SLID Chief Faizal Salieh shares key insights to advocacy role; challenges to Boards and directors

Sri Lanka Institute of Directors (SLID) Chairman Faizal Salieh in this interview with the Daily FT shares key insights to how the organisation has evolved and progressed since its formation over a decade ago as well as some of the new initiatives. Salieh also spoke of new challenges to Boards in companies and directors and the need to reinvent themselves to remain effective and successful. Here are excerpts.

Q: Could you please talk a bit about the beginnings of the Institute of Directors in Sri Lanka?

 The Sri Lanka Institute of Directors was created under the aegis of The Ceylon Chamber of Commerce in the year 2000. Since the Chamber was essentially a trade and commerce chamber, it was felt that there was a need for a separate and dedicated body for the furtherance of good corporate governance and other matters of direct interest to company directors in the private sector. It operated under the wings of the Chamber until about 2010 when it chose to go it alone and became self-driven. The first founder president of the Institute was Deshamanya Ken Balendra who served until 2002 and many top corporate leaders have been at the helm of the institute since then. 

Membership was limited to registered directors of listed companies in the private sector but over time the Institute has become more inclusive and we’ve opened our membership admission criteria to include directors in the public sector, state-owned enterprises, family-owned businesses, C-suite managers and even academics and students under different membership tiers. The legal form was changed to a company limited by guarantee in 2012. 

Q: What has been the response to the changes SLID has introduced to member admissions?

 We are seeing an increasing number of young directors and aspiring directors from private sector corporates, middle market enterprises, SMEs and family-owned businesses joining us but the response from the public sector and SOEs have not been as much as we had expected. We shall continue with our efforts to reach out to and onboard directors from the public sector as we believe that the public sector institutions and SOEs should benefit from our range of director education, training and development programs as well as our exchange and interaction platforms. 

The challenge here is that most public sector officials tend to wait for written circular instructions from their respective ministries to join. We would like to see this situation change and the ministries and officials using our services and platforms to build capacity and competency in the public sector. The private sector and public sector directors and key management personnel should not operate in silos but come together on a common platform and benefit from the world-class knowledge, skills, competencies, training and development opportunities offered by SLID. 

Q: What are the membership categories available at your Institute? 

 We have three categories of membership namely, Ordinary Members, Associates and Affiliates. Ordinary Members are all Form 20 registered company directors. Associate Members include partners of professional practices, sole proprietors and partners of incorporated and unincorporated businesses, senior C-Suite managers of private and public companies reporting directly to the Board or a Board Director, persons in the senior management of public sector entities reporting to the apex level of that organisation, and academics at the level of professor or equivalent. Affiliate status is given to those in management positions, aspiring directors and students engaged in postgraduate studies and having a keen interest in the purposes of the Institute.

Q: What were the challenges caused by the pandemic to the operations of the Institute?

 The lockdowns in particular constrained our training and development programs which were almost always face-to-face deliveries. Though we were able to run webinars and limited online sessions, our core Board Leadership Training sessions, popularly known as BLT, were seriously affected as we could not hold them regularly under elevated health risk conditions and lockdowns. Our member networking opportunities were also constrained. This also dragged down our educational and training income streams. Nevertheless, our production and delivery teams have worked round the clock to deliver education and training sessions through the pandemic, doubling our participant intakes and running parallel sessions whenever possible during times of lower health risk. 

We’ve used the pandemic times to review and consolidate our director training programs, have carried out extensive content reviews and developed and updated several of them in line with contemporary global trends. We also experienced delays in membership subscription payments, and a higher than usual attrition rate particularly amongst Associate and Affiliate members which impacted upon our cash flows. 

The SLID Board/Governing Council continued to meet as scheduled even during the most difficult times, deliberating and responding to the challenges with renewed vigour and rigour. In August 2021 we rallied round and took a conscious decision to elevate SLID to the next level despite the pandemic and its numerous challenges and we remain strongly focused on the execution and delivery of our strategic plan. Our Secretariat staff continue to work with great commitment both in office and from home in a volatile pandemic environment. We have not allowed the pandemic to stall our internal thinking and doing, and are staying firmly connected to deliver what we have planned.

Q: What are the key strategic initiatives SLID has introduced to enhance its image?

 Our key strategic focus areas are Relationship Management, Thought Leadership, Event Management, PR and Marketing, and Finance and Administration. Under Relationship Management our focus is on Membership Value Propositions and Partnerships and Collaborations. Under Thought Leadership, our focus is on Advocacy, Accreditation, Research and Publications. Under Event Management, our focus is on Networking Events, annual events, fundraisers, round tables and forums. Under PR and Marketing, our focus is on Digitalisation, Brand building and media relations including social media communications; and under Finance and Administration our focus is on streamlining and improving the efficiency of the internal processes at the Secretariat.

Our strategic initiatives are time lined in terms of the four quarters in 2022. In the first quarter, we have resourced our Secretariat by adding new recruits to the areas of Policy and Knowledge Management, and Finance and Administration; created two new Working Committees and four new Forums; started on a project to modernise our website and enhance our presence in the social media; are working on the revision and updating of our BLT program; reviewing and updating our basic operating guidelines; setting up an expert counselling/advisory panel for individual director consultations and building a viable model for Board Opportunities and Placements for directors and aspirants. 

We’ll work on our Q2 – Q4 deliverables in sequence. 

We have four Working Committees in place in the areas of Advocacy (led by Shehara de Silva), Education and Training (led by Aruni Rajakarier), Innovation and Technology (led by Nuwan Perera), and Editorial (led by Rasakanth Rasiah). 

We have four Forums namely the Audit Committee Forum (led by Suren Rajakarier), the Independent Directors Forum (led by Ravi Abeysuriya), the Women Directors Forum (led by Aroshi Nanayakkara), the Board Secretaries Forum (led by Sitari Jayasundera), the Young Directors Forum (led by Anushka Wijesinha), the Family Business Forum (led by Imtiaz Esufally), the Chairmen’s Forum (led by Sunil Wijesinha) and the CEOs Forum (led by Rolf Blaser). The latter four are the new forums we have created this year. All our committees and forums operate under the defined core objectives, guidelines and terms of references issued by the Governing Council, and there is a Council member assigned to each of them for the purpose of oversight and reporting on their performance to the Board/Governing Council of the Institute. 

All our forums were evolved in response to the need we had felt for them. We have entered into strategic collaborations with top class partners to add technical support and value, such as the IFC, KPMG, EY and ACCA on some of these forums and platforms and I am happy to say that these partnerships are working very well for the benefit of the participants in these forums. The Young Directors Forum and Family Business Forum are two exciting new forums that, I believe, will make great contributions to an emerging segment of directors and aspiring directors in our country who are showing a thirst for new knowledge and skills in these areas.

Our connections with the international corporate director fraternity through our membership in the Global Network of Director Institutes (GNDI) gives us tremendous access and insights into what is going on in the global boardroom platforms, contemporary knowledge and future trends, and enables us to participate in global discussions and draw in current value for our members.

Q: Can you elaborate on your Board Leadership Training program? 

 Our flagship BLT program is unique in that it covers, across four main parts and through 16 modules, the nuts and bolts a company director ought to know and understand his/her role and carry out his/her responsibilities effectively on the Board. All the sessions run on templates designed and crafted by the IFC and endorsed by the SEC. They are subject to periodic reviews on content by SLID in consultation with the IFC and SEC. Our facilitators are also subject to performance reviews and some of them have been initially trained and certified by the IFC. All our facilitators come with a wealth of practical experiences and insights.

Part I of the BLT through its four modules covers the corporate governance framework, the different roles, rights and responsibilities of the shareowners, boards, directors, executive managers and other stakeholders in the corporate governance system, protection of minority rights, policies and procedures, concerns and challenges, financial and non-financial disclosure and transparency, insider trading and related party transactions. 

Part II focuses on The Board. It builds on the overview provided by Part I and through its four modules covers the Board’s role, directors’ duties, rights and liabilities, separation of roles between Management and the Board, different types of directors, Board characteristics, composition, structure and balance, The Board in Practice and The Board in Action including the Board’s effectiveness and evaluation. 

Part III focuses on Strategic Leadership, the Board’s role and responsibilities in the formulation and execution of strategy and governance of enterprise-wide risk. Through its 4 modules, this Part covers the Governance of Risk, Risk Management Frameworks, Evaluation of Strategy Execution and Executive Directors’ Performance, disaster recovery and business continuity planning and Corporate Responsibility. 

Part IV focuses on Financial Stewardship and Accountability and through its 4 modules covers the Board’s role in financial oversight, the international and local accounting environment, analysis of financial statements, the control environment, financial reporting, corporate finance, critical financial indicators, dividend policy, valuation, whistle blowing, the Board Audit Committee and external audit. 

The full BLT program of 4 parts and 16 modules is very comprehensive, well sequenced and deep dives into the critical skills a company director actually needs to stay sharp in the Boardroom. The sessions include case studies, experienced facilitator interventions, practical examples, role plays and discussions. The feedback we have had on all our programs have been very encouraging with very high ratings given by participants on its content value and practical takeaways.

Though there are other programs offered by other individuals and institutions from time to time in the business landscape, our BLT program clearly stands out as a well-structured, comprehensively focused and time-tested series with consistent high ratings for Board directors and aspiring directors across industries and corporate sectors. The challenge of Board building is huge. Most companies don’t know where to begin. To help them we have developed an agenda and toolkits that Boards can use to define and achieve their objectives.

Q: How do you see SLID’s role as the Voice of Company Directors in the country?

 I think this is important and a role SLID must play. We have been doing so in our own way in the past. We have now formed a dedicated Advocacy Committee to work on selected areas of advocacy on behalf of our members and the director fraternity in general. We believe that company directors matter, their voice must be heard and SLID should vocalise on their behalf in an effective and timely manner.

Q: What is your main advocacy agenda? 

A: We have some key areas on our advocacy agenda. As of now, we are advocating for greater diversity in the Boardrooms. We call it the Board Diversity Agenda. Our focus is not just on gender diversity alone but also on skills, knowledge, age and ethnic diversity as we believe Board diversity must be approached from all these fronts to enable Boards to rise above the parochial traditional perspectives and cross any subtle lines of discrimination in their compositions and make them become more resilient, future-ready and future-proof. 

We are also advocating for continuous competency enhancement processes for corporate directors through structured Board evaluations, director competency assessments, and accredited director education, training and development. The future demands current and up-to-date directors and we need to build calibre and capacity across our companies, particularly in the younger and aspiring directors. We are engaged in healthy deliberations with both the SEC and the CSE in this regard. We firmly believe that Better Directors make Better Boards and Better Boards make Better Companies.

Another advocacy point is that governance should not be limited to public listed companies. We believe that good governance must be embraced by the MMEs and SMEs as well, and early enough in their life cycles, in order to enable them to progress smoothly to the next league of business operations. So, we are reaching out to MMEs and SMEs on this.

Q: What areas should company directors focus on to make their Boards more effective?

 The pandemic has altered the trajectory of many companies. The strategies and plans set two years ago may be obsolete today. If the strategy has changed, the Board should ensure that the directors, executive managers, and their succession plans fit to meet the strategic changes. Realignment and rebalancing become imperative under these circumstances. Directors should have a closer eye on their business cashflows, develop an ability to be more flexible with technology, and a responsibility to create fair and representative environments. 

Not all Boards have a dedicated Board Diversity Agenda and a Technology Resilience Agenda. Both these are necessary to increase the effectiveness of the Board’s governance process. Diversity and an inner Boardroom culture that encourages challenging questions, rigorous analysis, open discussions and independent judgment would help the Board steer through difficult environments in a professional and mature manner. Technology is a great enabler of business. Boards must be open to embrace technology with a proper technology governance framework and be able to read and understand the various technology risks in order to make the right decisions. 

Leaving technology entirely in the hands of one expert director or manager might not be the right thing to do. For example, cybersecurity risk should not be seen as a technology risk but a business risk that requires understanding by all the directors sitting on the Board. There is a paradigm difference between digitisation, digitalisation and digital transformation. The latter goes beyond simple automation and involves business model changes and organisational restructuring and realignment. Most people are confused about these three states. Digital transformation is a challenge that most Boards must be prepared to embrace and provide leadership to in business today. 

Boards should review and ensure that they have a rigorous process in place for the selection of directors and key management personnel, particularly the criteria to assess competency, the evaluation of performance and planning for succession. Nomination Committees must up their game in selecting the right people for the company and put in place a defined process by which the Board’s and Directors’ performance is regularly evaluated, at least annually. 

Today most Boards work through a number of business-relevant Board Committees. Such structures help directors to deep dive into critical matters through a process of rigorous oversight. The Board performance evaluation process should also include the evaluation of the performance of each Board Committee with respect to their defined objectives and terms of reference. Boards should have a structured agenda to act on the outcomes of these evaluations in order to remain effective.

Q: What are the emerging challenges to Boards in the global arena? How much of that is relevant to local Boards?

A: The pandemic is driving companies to review their very existence, reimagine their purposes, reset their business models and grab new opportunities. This also poses a challenge to the Board’s Integrity Agenda and should make Boards think how they should drive business integrity through stressed business conditions. This is real as many Boards grapple with the pressures of short-termism, which is often driven by executive management, versus long term sustainability which is a Board level responsibility.

As business dynamics change, corporate governance frameworks must also change to preserve fairness in the market. Regulators everywhere are becoming more and more alive to this. But regulations alone will not ensure fairness unless companies are genuinely committed to comply. The rigor of compliance as a policy and process is a key Board responsibility. Where there is no compliance, there must be an explanation which is made transparent to the stakeholders.

In addition to the drastic supply chain disruptions caused by the pandemic, Boards will have to deal with monetary policy uncertainties, changing regulatory priorities, geopolitical uncertainties, and talent acquisition and retention challenges.

All these are also relevant to local Boards.

In addition, there is ESG which is now trending globally. It is a new philosophy that has emerged and is attracting investor activism in several markets. Some investors are even prepared to settle for lesser ROIs if a company has ESG goals. It is an extension to the contemporary view that a company should not only exist to meet the financial expectations of its immediate shareowners but consciously go beyond to serve the broader stakeholder interests of the society and environment in which it operates. 

The Environment component includes areas such as Waste and Pollution, Resource Depletion, Greenhouse Gas Emission, Deforestation and Climate Change. The Social component includes Employee Relations and Diversity, Working Conditions, Local Communities, Health and Safety and Conflicts. The Governance component includes Tax, Strategy, Executive Remuneration, Donations and Political Lobbying, Bribery and Corruption, and Board Structure and Diversity.

ESG helps businesses to look outwards. The challenge would be how well companies can define, measure and report their ESG goal achievements or compliance. There is an emerging thought process to build ESG metrics into executive compensation but hard metrics are a difficult proposition in this area as they could turn out to be counter-productive. As of now, ESG evaluation is very much a subjective and not an objective approach. Time will tell.