Directors’ Handbook: the knowledge you need

Einstein suggested that ‘imagination is more important than knowledge’, but if you think about it logically, before the human brain can begin to imagine anything it has to have something to build on, and that is knowledge.

Knowledge is at the core of what the Directors’ Handbook offers to those who are brave enough to be a director. That being said, it goes much further than that, because throughout it confronts the reader with challenging questions. It is these challenges that, I hope, will push the brain into the world of imagination, encouraging directors to think beyond the general and instead look at how the knowledge contained in the book needs applying within their own particular corporate context.

As the title of the accompanying webinar I hosted for the Institute suggests, I view the role of the director as vast, complex and ever-changing, but that, I would suggest, is a big part of the excitement and fun of being a director. It encourages us to use our critical thinking to find optimal solutions to the problems we face. Every organisation is different, and every director is different. There is very rarely, if ever, a single right answer to corporate questions. As directors it is essential that we understand, consider and challenge the operational, financial, governance, and stakeholder impact of our decision-making.

This book will be a useful resource for all directors, whatever their formal title or legal status, and is relevant to directors of all types and manner of corporate structure. Remember that under Companies Act 2006 there is no differentiation between executive and non-executive directors; the accountabilities apply not just to directors registered at Companies House, but to de-facto directors, shadow directors, and directors of any organisation where a judge might reasonably presume that a director is behaving in line with established duties and expectations.

All directors are required to be independent in their ability to remove bias and view problems with objectivity. The dynamics of a boardroom mean that balanced decisions are best formed from an optimal balance of executive and non-executive challenge. This is unlikely to happen by chance, the mix of directors and their knowledge must be appropriate for the size, complexity and sector of the organisation.

The Directors’ Handbook could form a useful part of an induction programme, but equally could be used as foundation knowledge in the evaluation of a board’s effectiveness and efficacy.

During my 45 years of working with many boards and many directors I would suggest that two main gaps are all too often evident in the boardroom, and these themes run through the Directors’ Handbook.

• A lack of financial literacy – the ability to look at, read, consider and challenge a set of figures – after all these figures underpin the liquidity and viability of the company for which each director is responsible.
• A lack of appropriate professional scepticism – the ability to step back, and challenge what is being presented from a perspective which eliminates bias.

It’s my hope that this book will go some way to addressing these two recurring gaps for those who read it and in general improve their performance, and by extension the performance of their organisation.

Mark Wearden

Author of the Directors' Handbook and Directors' Checklists.

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