Regular discussions about the length of time a chief executive has been in the top job should form part of a process for investors to improve effectiveness of senior management, a fund management body says.
However, The Investment Association and audit firm EY stress in their report – Board Effectiveness: continuing the journey – that there is no “silver bullet” to improving board effectiveness, as no two boards or companies are the same. But they say it is important to clarify certain matters, such as the role of the chief executive officer (CEO).
The research says it is imperative to have ongoing discussions about the CEO’s tenure and not just at difficult times or when the length of tenure is initially set at the time of appointment.
The report suggests it is important to have a robust board evaluation strategy and to make sure there is a steady stream of diverse talent working its way up to board level.
The report is designed to improve communication between board directors and investors, so that their objectives become more closely aligned. It is based on a series of meetings between investors and board directors in which they discussed best practice and new ideas. Topics such as the role of the chairman are also explored, along with non-executive directors and investors, progress on diversity, and board succession.
“Investors have a pivotal role in working with companies to improve board effectiveness. Effective boards are essential to the long-term success and sustainability of companies and ultimately of the economy as a whole,” says Helena Morrisey, chair of the Investment Association.
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