Running a business in Asia, says Sunil Puri, Senior Director of Center for Creative Leadership, is like driving a car at top speed on a poorly lit street at night, with a visibility of just 200 meters. The driver is the CEO and the board directors are the navigators of the trip.
Boards can be creators or destroyers of shareholder value. The board knows the destination and lets the CEO decide the best route. As passengers, the board should know when to lead or speak out and when to sit back or stay out of the way to help management succeed.
At the Institute of Corporate Directors (ICD) webinar on “Future Ready Boards: A Deep Dive” with Sunil as guest speaker, I was a panelist with Val Bagatsing, CEO of ICCP and Jig Juliano Chairman of Alpha Acanthus. Sunil said board leadership is like building a house which needs a strong foundation. The four pillars are:
• Individual motivation — Treat being a director as a profession with strong sense of responsibility. Ask questions. Speak your mind. Demonstrate mature judgment. Develop relationships with other board members, with management, with shareholders and with regulators.
• Board capability — The skills and technical expertise of the directors but also the need to build on strategic leadership and foresight
• Board mandate — Know the role of each key director and what the board should spend time on.
• Board composition — Nurture diversity in skills, experience, age, nationality and gender.
On gender equality, PNB has four women directors and was the first universal bank to be a member of the Philippine Business Coalition for Women Empowerment and the first certified Economic Dividends for Gender Equality (EDGE).
Board culture, Sunil says, is “the secret sauce.” Board culture is the board dynamics and how things are done at the board level. It’s quite complex — it’s a combination of factors such as personalities of the directors, their drive and motivation, board diversity, the mix of independent directors and family directors, the relation between the CEO and the board, etc.
Board culture is the key differentiator between average and great boards. To have all board members as “rock stars” is a recipe for disaster. A board should act and function as a group to be effective. How can boards foster the right culture in times of crises? More than ever, there should be strong collaboration between the board and the CEO and the CEO should be transparent on issues and challenges faced. The board should demonstrate its support to the CEO and the management and work together to achieve their objectives. Open discussion is encouraged — even diverse views — so they can then agree on the best course of action and move forward.
To create the right board culture, Sunil says four Cs are needed: collaboration, candor, challenge and commitment. I’d like to add another C: communication. All of these are deep-rooted in trust, the new board currency. Trust comes with credibility and no personal hidden agenda except what is the best for the company.
With current disruptions, boards should be future fluent and able to deal with new trends in technology, people and sustainability, among others. Is your board future fluent? Here are some questions to answer if your board is getting ready for the future:
• Are there tangible efforts in place to create a learning environment on the board?
• Do you have a technology committee in place?
• Does sustainability (both human and environment) often come up in board dialogues?
• Are there proactive steps to tweak board composition to include future relevant skills?
At the recent Bankers Association of the Philippines (BAP) board meeting, BAP President Bong Consing commended the decisive monetary policy by the Bangko Sentral ng Pilipinas (BSP) in this time of the COVID-19 crisis. He reported that the bank lending and credit spreads have declined to January 2018 levels given the BSP’s proactive actions such as the monetary easing by 125 basis points, the 200-basis-point reserve requirement cut to 12%, the inclusion of MSME loans guaranteed after March 15 as part of the reserve requirement compliance and the staggered booking of allowance for credit loss for a period of five years, among others.
We are fortunate that the Philippines is in strong financial position at this time of crisis with the tax reforms recently implemented by our capable economic management team led by Finance Secretary Carlos Dominguez. Japan Credit Rating Agency just upgraded Philippines to “A-” with stable outlook.
The world is changing fast. We need to be skilled in technology, innovation, understand global business dynamics, appreciate sustainability and be forward looking. Let’s ensure our boards are future ready.
Flor Gozon Tarriela is chairman of the Philippine National Bank and PNB Capital. She is a former Undersecretary of Finance and the first Filipina vice-president of Citibank N.A. She is a trustee of FINEX Foundation and FINEX Academy and an Institute of Corporate Directors fellow.