15% in most developed countries. Here are the differences that have been observed for each competency.
Annex 1. Index Rating
Annex 2. Priority Rating
In reviewing the results between women and men, we found that four competencies did not show any differences between genders on how they evaluate competencies. Those competencies are “Judgement”, “Team Intelligence”, “Strategic Thinking” and “Sense of Ethics”. Their ranging difference only alternates from 0.5 to 1.2 and we consider that no significant difference exists between these competencies. Women don’t lack clarity nor are inferior in assessing what is important to be an efficient Board member. Therefore, men cannot claim that women are not ready or knowledgeable enough to become a Board Member, nor can they claim to have more insight and be cleverer than women. This is highly positive to reduce gender discrimination when recruiting a Board member.
The other two competencies to consider, “Commitment and Sense of Responsibility” and “Communication”, appear to be significantly different. First, in “Commitment and Sense of Responsibility”, men gave a higher Index rating compared to women. With a difference of 4.7 Index point (Annex 1). We can assume that men may tend to be more engaged in getting their job done in a Board setting. However, when considering the priority rating (Annex 2), men selected this competency as Top Two only 17.9 % of the time while women selected this
competency as one of Top Two competency 41.2 % of the time. In fact, this competency had the highest difference amongst all the competencies in the Priority rating list (Annex 2). Also, women have an Index rating of 83.2 (Annex 1) which is considered in our study as Very Important. Therefore, we cannot conclude that “Commitment and Sense of Responsibility” is more important for men or women. Nothing clearly shows that any gender is more engaged or committed to meet their responsibilities. Therefore, we conclude that there is no gender bias and both groups are equally committed and engaged in doing their Board work.
Second, “Communication” is the competency with the highest difference in the Index rating (Annex 1) with a delta of 5.21 points. In addition, the Priority index (Annex 2) is the lowest for both groups, which reinforce the idea that both genders similarly view the unimportance of the competency to be used as a proxy for an efficient Board member. However, the details of the results tell a different story. Men gave a very strong rating of 94.7 (Annex 8) for “Say what they think, believes and feels in a transparent manner” while women rated the same statement as the lowest with a rating of 75.3. This creates a large difference of 19.5 points. Then, women rated “Adapts message to the audience” with a note of 83.1while men gave a rating of 61.7 for a wide difference of 21.4. In “Communication”, we observe that what one gender values the most, the other values the least. We conclude that a significant difference exists between women and men regarding “Communication”.
In this section, we find all six competencies with detailed results from the interview and include our observations.
Annex 3. Judgement
- The index is the same for both genders;
- None of the elements show any significant difference;
- The element with the highest score is the same for both genders;
- The element with the lowest score is the same for both genders;
- Equally important, judgement has the highest priority score against all other competencies;
- We conclude that judgement has an equal value for women and men .
Annex 4. Team Intelligence
- The index is low and similarly for both genders;
- The competency is the lowest of all the competencies and is not important;
- Complementary skills and other’s ideas are two elements with similar values for women and men;
- Respecting others ideas is an important elements for both genders;
- Complimentary skills is highly valued.
Annex 5. Strategic Thinking
- The index is very similar for both genders;
- The priority element is the same (# 4) for both genders;
- Women tend to analyse more the information before deciding;
- Men tend to seek new alternatives before deciding;
- We may conclude that women and men working together will be more efficient because they will leverage both strategic strength.
Annex 6. Sense of Ethics
- The index is very similar for both genders;
- The priority element is the not the same for both genders;
- Element # 4 has a significant difference between genders;
- Men’s priority is to demonstrate honesty at all time – “Tone at the top”;
- Women’s priority is to focus on the company’s interest;
- The element with the lowest score is the same for both genders.
Annex 7. Commitment and Sense of Responsibility
- The index has a significant difference between women and men;
- Three of the four elements have a significant difference between genders;
- The priority element is the same (# 1) for both genders;
- Women and men believe that preparing rigorously is extremely important;
- Overall, women rate commitment and responsibility less critical than men;
- However, women rate responsibility significantly much higher than men on the priority list (third with a rate of 41 versus fifth with a rate of 18).
Annex 8. Communication
- The index has a significant difference between genders;
- All four elements are not aligned between women and men;
- Men’s priority element is women’s lower priority (# 3);
- Women seem to be more tactful than men in their communication;
- Men will tell their opinion like it is, regardless of others;
- We conclude that women and men have a significant different approach to communication in a Board setting. Women are more tactful and attentive on how to communicate than men.
This article presents the results of a study involving the interviews with 45 seasoned directors in seven countries: Canada, Finland, Germany, Hungary, South Africa, Sweden and United States.
Interviewees are sitting on boards of traded companies with revenues of more than $1 billion. These board members all have over 10 years of experience in different industry sectors. An advisory committee helped the research team to identify the six most desired behaviors from a list of 39 standardized behaviors used in the assessment of CEOs. A questionnaire for each of the six behaviors was developed. Face to face interviews were conducted then using the questionnaire to gather comments from the interviewees based on their professional board
Following are the six behaviors that were the subject of the study:
- Sense of Ethics:
Demonstrates a high sense of integrity and puts forward strong values related to ethics. Places the needs of the company before his own.
- Strategic Thinking:
Has a clear vision, anticipates trends and considers the risks associated with strategic decisions. Analyzes situations in a global perspective. Has good sense for planning and anticipating the long-term impacts.
Knows how to put things in perspective and sets priorities after assessing the facts objectively. Remains objective in analyzing complex and ambiguous situations. Adopts a constructive approach and ensures good balance of the different views.
- Commitment and Sense of Responsibility:
Honors its commitments. Shows availability and assiduity. Spares no follow-up.
Able to share his views with clarity by promoting the adhesion of others. Knows how to use the right words to simplify the complexities of his thought.
- Team Intelligence:
Focuses on common goals, priorities and problems through active listening of the concerns expressed by others by focusing on teamwork. Seeks to establish trusting relationships. Recognizes the importance of complementarities on the Board.
In this study, more than 2,000 pages of interview notes which were the subject of a thorough review were collected. The observations and the information disclosed from the interviews were recorded, compiled and personal identifiers were removed to preserve confidentiality. In this report, the desired and undesired behaviors are listed which we have extracted from the interview transcripts with some of the most relevant comments and opinions.
The goal is to present what directors experienced and lived according to the six behaviors which were aimed to better understand. This study contains six sections, one for each behavior. In each of these sections, you will find the definition for each behavior, a brief summary of the results of the study and the list of desired and undesired behaviors mentioned by respondents.
What are the most efficient competencies of a Board Member in a Board setting?
Sense of Ethics
Definition: Demonstrates a high sense of integrity and puts forward strong values related to ethics. Places the needs of the company before his own.
For ethical values to be firmly rooted in an organisation, it must start from the top. The behaviors must be adopted by each director. Clearly, the chairperson plays a vital role to enforce a sense of ethics in a board setting. It is he who sets the tone hence the term “The Tone at the Top”. It is he who embodies the values that convert into behaviors within the meaning of ethics. It is he who will ensure that these behaviors are respected by everyone, including management.
In this study it was observed that there are two situations that can influence the Sense of Ethics: independence and compensation. The interviewees were clear in stating that if a director wants to remain on the board to help its social status, business contacts or to preserve or needs the income, he may tend to dilute their independence. In those two situations, the director will not disturb the CEO or chairperson in fear of being asked to leave.
Definition: Has a clear vision, anticipates trends and considers the risks associated with strategic decisions. Analyzes situations in a global perspective. Has good sense for planning and anticipating the long-term impacts.
The desired behavior of Strategic Thinking is the ability to filter the facts through past professional and life experiences. It is the ability to analyze the information provided by management and assess what is good, what needs improvement and what is missing.
The diversity of the members is the greatest contribution to the strategic thinking. Everyone will provide opinions that are diverse because they are based on different past experiences and industry background. Respecting each director’s opinions is highly important to raise the level of strategic thinking in a board.
The clash of ideas and diversity of opinions is vital to ensure that strategies are validated. This exchange process contributes to understand and identify the risks of the company. Moreover, according to respondents, strategic planning and risk management are becoming increasingly complex and important in a board. This is one reason why the former CEOs of large corporations are sought to become directors since they have practical experience of executing a strategic plan and to manage risks.
The role of the director regarding the strategic plan is clear. It is not his responsibility to develop the strategy. However, he must ensure that a strategic plan exists, that it is a good one and that it is implemented.
Definition: Knows how to put things in perspective and sets priorities after assessing the facts objectively. Remains objective in analyzing complex and ambiguous situations. Adopts a constructive approach and ensures good balance of the different views.
The behavior of “Judgment” received many interesting comments. It is interesting to note that when the respondents were asked to prioritize the six behaviors, only the judgment was ranked as the top behavior in100% of cases. For most respondents, judgment is seen as a proof of the quality of a director. A director who has no judgment is an ineffective director.
Respondents believe that judgment is partially innate and may have developed over the years. They observed that a long academic training does not ensure a better judgment. Rather, it is the accumulation of professional experience that fosters better judgment. Directors must deal with facts objectively. That is to say, they filter information through their professional experiences and they provide a constructive
and different opinion. Usually, a director should have demonstrated the ability to have a sound judgment in his prior career as a professional manager or entrepreneur. This is a behavior that allowed them to be successful. Retired CEOs have usually demonstrated good judgment to be successful in their career.
An important factor in the conduct of a director is the fact that they are asked to constantly make business decisions without having all the facts. Their good judgment will guide them in how to take action without assuming unnecessary risks. Those who are too emotional or who are always in a brainstorming mode will have more difficulty to step back and adopt a desired behavior with respect to judgment.
Commitment and Sense of Responsibility
Definition: Honors its commitments. Shows availability and assiduity. Spares no follow-up.
Today, directors are exposed to greater risk and more responsibilities than ever before. Respondents attest that there are few directors nowadays who are not well prepared for meetings. Since the average number of director on a board has decreased in the last 15 years, each must fulfill their duties with diligence. The formal assessment processes of the board helps increase its effectiveness. Also, there has been an improvement in the transparency regarding the attendance level for each director.
Because the work load has increased, the expectation is that each director must contribute and carry their weight. Inside the boardroom, it is easy to identify who has not thoroughly read all the information provided. Preparing a well-structured question prepared in advance is the most efficient behavior for a director. It increases the meeting effectiveness and discourages the board to fall into a brainstorming mode because questions are asked on the spot without thinking it through. More and more, directors are living in a fishbowl and they can no longer hide their lack of preparation and contribution to the shareholders.
Definition: Able to share his views with clarity by promoting the collaboration of others. Uses specific words to simplify a complex thought.
A director must say what he thinks, feels and believes in a transparent manner. Questions that he asked must be of quality. A director who expresses his ideas with a structured thinking process adopts a desired behavior. Having good content when making a comment is a desired communication behavior. This is the best tool to influence other directors.
On the opposite, being eloquent with a meaningless message is an undesired behavior. It leads to a loss of credibility with other members.
Active listening and having an open mind are two best behaviors that the respondents are seeking from a director. It allows for everyone to express their ideas without being judged. It also allows the other directors to see things differently.
Many directors mentioned that learning new ideas are one of the main reasons they are motivated to be on a board, even if they are at the end of their career.
Definition: Focuses on common goals, priorities and problems through active listening by focusing on teamwork. Seeks to establish trusting relationships. Recognizes the importance of complementary skills between Board directors.
Directors are seeking respect from other directors on the board. In fact, a Chairman prefers that each director refrains from socializing with (i.e. outing activities with spouses) in order to preserve their independence of mind. They do not want anyone to be influenced to hold back on their opinion, because they are forging a personal friendship. The desired behavior is to have individuals who will test the opinions openly and create a clash of ideas. Too many familiarities can interfere in these circumstances. What is crucial for the Board to work well is to have diversity and a full exchange.
Some even admits that the debates and disagreements in a Board setting motivate them to stay. One can always disagree and it must be done in a respectful manner. If a Board member is too emotional or wrapped up in his opinion, then he will demonstrate undesired behavior. It is also negative for a director to use his reputation (i.e. CEO of a large corporation) to influence the Board or even bully another Board director.
Now more than ever, directors are subject to much attention and their role is becoming increasingly important on the Boards of companies. All stakeholders want the directors to contribute to the growth of the company through active involvement on the Board, while shareholders and other stakeholders are asking them to fully assume their role as trustee.
After several years of assessing corporate Boards both in their efficiency and their structure, it was observed that the behaviors of individuals that make up a Board of directors of a publicly traded company are of great importance. How can the selection of the new director be assessed objectively? How are the desired behaviors defined to ensure an efficient management of the Board?
Over the last 20 years, the main improvements in governance have dealt with laws, regulations and structures. There was little emphasis on the behaviors of individuals that make up the Boards. In some countries, the regulators have requested that an assessment of the Board be made annually, including the evaluation of individual directors. Today, in developed countries, the majority of traded companies are using this process. This is a significant improvement from 15 years ago. Another example is the concept of independent director where the board of directors must be composed of a majority of independent directors. These two examples demonstrate the advancement of good governance and its application to restrict directors to behave as if they own the company without taking into account the interests of shareholders and other stakeholders.
Desired behaviors of individuals are essential to have an efficient governance model within a board. They are the driving force that allows a Board to reach the level of expected performance. There are many Boards that are exemplary and it is often the Boards of larger companies. And, in some cases, a Board that is well perceived may be going through serious difficulties from within. In those cases, the undesired behaviors of the directors become more apparent and they can lead to a dysfunctional Board. There are very limited scientific literature and references documented to address specifically the behaviors of a director. Most publications deal with regulations, structures and duties. In fact, it was found that most literature and references have mainly focused rules and regulations.
The experience when recruiting a new director shows that few tools exist to assess the behaviors of a candidate during the selection process. Few benchmarks exist when recruiting a director for the simple reason that there are no specific assessing tools to evaluate a director. The results of the research are to offer a framework to understand the desired behaviors of efficient directors.