Session 4: The Boards role and Directors Responsibilities Claire - PowerPoint PPT Presentation

Session 4: The Board’s role and Directors’ Responsibilities Claire Lea, Thursday 21 September 2017, 4pm My microphone is currently muted

Record session

Session 4: The Board’s role and Directors’ Responsibilities Claire Lea, Thursday 21 September 2017, 4pm

Today’s plan • Introduction • The Board’s structure and its committees • Directors’ duties and liabilities • Maintaining an effective board • Concluding remarks

Effective boards

Underlying governance codes • UK Corporate Governance Code • FRC Guidance on Board Effectiveness • FT Code of Governance • Healthy NHS Boards • NHS Code of Conduct and Accountability • Well Led Framework

The purpose of the FT board ‘The general duty of the board of directors, and of each director individually, is to act with a view to promoting the success of the corporation so as to maximise the benefits for the members of the corporation as a whole and for the public.’

The purpose of the CCG governing body • promoting the NHS Constitution in the securing of health services; • securing continuous improvement in the quality and safety of health services and in the quality of the experience undergone by patients; • securing continuous improvement in quality of primary medical services; • reducing inequalities between patients with respect to their ability to access health services, and with respect to the outcomes achieved for them; • ‘ promoting the involvement of patients, their carers and representatives in relation to their health service;

The purpose of the CCG governing body • enabling patients to make choices with respect to aspects of health services provided to them; • obtaining appropriate professional health service advice to enable it effectively to discharge its functions; • promoting innovation in the provision of health services; • promoting research on matters relevant to health services; • promoting education and training for the persons connected with the provision of health services; and • securing health services that are provided in an integrated way to improve quality, reduce inequalities of access or outcome.

The purpose of a NHS trust board • to set the strategic direction of the organisation • to oversee the delivery of planned results • to ensure effective financial stewardship • to ensure that high standards of health service governance and personal behaviour are maintained • to appoint, appraise and remunerate senior executives, and • to ensure that there is effective dialogue between the organisation and the local community.

Boardroom practice examples Can you give me an example of how a trust board or governing body delivers one of their key functions?

Unitary boards “Board corporacy is paramount. Each decision or agreement entered into in the boardroom is a fully accepted corporate decision. If a decision around finance is taken and the information brought to the board clarifies the debate, if there are implications say, one month after the decision, the responsibility is of the corporate whole, rather than just the finance director.” 2006 Integrated Governance Handbook • Balance of NEDs and EDs to protect interests of stakeholders • Independent challenge to EDs who are also management • Requires investment in mature relationships

Challenges to unitary board principle • Different for CCG’s – Good Governance Standard presupposes a form of leadership that is not unitary • FTs also have a council of governors which has to fit within the unitary board structure • Increasing emphasis on role of NEDs • NED champions – blurring the boundary of management and governance

Board committees • Audit Committee • Nomination Committee • Remuneration Committee

NHS directors – fit and proper persons The ‘fit and proper persons’ test for NHS directors (all directors and ‘equivalents’) was introduced under the Health and Social Care Act 2008 (Regulated Activities) Regulations 2014. This means the CQC will assess whether directors are: • of good character; • have the necessary qualifications, skills and experience; • are able to perform the work that they are employed for; and • can supply information, such as certain checks and a full employment history.

NHS directors – fit and proper persons test The regulation also bars individuals who: • are prevented from holding the office of director (for example, under a directors disqualification order). •‘have been responsible for, been privy to, contributed to or facilitated any serious misconduct or mismanagement (whether unlawful or not) in the course of carrying on a regulated activity, or discharging any functions relating to any office or employment with a service provider • are an undischarged bankrupt or are the subject of a bankruptcy order or an interim bankruptcy order; or have an undischarged arrangement with creditors.

The powers of directors • Constitution • Schedule of matters reserved for the board • Scheme of delegation • Standing orders • Standing financial instructions

The common law duties of directors • fiduciary duty • duty of skill and care

The statutory duties of directors • act within powers • promote success of the organisation • exercise independent judgement • exercise reasonable care, skill and diligence • avoid conflicts of interest • not to accept benefits from third parties • declare any interest in a proposed transaction

Other statutory duties of directors • Directors’ responsibility to third parties • Related party transactions • Duty to break even • Duty of candour • Duty not to give false or misleading information

Liability of directors The corporate nature of an organisation means that, in most instances, even if a decision is open to criticism, individual directors will not be legally liable. Except for: • Criminal liability • Civil liability to third parties • Claims by the NHS organisation • Indemnity NHS Code of Conduct and Accountability

Good boardroom practice ‘An effective board develops and promotes its collective vision of the company’s purpose, its culture, its values and the behaviours it wishes to promote in conducting its business. In particular it: • provides direction for management; • demonstrates ethical leadership, displaying – and promoting throughout the company – behaviours consistent with the culture and values it has defined for the organisation; • creates a performance culture that drives value creation without exposing the company to excessive risk of value destruction;

Good boardroom practice In particular it: • makes well informed and high-quality decisions based on a clear line of sight into the business; • creates the right framework for helping directors to meet their statutory duties under the Companies Act 2006, and/or other relevant statutory and regulatory regimes; •is accountable, particularly to those that provide the company’s capital; and • thinks carefully about its governance arrangements and embraces evaluation of their effectiveness.’ FRC Guidance on Board Effectiveness 2011

Board behaviours • FRC Guidance on Board Effectiveness • Intelligent Board • The Healthy NHS Board • Mapping the Gap Can you name one aspect of behaviour or culture highlighted by these reports/guidance?

Board appointments “ we need boards with enough industry expertise to make meaningful judgments about strategy and risk, with members who can take on the specialized committee tasks, and represent the stakeholder ’ s views, with enough diversity to capture the interests of other stakeholders important for the long term. …. Judgement is needed to decide which of these is essential at different points in the life of the organisation , combined with a willingness to alter the composition of the board ” CEO Forum – Paul Strebel • Role of Nomination Committee • Role of NHS Improvement • Succession planning

Board evaluation The FT Code of Governance and the UK Code states as a main principle that the board should undertake a ‘ formal and rigorous annual evaluation of its own performance and that of its committees and individual directors ’ . The Well-Led Framework for FTs require an independent evaluation every three years. What do you think these Codes/Frameworks are trying to achieve from this principle?

Conflicts of interest Conflicts arise when the interests of directors, or ‘connected persons’, are incompatible or in competition with the interests of the trust. Such situations present a risk that directors may make decisions based on these external influences, rather than the best interests of the organisation. • Direct financial interest • Indirect financial interest • Non-financial or personal conflicts • Conflicts of loyalty

Declarations of interest A conflict of interest policy should require the board chair and board members to act impartially and not be influenced by social or business relationships Regularly updated and regular review of register Managing meetings when an interest is declared CCG guidance on managing conflicts of interest