Small on numbers, big on skills: a Goldilocks formula for captive boards
Captive board members must have an understanding of the businesses they are working with to be effective in their roles, according to Margaret Nekic, president at Inspirien.
Speaking at the VCIA conference on a panel considering the optimal composition of captive boards, she said members should have received training to ensure they understand financial statements.
Captive boards should cultivate good relationships with the regulators on their jurisdictions, she added.
The panel stressed boards should invite a breadth of expertise to be represented, including management, IT, human resources, insurance, regulation, finance, accounting, claims, legal and asset management, as well as any other areas that may be deemed appropriate to the specific business of the company.
A range of examples highlighted the many variables to be taken into account when thinking about the composition of captive boards. In some instances panelists thought having the parents of company managers on the board could be appropriate, if for example they were family businesses which the parents used to manage themselves, and therefore knew very well.
But a consistent theme was keeping boards relatively small and diverse. Big boards may bring a wider range of skills and expertise, but at the expense of making it harder to organise meetings with full attendance.
Similarly, having a range of committees on the board can be helpful, but too many can be cumbersome and may not ultimately be beneficial, warned Nekic. She cited financial and compliance committees as the critical ones to form.
Around half of the audience in the panel session indicated they themselves were board members, with a good number of them saying they felt they had been well prepared for the role when they took it on. The vast majority indicated they felt being a board member had been a positive experience.