The board of directors is the beating heart of any organisation. Michael Lange, co-founder and chairman of governance service provider mebs, highlights the importance of board efficiency and the role of independent directors in fostering a proactive and result-focused approach.

 

How can the board of an investment fund achieve maximum efficiency?

Board composition can sometimes be imposed by the structure of an organisation. It is important to achieve the right balance between experience, knowledge and independence; and diversity of profiles can create a pool of administration, custody and regulatory expertise as well as market knowledge. In addition, the inclusion of a consultative member is a smart option for specific investment niches. Planning and structure is vital, too: necessary information should be provided minimum five working days before board meetings to ensure adequate preparation, and directors should engage with each other as well as the firm’s personnel beforehand to avoid missing any information, saving time and avoiding unnecessary postponement.  Most importantly, agendas should be well planned and cover all legal aspects, which is the primary purpose of a board’ supervision role. However, this should not come at the expense of implementation of best practice and other steps that allow the structure to thrive. In routine boards, where only legal points are addressed, it will lead to a “comfort kills effort” mentality.

 

 

« The independent director should seek to ensure proactive

and unbiased debate. »
 

What is the role of a modern independent director?

An independent director is supervised by and responsible towards the CSSF, which is both a burden and a driver. The independent director should therefore raise issues that need to be addressed at board level and smooth the complexity of legal points to save time for more critical matters. In theory, discussion time should be allocated 20% to legal and regulatory matters, 40% to open topics and market evolution, 20% to decision-making process and strategy, and 20% to decision-taking. The independent member should seek to ensure proactive and unbiased debate – as well as asking uncomfortable questions, and disagreeing without being combative. Herein lies the difficulty of the role.

 

What challenges can you identify?

Access and acceptance spring to mind. Nobody likes to invite a stranger to a party. Companies tend to pick directors in-house or in their close circles. Our role as independent directors is to share our experience to promote best practice and foster it at board level. We make ourselves welcome in more and more boards through the consistent quality of our work and our focus on long-term vision. Pricing is another challenge for our profession, as we are always competing with cheaper in-house people, but who often come with their own engrained attitudes and mentality. It is therefore critical for us to explain our pricing in terms of the value that we add.