Boards of directors of companies have become again realities of the Romanian economy before their role in the business process was well understood. There are still numerous situations in which the positions of directors are treated as sinecures or rewards, without being accompanied by the responsibilities or natural expectations for such position. We discussed with Gabriela Hărțescu, PhD, Dean & Chief Operating Officer at Envisia – Boards of Elite about the priorities of the moment from the perspective of leadership in energy companies and in relevant institutions for this industry.
Dear Mrs. Gabriela Hărțescu, I propose that we begin with a brief description of the main attributions that the position of member of the Board of Directors involves. Next, is there a sketch of the ideal person to be a member of the Board of Directors?
There are important studies at the international level that are aimed at identifying the set of qualities and skills necessary for a board member to be efficient or, as you named it, sketching the ideal person to be a member of a Board of Directors. Such a study, which has analyzed boards in over 40 countries and included over 19,000 public and private organizations, is the one that was the basis for the development and accreditation of the postgraduate program Board Practice and Directorship provided by Henley Business School in partnership with Envisia – Boards of Elite.
Therefore, some key attributes were identified that characterize a successful board member:
- Understand the expectations that shareholders and the other stakeholders have from the top management. This ability to take into account all aspects when a decision is made is defined as situational intelligence and represents the ability of board members to integrate shareholders’ expectations into a given time horizon and specific situation.
- Have a good knowledge of corporate governance, of formal and informal structures that contribute to the governance system. At the board level, this involves a composition of the board that ensures the optimal balance between risk appetite and opportunity.
- Have authority. Board members must be confident and respectful, recognized and listened to from the perspective of authority, keeping their empathy, intuition and creativity needed in an effective decision-making process.
- Have the ability of networking. Networking and the existence of an important portfolio of professional contacts are extremely important strengths of a board member, which he can use in the benefit of the organization he runs.
- Have resilience and the capacity of working under pressure. These two characteristics refer to both the possibility of performing in critical situations and under stress and to the fact that the position of a board member is one subject to media scrutiny, evaluation by the general public, etc.
In many companies in Romania, especially the state-owned ones, the role of the Board of Directors is misunderstood and its potential contribution in guiding the company is not capitalized enough. How much of this situation is related to the selection and education of BoD members?
Both aspects are extremely important. Selection of board members is a complex process, which must take into account a number of aspects, in an integrated manner: professional expertise in a certain field; experience in leadership and management; commitment to the company – members of the Board of Directors must be interested in that business and its development; allocate time and energy to fulfill the roles and tasks they have within the board; be honest and avoid any potential conflict of interests; the capacity to attract capital for company’s development etc.
The education of board members is a pressing topic and should be on the list of priorities of decision-makers. In Romania, there was no educational system for the professionalization of members of Boards of Directors / Supervisory Boards. There are only a few business schools dedicated to this niche in the world. For the first time in Romania, Envisia – Boards of Elite, in partnership with Henley Business School – an executive education school listed by the Financial Times in the top 25 in the world – offers the postgraduate program Board Practice and Directorship, which professionalizes the role of a board member, bringing in a single program the highest academic and practical expertise, for the development of specific skills required for a board member, according to international standards in the field.
The first series of the program was launched in November last year, the second series begins on June 11 this year and a new series is scheduled for November 2021. We had the pleasure to find that we came up with this program at an opportune moment, in which the need for specialized education for members of boards of directors is acknowledged; participants in the first two series are board members, representatives of top management of some powerful companies and financial institutions.
New skills, which are related to at least two categories, are mandatory for the top management of modern companies: European policies and financing, respectively attracting private financing (listing on the stock exchange, bond issuance or capital increase, crowdfunding, seed financing etc). How can such skills be accessed – attracted in the organization and/or educated, through courses, for example?
Indeed, in the current context and in the medium term, evolutions in the business and financial environment involve completing the portfolio of competencies with additional knowledge and skills. Agility to identify development opportunities is a fundamental characteristic of a board member. For example, the European Union’s 2021-2027 Financing Program can bring EUR 29.2 billion to Romania, and the use of these funds depends not only on companies but also on authorities, which must promote them and explain them in relevant and useful guides, as well as the banking system, which is a partner in the co-financing process. Therefore, we need efficient corporate governance in both the public environment and the private environment. Also, understanding the operation of the capital market and financing methods in continuous evolution in this sector is imperative for board members. The most important role here is played by education, which must complement the development of new skills needed by a board member.
Here there are two aspects we recommend: building a portfolio of competencies specific to a board member by participating in an accredited program with international recognition, such as the Board Practice and Directorship program, and developing in real-time the new competencies needed to face the challenges of the constantly evolving economic, social and geopolitical environment, by requesting board members to participate, annually, in professional and personal development courses dedicated to this level of leadership. To have a long-term impact, these requirements should be provided in the legislative framework.
Companies are facing one of the most complicated periods in recent decades, in the light of external challenges. I would mention only the Covid-19 pandemic, digital transformation, imposing an extended process of decarbonization, boosting competition. How much can a CEO (still) learn/be taught and how much can he delegate to members of the top management team to stay in control? What roles can members of the Board of Directors take over?
The concept of lifelong learning is more topical than ever. Lifelong learning, all the more so in strategic positions, should be part of the job description of a board member.
Piloting the institution in times of crisis, risk management, ensuring resilience required an exemplary collaboration between the board and top management. A flexible agenda of the board, to identify solutions to unpredicted situations, is necessary.
Good governance requires separating responsibilities between the Board of Directors and the CEO, but constructive collaboration between them is the key to success. Requirements related to ESG – Environment, Social and Governance lead to new concepts, such as ethical governance, which requires the management of the company to succeed, in a moral and responsible manner.
The business environment is currently not only complicated, but also troubled, because the new generations and new realities impose different working models, but not everything that is validated by tradition is automatically obsolete. What do we need to keep from the classic instruction that top management decision-makers benefited from and what are the new approaches that we need to take into account today?
Each generation of members of boards of directors comes with a valuable background of skills, experience and expertise. It is a board design art to bring them to the best mix. Here, again, we have good news: Envisia – Boards of Elite provides board design and profiling services, which ensure the best composition of board members, depending on industry, objectives etc.
Summarizing the above, Envisia – Boards of Elite is the perfect symbiosis between education and specialized services addressed to board members, individually, and teams represented by boards of directors and top management. Envisia is an innovative and visionary concept, which provides the necessary infrastructure for good governance, for long-term economic and social progress.
This interview firstly appeared in the printed edition of Energynomics Magazine, issued in June 2021.
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