The BSA

The BSA See Benefits of Board Evolution

The UK's financial services sector is facing a very challenging regulatory climate and greater scrutiny of corporate governance arrangements, following the global credit crunch. Effective Board evaluation is a key issue, and members of the Building Societies Association (BSA) turned to their trade association for advice and guidance on this hot topic.

The BSA represents mutual lenders and deposit takers in the UK, including all 47 UK building societies. Its members have total assets of over £375 billion, residential mortgages of almost £235 billion and over £250 billion of retail deposits.

"Board evaluation is a fairly new area for our members, and they have very different approaches to the process, as we discovered through a quick survey," explained Adrian Coles OBE, Director General of the BSA. "We realised more detail was needed to try to establish some good practice guidelines, and so asked the Financial Services practice team at Warren Partners, who are associate members of the BSA, to help us with this."

Led by Joëlle Warren, the team already works with around a quarter of BSA members on executive search assignments. Based on their detailed knowledge of the sector, they sent a questionnaire to all 49 BSA members. Chairs, Chief Executives or Board Secretaries from 33 members responded.

Their written responses were followed up with a series of one-to-one telephone interviews, and a the BSA produced a detailed report outlining the findings.

Key findings

UK mutuals are required to conduct an annual review of the effectiveness of their Boards, and Warren Partners asked them about how they carried out this process and the areas they assessed.

Among the key findings were: That the review methods used varied widely, including face-to-face and online questionnaires, self-assessment, peer appraisal and 360° feedback.

The key areas for assessment were:
Behavioural – How executives are challenged by NEDs, how concerns are voiced, ethical behaviour.
Operational – Directors' individual contributions to the Board, the balance of people and skills, training requirements, the effectiveness of sub-committees. 
Procedural/structural – The Board size, length of meetings and quality of papers.

A third of those surveyed used external facilitators for the review process, including accountancy or other specialist firms, and paid a broad spectrum of fees for the service.

Next steps

"We were very pleased to work with such a responsive and experienced team, and this project has proved very worthwhile for the BSA and our members" said Adrian Coles.

"We approached it with a very open mind, but were still surprised by the significant variation in approaches to Board evaluation among building societies, even between those of a similar size and complexity. There clearly isn't a ‘one size fits all' answer, but consistency of approach is important and we believe our members can learn from each other. The report findings offer a valuable benchmark and give our members a clear agenda for those tasked with carrying out their board evaluations. This is particularly useful in terms of securing value for money from external providers."

Importantly, Mr Coles believes that the project is also welcomed by the industry's regulator, the Financial Services Authority, and enables BSA members to demonstrate commitment to good governance for their members and other stakeholders.

Added Andrew Hopkins, BSA Policy Adviser: "We have shared the findings with members' Chairmen and will be holding a session on Board evaluation at a member event in April. Feedback has been very positive, and we hope to conduct the exercise again, in 12 months or two years, to see how the report has shaped thinking among our members. They face a very different housing, savings and mortgage market than they did in 2007, and anything which helps to highlight the quality of the Boards running mutual organisations is very welcome."

Warren Partners Head of Financial Services' Practice, believes BSA members also have the opportunity to differentiate themselves from other sectors of the financial services industry by broadening the diversity of their Boards and moving beyond the perception that a Board effectiveness review is just another box to tick.

"We're keen to work with the BSA to help develop best practice for recruiting, training, developing and evaluating mutual organisations' Board members" she said. "An accredited process suited to the varying size, objectives and complexity of BSA members would provide a clear framework to show what a great mutual business looks like. This will, in turn, deliver real business benefits, driving organisations forward and improving their performance – to the benefit of members, customers, employees and the wider UK economy."


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