Tone at the top: The view from a veteran director

Tone at the top: The view from a veteran director

Dr Seree Nonthasoot offers insights into how boards can function more effectively

'Generally speaking, there are two approaches to business risk," says Dr Seree Nonthasoot, chairman of the audit committee at Thailand Post. "The first is conventional or outside-in risk. The other, to which the organisation needs to be aligned, is inside-out risk which refers to the ways an organisation can cause concern to people and the planet."

Listed companies in Thailand are required by law to have an audit committee, and for some companies, risk is part of this committee's remit. However, Dr Seree favours a different approach, given the dual nature of risk.

"Due to the fact that risk is in the nature of business, the risk committee should be a separate committee," he says.

"In the past, there was not much discussion about this but it has become a focal point for some since the Securities and Exchange Commission called for due diligence on human rights under the latest 'one report' guidelines that took effect at the end of last year."

Besides Thailand Post, Dr Seree has years of experience as a director with organisations including the Stock Exchange of Thailand, SME Development Bank and the Government Pension Fund. He is also the first Thai to be appointed by the United Nations for a four-year term (2021-24) on the Committee on Economic, Social and Cultural Rights. Over his career, he has devoted a lot of time to thinking about how the boards of companies and organisations can do their jobs more effectively.

"The board normally discusses issues based on the broad picture, strategy and direction of organisation," he observes. "I believe that a board should not go deeper into details except on strategic issues and organisational direction.

"Subcommittees can help lessen the workload from the board since members of the former can discuss and look in detail at specific issues. They can also invite an expert who is not an independent director to be a member, or occasionally invite an expert to join the meeting.

"Besides the audit committee, as required by law, there should be a nomination and remuneration committee [NRC], which can be a single body or two separate ones. Depending on the condition of each organisation, legal and IT subcommittees may be considered. At the SET, it is necessary to have both due to its nature of business," says Dr Seree, who used to chair the SET's legal committee.

HUMAN CAPITAL FOCUS

The holder of a doctoral degree from Oxford University and a master's in international law from Columbia University, where he was a Fulbright Scholar, Dr Seree has a strong legal background. As well, his interest in human capital has often led to his involvement in the selection of senior executives and CEOs, not to mention succession planning.

"Directors who take responsibility for human capital issues should handle C-suite and succession planning, two areas where I feel there is not enough concentration at this moment. In my view, there should be a dedicated HR committee exclusively for human capital issues," he suggests.

"In some organisations, the board usually assigns the NRC to take care of C-suite positions or one level down. In my opinion, this may not be practical because we cannot cut it off at one level below the C-suite. The board needs to understand the holistic picture of human capital in the organisation such as the number of employees, quantity of work, number of silos in the firm, how the business will change, trends in compensation and benefits, employment conditions, and so on."

Corporate culture can be considered based on the "tone at the top", which depends on the behavioural practices of the board and CEO. The ethical climate also plays an important role.

"In principle, the board has only one subordinate, which is the CEO. However, in reality the board is involved with many co-workers, especially at the subcommittee level where a number of executives and employees work closely with members," Dr Seree elaborates.

"If an agenda item requires only acknowledgement but the board takes a look at it in detail, it also sets the culture or 'tone at the top' for management, who must be careful and concerned with internal auditing.

CEO IS THE CAPTAIN

"The appropriate tone is that the CEO is the captain of the organisation and the board sits behind in support. The CEO oversees day-to-day operations and the board should not be concerned with routine functions. However, directors may get involved in the details of a particular subject under their responsibilities as members of subcommittees."

Harmony between the board and management is important for organisational success. Personal comfort is crucial between directors and management. In another words, trust can be built.

"Outings, having meals together, meetings between independent directors and special sessions with the CEO are examples of activities a board should consider," suggests Dr Seree. "These should be part of a planned schedule every quarter, six months or annually.

"During these forums, management will have an avenue to voice concerns such as new projects, new direction, issues with the current programme. Directors can converse eye-to-eye with management to assure them of the board's support as long as performance can be delivered according to an agreed plan."


Sorayuth Vathanavisuth, PhD, is Principal and Executive Coach at the Center for Southeast Asia Leadership. His areas of interest are executive coaching, leadership development, succession planning and corporate culture. He can be reached at sorayuth@sealeadership.com



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