The changing face of directorship
The culture of the boardroom can make or break a director’s ability to fulfil their duties
A DECISION to join the board of a listed company is often seen as a prestigious capstone to a successful career. But the boardroom today is not what it used to be. New directors can quickly discover that the expectations of a modern board role are far greater than they were before. The responsibilities are heavier, the risks higher, and the scrutiny from regulators, shareholders and society more intense.
In the past, a board role focused on oversight, networking and the occasional strategic intervention. As the business environment has evolved, so too have the demands placed on boards.
Today’s directors must grapple with a host of emerging issues: climate change, sustainability, cyber security, technological disruption and a rapidly shifting regulatory landscape.
Expanding role of the ‘modern’ director
This expansion of duties means that the skills required in the boardroom have broadened significantly. No longer is it sufficient to have a board composed solely of individuals with management or financial expertise. The ability to anticipate and respond to societal expectations, manage digital risks and oversee complex compliance requirements is now part of the director’s remit.
Companies law, including the Companies Act of Singapore, would typically require directors to manage the business in the company’s best interests. Today, directors who consider profit maximisation for the benefit of shareholders as their primary duty to the company are, in addition, challenged to embed purpose and community into the equation.
Putting profit before purpose has been criticised as “short-termism”. Calls to recalibrate corporate governance as a collaboration among corporations, shareholders and other stakeholders have shifted the focus to achieving sustainable, long-term value. These principles are embodied in the Code of Corporate Governance and the Singapore Exchange’s Listing Rules that require listed companies to publish sustainability reports.
The true test of a board
Given these heightened expectations, the composition of the board is more critical than ever. For a prospective director, assessing whether the board has the right mix of skills, experience and perspectives is a fundamental step in the due diligence process.
A well-constituted board should be diverse – not just in terms of gender, ethnicity, or age, but in professional background, expertise and thought. Diversity of skills ensures that the board can collectively address the full spectrum of risks and opportunities facing the company. For example, a company with significant environmental impact should have directors who understand sustainability and regulatory compliance.
Equally important is the mindset of the board. In upholding their fiduciary duties, directors must act in the best interests of the company, maintain independence of thought, and exercise reasonable diligence. Mutual respect among directors is essential for effective governance. Constructive disagreement should be encouraged, but it must be grounded in professionalism and a shared commitment to the company’s success.
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The culture of the boardroom can make or break a director’s ability to fulfil their duties. A board that values open dialogue, critical thinking and ethical decision- making will be far more effective than one where dissent is stifled or where decisions are made based on personal relationships rather than the company’s best interests.
For anyone considering joining a board, due diligence is essential. Who really holds decision-making authority? How are conflicts resolved? Is there a culture of transparency and respect for independent views, or is the board expected to rubber- stamp decisions?
The price of getting it wrong
The risks of joining the wrong board are significant. Directors can be held personally liable for failures in oversight, especially in cases of fraud, regulatory breaches or major governance failures. The reputational damage from being associated with a dysfunctional or unethical board would be lasting.
Recent legal cases in Singapore have underscored these risks. In the Inter-Pacific Petroleum case, the claim against a non-executive director for fraud perpetrated by the executive management sent shockwaves through the director community, highlighting the importance of vigilance and the limits of director liability. While the courts ultimately clarified that directors are expected to be “sentinels, not sleuths”, the message was clear: directors must exercise reasonable diligence and cannot turn a blind eye to red flags.
Boardroom of the future
As the role of the director continues to evolve, so too must the approach to board recruitment and development. Companies need to invest in building boards that are fit for purpose – diverse, skilled and forward-looking. After all, companies spend time and efforts in the recruitment of CEOs, CFOs and other C-suite personnel. So why should they expend less time and efforts to find the right individuals tasked to provide the strategic direction for the company?
Prospective directors, for their part, must be discerning in their choices, seeking out boards that are committed to good governance and continuous improvement. With the world evolving so rapidly, directors should take it upon themselves to continually be updated on areas such as environment and technology. Ultimately, the effectiveness of a board depends on the quality and integrity of its members.
For anyone considering a board seat, the message is clear: do your homework, ask the hard questions, and join only those boards where you can be confident that your skills, values and commitment to fiduciary duty will be matched by your fellow directors. In today’s complex and high-stakes environment, nothing less will do.
The writer is a member of the Review Panel for the Remuneration Committee Guide of the Corporate Governance Guides for Boards in Singapore published by the Singapore Institute of Directors.
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