Forum Significance

Boards of Directors: Composition and Process

Significance of the Forum Theme

Boards of directors are at the centre of corporate governance because they are at the heart of companies. It is the board that manages a company and determines the direction in which it will head. In some jurisdictions such as the US they have immense power. Corporate governance systems provide that companies must have one board, two boards or companies may choose to have one or the other. In all companies, whether they reflect dispersed or concentrated ownership, and whatever the objective of a company is seen to be, the make-up of the board and their proceedings are critical issues for corporate governance.

Legislation and codes of corporate governance have provided some specifications as to who must act as members of boards, such as requirements to have a certain number of non-executive directors or independent directors as members of one-tier boards, but there has been significant debate about whether what has been prescribed needs re-thinking. There have many calls for greater diversity in boards, especially in relation to gender, and calls for representation on boards of wider interests than just shareholders (most recently evidenced by the UK’s government inquiry into corporate governance reform). So, who should act as members of single boards; members of management and/or supervisory boards? Is it appropriate for jurisdictions which require one tier or two boards to be less prescriptive? Is it time to rethink the structure of the board?

The manner in which boards operate is generally regarded as important. Much consideration has been given to the processes that they must or do embrace in managing the company. What role does, and should the law, soft law and regulation play (if any) in influencing board processes? This question encompasses a broad range of concerns, and could include, for example, whether courts/regulators are able to review what boards have done or how they did it; what kinds of decisions do boards take and how should the law respond; how can better board decision-making be supported including long term strategic decision-making; to what extent should boards of parent companies monitor, and be accountable for subsidiaries; how important is board culture to good corporate governance and effective performance; what impact might technology have on board processes and the board’s role.

The Forum will examine issues related to the nature of the composition of a board and the processes by which it operates.