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Why is a Board Skills Matrix Vital for a Well-functioning Board?
The ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, functioning on an if not, why not basis, recommends that companies should have and disclose a board skills matrix that sets out the mix of skills that the board currently has or is looking to achieve in its membership.
A well-composed board should comprise individuals bringing different capabilities, perspectives, and experiences to enhance decision-making and the overall performance of the company. Through the use of a board skills matrix, businesses can ensure they have a well-rounded, effective board of directors.
Key Points:
- Effective use of the matrix enhances the decision-making process, and ultimately overall performance.
- Investors and stakeholders gain increased transparency about the board’s capabilities.
What is a Board Skills Matrix?
A board skills matrix is a tool used to provide an overview of the skills, expertise, and characteristics of board members. The matrix can include different elements such as education, experience, gender, age, industry knowledge, and specific business-related skills. By outlining these diverse attributes, a board skills matrix provides a clear snapshot of the board's collective abilities and identifies gaps.
The AICD provides a Board Skills Matrix tool for directors and AICD members for free.
How Does a Board Skills Matrix Benefit a Company?
The board skills matrix has benefits for both the company and its stakeholders. It enhances decision-making and board effectiveness by ensuring board diversity and coverage of necessary skills. A diverse board provides a variety of perspectives, encouraging innovative thinking and robust discussions.
Moreover, the skills matrix can identify skills gaps in the current board, helping to guide recruitment efforts when filling board positions.
The matrix also increases transparency to stakeholders about the board's composition. It gives investors insights into how well the company's board is poised to steer the company, which can influence their investment decisions.
What Skills Should be in a Board Skills Matrix?
Depending upon the business and industry, a company may need board members with various technical skills, such as financial literacy, knowledge of the industry, or experience in corporate governance. These specifics will vary, but every board should include member skills such as strategic thinking, sound judgement, integrity, and the ability to work within a team. You can read about these attributes and skills, and see suggested compositions with our free tool here.
Board Skills Matrix Example
The AICD publishes our own Board Skills Matrix publically, and you are free to use it as an example board skills matrix. You can access our Board Skills Matrix from 2023 here.
Acknowledgement
We acknowledge the Traditional Custodians of the Lands on which we are located and pay our respects to Elders, past and present. We recognise First Nations peoples' cultural and spiritual relationships to the Skies, Land, Waters, and Seas, and their rich contribution to society.
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