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We must change the framework and culture of company boards to restore confidence in corporate Ireland, writes Maura Quinn.

The issue of corporate governance was high on the business and political agenda last year but for all the wrong reasons. With numerous scandals coming    to light in all sectors, it is clear that governance frameworks were both fractured and flawed and played a serious role in undermining public and investor confidence in Ireland Inc.

The year ahead will, no doubt, throw up several more challenges with corporate governance continuing to be an area of interest. It is, therefore, essential that the mistakes of 2009 are not repeated in 2010.

We need to move towards implementing rigorous changes regarding the appointment, induction and training of company boards, ensuring that corporate governance takes a central role in the boardroom and every organisation in Ireland.

A new approach

The Tánaiste, Mary Coughlan, recently announced the appointees to the newly formed Fás board. With a number of significant governance initiatives introduced through the Labour Services (Amendment) Act 2009 - including a reduction in the board size, a rolling appointment system, accountability to the Oireachtas and the requirement to disclose any conflict of interest - the new governance structure signals a much needed change in approach at the controversial state agency.

However, it is vital that this new structure is adhered to across all aspects of the board's remit and that we do not see a repeat of what has gone before.

Ensuring that the board is clear as to the outcomes it is expected to deliver and that an appropriate reporting structure is in place will be key. If either of these elements are lacking, then no amount of good housekeeping will make up for the deficiency. 

It is crucial for all companies and State bodies to examine and assess their corporate governance structures. Management must ensure their organisations implement a solid and robust risk and governance framework. 

The director and the board

The capacity of directors to fulfil their roles faithfully, diligently and skilfully is at the heart of corporate responsibility and good governance. This has been put into sharp focus over the past 18 months and repairing the disparity must be part of the recovery strategy for the country's future.

The shortcomings revealed across a range of sectors, have had an impact at both national and international level and highlight the imperative to restore credibility in Irish companies among shareholders, investors and international markets.

The first step is to ensure the best and most appropriately qualified people are appointed to company boards. A transparent recruitment, selection and appointment process must exist with regard to all director board positions, regardless of being public or private-sector based.

Board directors must be chosen on the basis of their experience, skill and requisite training, to be complemented by knowledge and understanding of their role and responsibilities. This standard needs to be set and adhered to by all. Companies can build and improve their boards by sourcing non-executive directors through the Boardroom Centre which is an independent resource to companies seeking highly qualified directors with the skillset suitable for their business.

The key attribute which every non-executive director should bring to the board is the ability to provide an objective and external perspective and to ensure that their primary responsibility is to the company as a whole, not to each other.

They must provide entrepreneurial leadership within a framework of prudent and effective controls, thus enabling risk to be assessed and properly managed. 

A board's effectiveness is highly dependent on the experience and judgement of its directors and their ability to constructively challenge management and each other as required.

The board of directors should set the company's values and standards, ensuring that its obligations to shareholders and to the wider community are met. The board has a collective supervisory responsibility and this must feature at the centre of everything it does.

Proper professional governance

Company directors can build their expertise in the area of corporate governance through programmes such as the Institute of Directors' Chartered Director and others, which enable them to achieve a professional qualification in company direction, thus contributing to best-practice frameworks and supporting professional development. 

With the topic taking centre stage in the political and media arena, it is paramount to prevent a situation developing whereby companies or State bodies build makeshift corporate-governance frameworks out of perceived necessity rather than genuine recognition of the critical role it must play in the future of Irish business. 

Every organisation, through its board and those directors who sit on it, must build a value-based culture where adherence to a code of corporate governance is seen not as an obligation, but as a mechanism for ensuring that an organisation brings together all of its powers and resources, with the objective of supporting and nurturing better business and, ultimately, restoring and rebuilding the reputation of corporate Ireland.

Maura Quinn is chief executive of the Institute of Directors in Ireland.

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