A key role played by any Board of Directors is to continuously take stock of their effectiveness and honestly evaluate themselves to identify where they stand, aside from setting the direction of the company or organisation.

Essentially, boards must realise that they have to better govern themselves before they can effectively provide the oversight for their organisations in the current environment. This means looking internally first – to develop the ability to self-reflect and evaluate their effectiveness, from the honest lenses of their stakeholders (customers / clients, shareholders, staff, senior management, regulators, etc).

Speaking to BusinessToday exclusively recently, ICDM President and CEO Michele Kythe Lim said other than fulfilling the Malaysian Code on Corporate Governance (MCCG) requirement for board effectiveness evaluations of listed companies every 3 years, board members must take every opportunity to get honest and independent feedback to better understand the landscape of their board and how their composition, culture and current dynamics impact their individual and collective effectiveness.

“Companies and their boards can explore other avenues of assessing their effectiveness, such as candid 360-degree assessments, self-assessments and peer reviews that provide holistic perspectives for forward-looking improvement. It is also pertinent that companies put mechanisms in place to regularly obtain feedback from management, who are the operational crux of the organisation, and other stakeholders with valuable insights that can enable boards to be more effective in fulfilling their oversight duties.

“The operative word here is “honest” evaluations because board evaluations have to be more than just a box-ticking exercise. Boards must approach these board evaluation activities with a clear understanding of their purpose and the right mindset to drive actionable change with authentic feedback. Otherwise, there is no point in the evaluations. In environments where the influence of personal relationships is heavily present within the dynamic of the board, this might be harder to achieve. A board evaluation is as good as the participants make it and how candid their feedback is. Hence, this is why independent evaluations are crucial.”

However, evaluations alone are not enough. Research such as PwC’s annual corporate director survey in 2023 found that despite being critical of their peers, boards are not using the board assessment process to drive change. Nearly half (45%) of directors think someone on their board should be replaced, yet 39% say their boards have yet to make any changes resulting from their last board assessment.

This needs to change. Boards must be clear that an effective evaluation is not about the blame game, but rather a forward-looking perspective that addresses gaps and weaknesses of the board to provide better oversight, she said.

With the level of responsibility that corporate directors today need to fulfil, there is no room for passive board members who do not consistently and effectively contribute to boardroom deliberations.

Modern-day directors must possess courage, candour, and other strong leadership qualities to have difficult conversations at the board level and with management, master the art of asking the right questions, and challenge the status quo when necessary to encourage robust discussions and support their strategic oversight. Every director has a vital role to play and, more importantly, value to deliver for their organisation, and that’s the crux of the matter around why boards need to pay deeper attention to their selection process and composition.

Mindset To The Ascension Pathway

Embracing an attitude of continuous learning will require a mindset shift about the role of board members. The idea that becoming a corporate director is the capstone to a successful career or a retirement plan is outdated and hinders a board’s effectiveness.

“ICDM wants to change this view/perception because a board role is a professional role where directors must have the knowledge and capabilities to provide oversight and guidance. After all, the role of a director or chairperson is a career pathway that requires consistent effort towards the development of their skills.”

Board directors should keep in mind that while there may be no upward progression other than the role of a chairperson, there is plenty of opportunity for lateral growth to explore board positions in different industries or even countries. There are also different capacities required to serve on board committees, whether as a member or a committee chair.

Therefore, continuous learning can only serve to benefit board members and the organisations they serve as they continue to build their capacity.

Veteran directors also have the opportunity to give back to the corporate governance (CG) community by mentoring the new breed of leaders and sharing their experiences as a board member, both positive and negative.

While it is pertinent for boards to be forward-looking to adapt to the new ways of corporate Malaysia, this does not relegate the wisdom of the past to irrelevance, as history is often a good teacher.

Learning is lifelong, no matter what profession we are in, but for board directors the stakes are higher, and they need to be dynamic and adaptable to the rapidly changing corporate world. They must be willing to admit and acknowledge that they do not know what they don’t know, and seek external guidance such as from ICDM.

ICDM’s Initiative

Asked on the role ICDM plays in enhancing corporate governance at management levels, Lim said they serve as the nationally recognised institute of directors (IoD) for Malaysia established by the Securities Commission Malaysia.

“As the national IoD, we consolidate all matters relating to boards and directors, from building the pipeline of future directors, to networking and advocacy platforms locally and internationally to raise the competency or professionalising boards and directors in Malaysia. We were set up to promote and uphold the highest standards of leadership and governance.

“Our efforts are supported by Bank Negara Malaysia, Bursa Malaysia and the Capital Market Development Fund, as we aim to transition corporate Malaysia from regulatory discipline to market discipline and eventually ascend to self-discipline under the SC’s three-pillar approach to market regulation.

“As a vanguard of CG excellence, ICDM strives to provide a holistic platform to support the board and director ecosystem. We focus on being the standard bearer in building competency through professionalising directorship and pipeline building and representing the voice that advocates on issues affecting directors and the marketplace. ICDM is a one-stop-centre of end-to-end services for boards, and the network and resources we offer ensure that boards have avenues of support to help them navigate the challenges and risks facing companies.  Our programmes and resources are also accessible to the senior management of our boards to encourage alignment amongst them.”

ICDM delivers value to boards and directors via the above areas through four (4) buckets of services:

Network – We provide directors a platform for them to expand their network and profiling through forums, panel discussions, special interest dialogues curated to address board needs. We create the avenue for board members to interact, engage in discourse and learn from their peers. ICDM also has a growing network of local and regional talent through collaborative efforts to better support the CG ecosystem, create new pathways for business and enhance the regional landscape to fuel Malaysia’s potential as global attention is on Asia’s economy.

Development – ICDM commits its resources to the continuous capacity building of directors to enhance their competence. We run two mandatory programmes for directors – the Mandatory Accreditation Programme (MAP) under Bursa Malaysia to formally onboard first-time directors of listed companies and Leading for Impact (LIP) to build high-impact boards for sustainable growth – in addition to our public programmes, bespoke programmes as well as talks and workshops.

Advisory – We also provide consultation services in various areas of from the Board and Director Effectiveness Evaluation (BDEE) and board remuneration reviews to director sourcing and placement as well as coaching and mentoring.

Advocacy – ICDM curates data-driven research and reports to better understand the board and CG landscape, and more importantly to advocate for board and directors’ roles and responsibilities, priorities, challenges and development. Our research informs the knowledge and toolkits for international best practices and benchmarking.

All our efforts serve to enhance the board’s understanding of CG practices and new developments so that they can better lead their companies. ICDM’s programmes and resources helps to paint a clear picture of the governance landscape and the considerations against current events that boards must heed to lead their organisations with adaptability and resilience.

Overall, in today’s fast-paced business environment, board members and aspiring directors must wholeheartedly accept the evolution of their role, understand their purpose and how they can better serve their organisation and stakeholders.

To reiterate once again, boards must look inward before looking outward at the gaps that need to be addressed. Boards must review their agenda and priorities to ensure they are honestly and openly addressing the issues within their board and organisation and invest in their continuous development to fulfil their role.

This approach fortifies the board’s capacity to drive company success and resilience while building a talent pool of dynamic and highly skilled directors, Lim said.