Key competencies for directors

Wednesday, 01 January 2020

The board is responsible for ensuring that it has represented on it the skills, knowledge and experience needed to effectively steer the company forward. Directors will be appointed to the board because their specific skills, knowledge and experience will fill particular gaps on the board. It is important to acknowledge that not all directors will possess each necessary skill, but the board as a whole must possess them.

What is a competency? Kiel et al. define the competencies of a director as being the experience, knowledge, skills, attitudes, values and beliefs of the person.1 They provide a framework for considering these competencies as follows:

  • Industry: Experience in and knowledge of the industry in which the organisation operates; 
  • Technical: Technical/professional skills and specialist knowledge to assist with ongoing aspects of the board’s role;
  • Governance: The essential governance knowledge and understanding all directors should possess or develop if they are to be effective board members. Includes some specific technical competencies as applied at board level; and 
  • Behavioural: The attributes and competencies enabling individual board members to use their knowledge and skills to function well as team members and to interact with key stakeholders. 

The ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations2 (ASX Principles) touches on the competencies of directors in a number of recommendations. These recommendations highlight the importance placed on balancing the competencies of directors in publicly listed companies. The same requirements are also desirable for the boards of many unlisted organisations.

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