Courses develop effective strategies
The Hong Kong Institute of Directors has stepped up its efforts to encourage wider adoption of good corporate governance practices in the wake of the global financial crisis.
'In times of recession, people typically look for programmes that can offer them potential solutions to their problems and help to better position themselves,' says the institute's CEO Carlye Tsui Wai-ling.
The institute has a range of strategic courses focusing on how best to cope with the fallout of the downturn, addressing issues such as rebranding in difficult times, understanding the subprime crisis, the state of the market and executive compensation and incentives.
As the city's leading body representing the interests of directors, the institute focuses on offering a wealth of training initiatives that culminate in a professional diploma or certificate, and are open to members and non-members.
Courses leading to a qualification include corporate governance and directorship, enterprise directorship, company direction, essentials for listed-company directors, risk management and finance for directors.
More than ever, the challenges of the downturn have highlighted the need to broaden directors' understanding of the company and adopt a helicopter perspective of as many issues as possible so as to fuel debate and discussion.
'Assuming there is, at the management level, already a strong battery of expertise in finance, legal and accounting, it is important for the board to feature a mix of board members who share different perspectives,' says the institute's chairman Kelvin Wong.
He says the key to success is the art of seeing or identifying major issues confronting the company. Though in bad times, companies tend to be more cautious, focusing on risk control and management of systems and processes, this need not be the only focus.
'The board should regularly revisit the company's stated mission and place it in the context of the economic environment to derive the level of risk to take. It is a little like playing football. You can sometimes play defensively and sometimes play aggressively,' he says.
While contributions from all board members are important, the role of the chairman is particularly crucial when navigating turbulent and demanding times. More than being a consensus builder, a chairman has the task of galvanising views prior to setting a strategy which can be translated into a viable action plan to tide over the company in economically good and bad times.
Though leadership on such a scale can be trained, it also weighs heavily on personal virtues and the experience of the individual.
'Without the advantage of experience, it tends to be harder for younger individuals to be consensus builders. We believe directors cannot be too complacent, even if they are highly successful professionals, because this would limit their perspective. There is no logical deduction that says a very good professional would become a good board director or chairman,' Wong says.
A well-balanced boardroom led by an open-minded consensus builder would be best placed to deal with the controversial issues, including how best to leverage on the company's balance sheet, one of the most hotly debated issues of the day, he says.
'Lots of boards are debating how best to use the company's balance sheet amid the current economic background,' Wong says.
'The choice is whether to tolerate a high level of risk by borrowing more, while the US interest rate is still low or take a more prudent approach in case the interest rate rises in the near future. There is, of course, no hard and fast rule.'
He says family-run firms tend to err on the side of caution.