Boardroom executives have the responsibility to act in the best interests of the company and its stakeholders, but is this moral code always adhered to?
In our experience, not always – particularly among those who have worked together for a long time, where complacency seems to creep in all too easily.
Enter SID – the senior independent director. Usually a Non-executive director on the board, the SID exists to ensure that high levels of performance and appropriate decision making are maintained.
Key responsibilities of the role include:
- Evaluating the performance of the chairman, holding meetings with the board without the chairman present, and conducting his or her appraisal;
- Acting as a point of contact for stakeholders, for concerns which can’t be raised through the usual channels (i.e. the CEO or chairman); and
- Providing support to the executive team.
The role of the SID becomes clear in the event of issues developing within the team. For example, if a dispute were to arise between the CEO and chairman, the SID would help to resolve these problems before they begin to affect the wider board, or the company as a whole.
On the other side of the coin, the SID can also be a key player should an overly cosy relationship develop between the CEO and chairman develop. Potential, this can be just as damaging to performance as disagreement within the ranks.
It is surprisingly common for a respectful working relationship to turn into friendship. When you consider the pressure associated with board level positions, it’s easy to see how. Unfortunately, when it comes to the CEO and chairman, over-familiarity can cloud judgement and become a hindrance to decision-making.
In theory, this is where the SID’s role would come to the fore. In reality, do they really have the power to question this dynamic, or to address the subsequent issues? Although the Combined Code of Corporate Governance claims SIDs have the authority to provide feedback to the chairman, it doesn’t provide guidance regarding the consequences of under-performance or the pressures that can be applied. This lack of direction makes it difficult for SIDs to do what’s needed to resolve the situation.
For the majority, the UK business climate remains tough. With effective leadership these challenges can be overcome. However, in our view, the powers of the SID need to be reviewed and revised to give them more influence. To ensure that boards are operating in a transparent way and in the best interests of stakeholders, the SID must have the authority to challenge both relationships and decisions, without fear of a backlash.
Keith McCambridge is a talent consultant at Wickland Westcott.
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