Tuesday, 30 May 2017

Effective boards are more vital than ever

The deregulation package that came into effect for housing associations in April 2017 has removed the Homes and Communities Agency’s (HCA) power to prevent any future transactions, such as mergers and disposals, within the sector.

The move has placed responsibility for consent firmly with the association’s board and is a clear example as to why it is so vital for them to have an effective board in place.

Over the past few years the housing sector has seen an increase in the number of boards that include executive directors as full board members.

There has also been a move away from prescribed board membership, including the classic model of one third independent, one third local authority and one third tenant.

This is starting to bring housing associations towards a model that is more akin to private and listed companies and away from those seen in the wider housing and education sectors and within local authorities.

Grant Thornton’s latest report ‘The Board: creating and protecting value’ is a cross sector review of board effectiveness.

The report is based on a survey of executive and non-executives from a range of organisations including housing associations, charities, local government, private companies and publically listed companies.

Whilst the organisations included are subject to a variety of statutory and governance requirements, they do all share a common overriding principle: the governing body is a collective charged with developing the organisation’s purpose.

The role of boards is constantly evolving but one thing remains consistent; for an organisation to function at its best, it needs an effective board in place.

Given the importance placed on the culture of an organisation, a board highlighting and driving its values is now just as essential as providing effective management.

Encouragingly, all sectors scored highly in our report when asked about the strength of leadership displayed from their board.

We found that 89 per cent of housing respondents said they see their executives as strong leaders and almost all (97 per cent) thought that the executive directors effectively model the organisation’s values. Meanwhile, 87 per cent of housing respondents also thought that the non-executives inspire the executives to realise the organisation’s purpose.

All respondents from the housing sector agreed that they received enough information to keep up to date with developments within their organisation, a figure only matched by AIM listed companies.

In comparison, fewer housing respondents (84 per cent) felt they received enough information regarding changes outside of their organisation.

However, this was still one of the top results; potentially attributed to the fact that housing associations operate in a sector where the regulator, trade body and other sources are constantly producing general sector updates.

Housing associations also ranked highest, alongside main market public companies, when asked if there were adequate processes in place to evaluate the performance of the board.

This is an area which has clearly progressed within the sector in recent years, driven by the requirements of the NHF code of governance (or the combined code where applicable) and the general emphasis placed on board quality by the regulator.

Overall, the reports results show that housing associations boards believe they are in a good position to perform effectively.

However, this is no cause for complacency.

Boards continue to come under increasing pressure from both the market and regulators in terms of effectiveness and accountability so whilst this is evidence that the sector has a solid base to build on, there is always room for improvement.

Jenny Brown, is not for profit chief operating officer, Grant Thornton UK

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