In September 2023, the Reserve Bank of NZ Te Pūtea Matua and the Financial Markets Authority released a report on governance of financial services organisations. It’s a great read and gives strong guidance to boards across many sectors. It’s a fascinating read and packs a punch with advice that can benefit all kinds of boards. Imagine this report as a compass guiding your team toward better governance. All points in italics are direct quotes from the report:
“Boards need to be continually learning. In this regard, the good practice findings in the Thematic Review point to areas where all boards can lift the bar on governance.”
As a team who knows that expert governance leads to a healthy and sustainable business the findings in this report were music to our ears! It was fabulous to learn that two key regulators see boards as teams, want to see better teamwork, more use of advice, and encourage boards to plan properly for their future. For example:
A. AGILITY: boards need to remain responsive to an ever-changing external environment.
B. BACK TO BASICS: Many of the recommendations relate to having an effective governance culture which is a key pillar of good governance.[1]
C. CLARITY: every board, committee, chair and member needs to have roles and responsibilities which are clearly defined, understood and remain fit for purpose … in a comprehensive governance framework. This includes selection criteria for appointing/renewing directors and committee members. The chair leads but everyone is involved.
D. DIVERSITY: this is critical – and needs to line up with the organisation’s overall approach. Diversity policies should also apply to the board.
E. EDUCATION: boards need training too. There should be an “… ongoing focus on suitability, training and development” so that boards and individual directors remain appropriately skilled. The capacity of directors needing to be assessed in a consistent and robust way.
F. FRAMEWORKS: These need to be formal, documented, and transparent whether for training, succession planning or other governance issues.
G. GOOD GOVERNANCE, NOT BEST PRACTICE: There is no single system, and no single best practice. Good governance evolves, rather than being set in stone.
This A to G summary is just a snapshot of some of the observations and recommendations of the report. We will include all the report’s guidance in our ongoing workshops and coaching. While the regulators have encouraged all regulated entities not involved in the review to assess their own governance arrangements against the report, the report’s findings are relevant to all directors.
Grounded’s team, through our board healthcheck, confidential workshops and/or coaching can support boards to become better teams and more effective. You can reach us at [email protected] . We would love to hear from you!
You can download a copy of the whole report here: RBNZ and FMA Governance Thematic Review report.
[1] From the IoD NZ’s Four Pillars of Governance publication, where Pillar Two is An Effective Governance Culture