Abdul Samad and Lim with copies of the Directors’ Remunerations Report 2015 and Directors Register: Board Leadership Framework for Financial institutions in Malaysia

DIRECTORS of financial institutions (FIs) have heavy responsibilities given the symbiotic relationship their industry has with the overall economic health of the country.
 
The board of directors are expected to provide leader­ship in decision­making, have foresight in ascertaining strategic direction and set the tone from the top for the corporate governance culture in the FIs that they oversee.
 
Given the increasing emphasis in ensuring strong corporate governance and oversight of management, accepting a directorship these days effectively means taking on a time and attention­consuming role ­ a responsibility suited only for the most committed.
 
With the financial industry constantly evolving, licensed financial institutions such as banks, insurance companies, Islamic banks and takaful (Islamic bond) operators have become more aware of the need to have strong boards that consist of directors with good credentials and diverse talents.
 
Directors Register
 
However, there is a gap between demand and supply of board talent which must be addressed. This has not gone unnoticed and one organisation that is offering a new source of board talent supply is the FIDE (Financial Institutions' Directors Education) FORUM. The organisation has begun creating a database of solid candidates who are suitably qualified to take up directorships in FIs.
 
This initiative known as the Directors Register is a joint project between FIDE FORUM, Perbadanan Insurans Deposit Malaysia (or the Malaysia Deposit Insurance Corp) and Bank Negara Malaysia. A key initiative for FIDE FORUM, the register is intended to build a healthy pipeline of high­calibre candidates from which its member FIs can appoint to serve on their boards.
 
When FIs become members of the FIDE FORUM, they will have access to the Directors Register which is a board talent pool from which they can pick the right candidate for directorship, explains FIDE FORUM CEO Lim Lai Hong.
 
"There will always be a need for high­calibre talent to join boards, especially in financial institutions which play a very important intermediary role in the real economy," she tells FocusM. "It is imperative that financial institutions identify the right candidates to sit on their boards given that the board sets the tone for the whole company and is expected to provide oversight and strategic leadership."
 
Lim points out that as demand is more than supply, the register aims to widen the talent pool from what is currently available.
 
According to Lim, the existing practice of getting a director is through personal networks, references or a search firm. Therefore, FIDE FORUM's register is a game changer in that it offers an added option which complements the existing approaches. Furthermore it allows financial institutions to identify potential board talent from the Directors Register who have gone through a robust selection process.
 
Of leadership and trust
 
Professionals who want to be part of the register have to undergo a strict vetting process to determine whether they are qualified to make the cut.
 
In addition to the applicant's character and financial integrity, the selection process is structured to determine if the applicant has the required leadership experience and exposure, competencies, traits and drivers to make him/her a successful director.
 
In determining this, FIDE FORUM uses its own Board Leadership Framework which was jointly developed with an international consultancy firm.
 
"We have benchmarked the requirements internationally and then customised them through consultations using focus groups and industry briefing sessions to seek the views of FIDE FORUM members ­ all of which are incorporated into the selection process," says Lim.
 
Therefore, getting one's name on the register is not easy. Each applicant must undergo a multi­step evaluation that begins with the submission of an application form to FIDE FORUM. Among the vital information that is studied are career history, an in­depth look into the applicant's experience, expertise and credentials.
 
Next, FIDE FORUM conducts a limited screening of the applicant's character and financial integrity.

Leadership traits and competencies are also identified using psychometric profiling during which a candidate is required to answer a set of questions online.
 
Lim explains that the psychometric profiling is the science behind the evaluation of an applicant's profile, as it is validated against the database of two million professionals globally.
 
The decisive moment comes when the applicant sits down for an engagement session with seasoned directors such as FIDE FORUM chairman Tan Sri Dr Abdul Samad Alias and other senior directors. This allows FIDE FORUM to assess the applicant's suitability for directorship appointments before deciding whether to admit him or her to the register.
 
Abdul Samad describes the review process as very behavioural in nature. "We look at the scientific data, and then using our experience we probe into what the applicant has done," he rationalises. "So, if he says he has done something, we will probe further to see how exactly he has handled the situation."
 
Succession planning
 
Ultimately, the process is to identify whether a particular applicant can offer what is needed and expected of a director on the ground in today's challenging financial industry. In this regard, FIDE FORUM believes that its register will be especially useful for boards which are striving to improve their diversity, for example, in terms of gender or expertise.
 
"We want boards to be made up of members with diverse qualities and professional backgrounds," insists Abdul Samad. "For example, technology is now very important. If you are a bank and does not have a technology expert, who will know what technology platform you are running on?"
 
In cases like this, financial institutions who are FIDE FORUM's members can use the register to identify candidates to plug these expertise gaps for the purpose of succession planning and board rejuvenation.
 
Launched in April, the register has 18 candidates to­date which FIDE FORUM believes is a good achievement given the stringent selection process. Lim emphasises that quality of the register's board talent is paramount.

FIDE FORUM also expects growing interest in its register given that new regulations mean that boards will have to be refreshed more often. "I think our members know that Bank Negara Malaysia wants more independent directors. Given the guideline to limit their tenure to nine years, there will soon be pent­up demand for independent directors," adds Abdul Samad.
 

Forum lets directors network and keep abreast of developments

FIDE FORUM was formed back in 2010 by the first group of directors who underwent Bank Negara Malaysia's inaugural Financial institutions Directors' Education (FIDE) programme.
 
After completing the programme, Tan Sri Dr Abdul Samad Alias and his batchmates decided it would be a good idea to continue the networking among programme participants and provide feedback on the programme to the organisers. Abdul Samad is currently FIDE FORUM's chairman.
 
FIDE FORUM provides its members with a platform to network, exchange views and discuss the latest industry developments and the implications with each other, regulators and experts. These sessions allow directors to keep abreast of the times as well as be in touch with the latest developments around them, says CEO Lim Lai Hong.
 
Abdul Samad says that such sessions are very useful because they make directors aware of the breaking trends in the industry. Moreover, they provide them an opportunity to have forthright conversations with their peers on the goings­on of their industry, allowing for collaboration and an exchange of ideas.
 
Membership applications to FIDE FORUM can be made by a licensed financial institution, in which case its directors must have completed or are undergoing the FIDE Core programme.
 
Aside from the Directors Register, FIDE FORUM also conducts thought leadership research and industry­wide surveys. Last year, it conducted a study into the remuneration of non­executive directors of licensed financial institutions and produced The Directors' Remuneration Report 2015.
 
In this report, FIDE FORUM emphasised that a holistic approach must be taken to strengthen boards' effectiveness, it recommended bold changes to the remuneration practices for non­executive directors to better recognise their contributions in light of their onerous roles and responsibilities. Among other suggestions, it also called for comprehensive board nomination and robust board evaluation practices.