The Board Induction Process

Directors bring a diversity of experience, skill and strength to the board. A prototype of an excellent board would be a representation of various skill sets that can ensure the sustainability and viability of the company. A defective board will ultimately tell on the quality of the company. Hence, a company must choose members to serve on the board who are not just success-driven but can project and execute the organizational goals of the company.

Since every company has its goals, it therefore becomes expedient for these individuals who have been brought on board to be properly indoctrinated. This is done through a Board Induction Process. The Financial Reporting Council of Nigeria, on 15th of January, 2019 released the Nigerian Code of Corporate Governance, 2019 and this code specifically provides for a board induction**.

A well-designed board induction process will help to ensure that new board members are aware of their roles and responsibilities as well as understand the company’s objectives and operations. It will assist new board members to more easily grasp the processes, procedures and aims of the company, which will, in turn, boost their confidence and decision making.

Truth be told, every new board member has the same concerns about wanting to fit in and to be respected. New members can be reluctant to contribute until they feel they know more and are better acquainted with their colleagues. First impressions count and new members do not want to appear brutish by asking ‘foolish’ questions or making ‘dumb’ statements. On the other hand, the energy and idea new board members can potentially inject into the system are unparalleled. The board gains a vital and valuable opportunity to benefit from the new members’ fresh perspectives. The trick is- the time before they learn the culture and social norms of the board and come to accept same assumptions about the way the company operates is a classic ‘window of opportunity’. Even one new member at the board table can significantly alter the social dynamics, strategic thinking and decision-making ability of the board. All these and many more underscores the importance of an effective induction process.

An effective board induction process will include discussions on the following:

1. History and traditions of the company including its ownership, discussions on mission and vision statements, ethics, value and philosophies of the company;
2. Company’s operations and facilities with provision for a tour of the site; introduction to key management staff as well as terminologies, jargons and glossaries of company-specific terms;
3. Core governance issues such as board structure and functions, board philosophy and vision for the company, committee structures, rules governing conflict of interest, risk policies, code of conduct, whistleblowing policies, finance and audit, performance evaluation procedures, allowances, etc.;
4. Board administration procedures, programs, information and contact details for other directors, meeting arrangements and schedules;
5. Provision of key board and company information such as copies of minutes of previous board meetings, Board manual, financial structure and recent financial reports, strategic plan and organizational chart of the company.

The need for a board to function as a team can never be overemphasized. Therefore, having some members of the Board who do not feel like part of the team might impact badly on the effectiveness of the board. The new board members may be “green” but they will still have a vote – and it is in the best interest of the company for the new members to know what they are voting on. An induction process will also help to ensure that the new members on the board can easily have a grip on the objectives of the company which will in turn help to boost their confidence. The earlier the new members of the board become comfortable within their roles, the faster they contribute meaningfully to the decision making process.

As the neurologists say, time is brain- therefore, recommended practices provides that the induction of new directors should take place as soon as feasible, after their appointment. It is best to strike while the new members’ enthusiasm is at its peak. Confirming an appointment and then cutting the appointee adrift for several weeks or months will most probably leave a bad taste in their mouth – and a feeling that maybe their services are not so in demand after all. Care must be taken however to ensure that the inductees are not bombarded with too much information all at once. The process must be done systematically and a drip-feed approach can be introduced whereby they are given time to digest and make meaning of the various information received. It must also be noted that the induction process should be at the Company’s expense but care must be taken that undue strain is not placed on the company’s finances. It is not how expensive, but how effective.

Boards generally suffer from inadequately conceived and poorly implemented induction processes. An effective induction process addresses, directly or indirectly, several problems that may only surface many months after a new director has joined a board. A well designed and explicit induction process should be a signal to the board that things are not as they were- a new team is in place and the board as a whole now has to re-form its thinking and approach.

*This article forms part of the Corporate Governance Series powered by Eunoia Law.

**Principle 13 of the Nigerian Code of Corporate Governance, 2019states that a formal induction programme on joining the Board as well as regular training assists Directors to effectively discharge their duties to the Company.