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Home arrow Economics arrow Boards of directors of state-owned enterprises : an overview of national practices.

Induction for new board members

Induction serves as useful reference point before taking up duties. Once directors are made aware of their duties, and any important rules and regulations (this is especially true in countries with relatively new director independence requirements) they can fulfill their roles more effectively and furthermore help to ensure smooth integration to the board (OECD, 2008). Induction is further aimed at introducing the company and its activities to the board member.

Good practice: Induction programmes should match the needs of each board. They should serve as a way to improve effectiveness of board members.

Board induction is a common practice across most OECD countries, although the format and organisation differ among countries and depending on the company, and even individual that is hired. A position held by most countries is that induction programmes should match the needs of each board and requirements will vary, (even if induction is a requirement).

An induction session is most effective if taken place within the first month of appointment, and always before the first board meeting. The induction session can be run by the Chair and/or Chief Executive. If possible, existing board members should also attend to pass on their experience. Some other members of the senior management team may also be required, including the board secretary. In smaller SOEs a discussion with the Chair, backed up with relevant documents could be considered sufficient. Larger SOEs are likely to require a more systematic induction programme including: formal meetings; courses or other development events; meetings with executive staff and other board members; a programme of visits; and more comprehensive reading material such as the ones on the list below.

Induction sessions normally cover three main areas: strategic, organisational and individual. The induction process should be tailored to the needs of new members. A less experienced board member, for example, may require support in more basic skills such as reading accounts. The induction session should explore these development needs and agree a plan to address them. Some countries have taken concrete measures to reach this objective. The government of New Zealand stands out thanks to its desire to appoint first-time directors and its regard for comprehensive induction programmes to achieve this goal. COMU organises inductions for both new and recurrent directors. It also sees the induction process as a networking opportunity (Box 4.1).

In a number of other countries, including Australia, Chile, and Germany mandatory formal induction within the individual SOEs is common practice. In Germany, for example, this is conducted through a two-week induction aimed at providing board members with up-to-date knowledge required to perform their duties as members of the supervisory board.

Box 4.1. Formal induction in New Zealand

Comprehensive induction is seen as very important to ensure that new Crown directors fully understand their responsibilities both to the SOE to which they are appointed and to the Crown and public. Specific induction to the SOE (its operations, personnel, strategies, markets, etc.) is conducted by the SOE under the supervision of the Chair, and according to the method determined as most appropriate by the SOE. The Crown Ownership Monitoring Unit (COMU) organises a separate one-day induction programme for all new Crown directors covering:

  • • The duties and responsibilities of Crown directors.
  • • The expectations of ministers.
  • • Relationships with key stakeholders (e.g. other parts of the Crown).
  • • An opportunity to meet with other new Crown directors to establish networks.

All new Crown directors are strongly expected to attend this programme within about six months of appointment, however this is not mandatory. An example of an agenda for a Crown Induction Programme is appended. COMU funds all venue and presenter costs, and the SOE funds any travel costs associated with attendance by new directors.

COMU is currently reviewing its full suite of development activities for Crown directors. In terms of induction, it is expected that face to face programmes will continue (to enable networking and other relationship-building to take place), and this will be supplemented by web-based materials and fora.

Source: New Zealander authorities' response to OECD questionnaire.

In other jurisdictions, induction is either mandated, or may be carried out at the level of the ownership function. For example, one may invite newly appointment board members to participate in a type of “orientation” as in the case of Israel. In most other cases the preferred form of induction consists of a one-on-one meeting with the CEO in addition to on-site visits (e.g. Finland and Sweden).

 
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