Learning the rules of the board

HR issues are being dealt with at the board level and HR needs to be up to speed.

Boards of directors are paying more attention to HR issues and that means senior HR professionals will have to start brushing up on their knowledge of corporate governance.

Increasingly boards throughout Canada are dealing with issues like succession planning, retention, compensation and labour relations, and they are turning to HR inside the organization and outside for information and guidance.

For HR, this new interest is due in part to the labour shortage and the need for skill development and expertise for business, says Brian Orr, managing director of OrgArchitect Inc., an HR consulting firm in Toronto.

“The boards are dealing increasingly with HR issues. This interest is because these issues are the critical ones that impact the success of the organization,” says Orr, who himself sits on a number of boards.

Most boards now have a member who has an HR background. In Orr’s case, that’s exactly why he was approached to sit on boards.

“They were realizing themselves that the board needed to have an understanding of HR issues.”

This involvement of boards at the various levels of the organization is determining the difference between good and bad governance.

Some boards will set up HR committees and will rely on information from the senior HR person in the organization. As boards become more active, they’ll rely more and more on HR, and that’s where knowledge of how boards work comes in handy for the HR professional.

“As this greater activity evolves, there will be more and more demand on HR for information by boards,” says Ezra Rosen, consultant and program co-ordinator with the Toronto-chapter of the Canadian Human Resources Planners.

Boards are still trying to figure out what a new, more active relationship will look like.

Two recent reports on corporate governance have brought the issue of governance to the fore but both with little fanfare. One report, presented by the Joint Committee on Corporate Governance and spearheaded by former Canadian Broadcasting Corporation chairperson Guylaine Saucier, recommends that a CEO should not also act as a chairperson for a board. It further suggests giving boards greater power, and that they should meet independently without management present. The report mirrors the 1994 Dey report on corporate governance that also suggested that a chairperson should not be a member of the management team.

“There’s an interesting dilemma here: should the board be hands-off or should they get involved in what’s going on in the lower levels of the organization,” says Orr.

The successful boards will be able to make a connection with the lower levels and not rely solely on the CEO for the goings on in the organization.

While the particulars of the reports have little to do with HR per se, HR will have to deal with the effects of changes to corporate governance practices. In the end, they’ll have to work with a “good” or “bad” set of directors.

“Ultimately, the board has the right to make those policy choices in the organization and you live with it or you don’t,” says Orr.

Facts on governance

According to the Conference Board of Canada report, Replacing a Few Good Men: The Changing Face of Canada’s Boards, Canada is set for the largest shift in corporate power in the last 50 years.

Some findings from the report:

•management wants a greater diversity at the board;

•up and coming directors will be much younger than the 65-to 70-year-old men they are replacing;

•most important factors when selecting board members include contribution, skills, experience and geography;

•ratios of women and minorities on boards are considerably lower in the private sector than in the public and not-for-profit sectors; and

•Canadian board members are paid about 60 per cent less than their American counterparts (the Canadian average is about $20,000).

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