6. Boards effective but the time commitment is growing

How well do NEDs think their Boards are running? 

Quite well, it turns out. Over 90% say their Board has an effective chair, an environment that encourages early escalation of issues and frank/robust conversations, clear accountabilities, confident and supportive relationships, and zero tolerance for poor behaviour or the domination of a single member.

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Almost all NEDs indicated that their Board asks ‘should we’ rather than ‘could we’ when considering if proposed actions are the right thing to do.

Ongoing refinements

Having said that, almost 80% of directors say their Board has now introduced more ‘deep dives’ into areas of specific interest or concern.  Plus half are spending more time connecting-the-dots and contemplating emerging and over-the-horizon matters. 

Also, close to half of the NEDs indicated their Board is improving the agenda setting process, spending more time with relevant executives ahead of meetings, and building in more structured reflection time without management present.

Increasing time commitments

NEDs appear to be split down the middle on the need to reset expectations about their time commitments (48% Yes; 47% No). 

Those who believed that expectations would need to be reset towards spending more time on Board governance activities gave a range of reasons.

Moreover, a number of those who responded that expectations did not need to be reset, acknowledged that these expectations were that time commitments could increase.

No agreement on maximum Board membership

Directors were also evenly split as to whether there should be a limit on the number of ASX companies a director can serve on. 

Those in the ‘No camp’ expressed a number of similar explanations.

Of those in the ‘Yes camp’ that nominated a maximum number of Boards which a NED should act on, the average was between three and four. That average did not include Chair roles, which many suggested effectively equate to two non-Chair NED roles. 

On average, NEDs on financial services Boards spend slightly more time (4.4 days per month) performing their duties compared to their peers in other sectors (3.8 days per month).

Board evaluations generally fair

While the majority of NEDs (81%) say their most recent Board evaluation was balanced and fair, the remainder (19%) indicated it was slightly too positive or failed to recognise reasonably significant shortcomings in the Board’s performance. Interestingly not one respondent felt the evaluation was overly critical of the Board’s performance.

Some highlighted the importance of using carefully-selected third parties to ensure evaluations are robust: 

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