The role of boards is emphasised during crises

This year, I have enhanced my expertise in business management by completing the Certified Board Member (CBM) degree and the chairperson course offered by the Finland Chamber of Commerce. These trainings gave me a practical reminder of the extensive scope of the duties of a company’s board of directors.

I have also been keeping an eye on the new regulations and directives proposed and approved by the European Commission, the latter of which are implemented into national legislation in addition to the domestic regulation amendments. A significant share of these changes are such that the companies’ boards should either implement them themselves or, as the law puts it, make the appropriate arrangements for their implementation. In other words, responding to these regulatory changes calls for expertise from the boards.

In addition to the ever-increasing regulation, we are facing one crisis after another. The COVID-19 pandemic, the war in Ukraine, inflation, increasing interest rates, the energy crisis, the component shortage – there are many major issues that cannot be fixed with legislation but nevertheless affect the business of companies and the decision-making of their boards. These changes are unexpected, and decisions have to be made based on the available information. When the board’s conduct is evaluated later, it should be kept in mind that there is more information available at the time of the evaluation than what the board had at its disposal when it made its decisions. 

The board must stay vigilant in case the company’s financial situation weakens due to crises. The board should actively monitor the state of its equity and notify the Trade Register if it is in the red. Particular attention should be paid to any operations and distribution of funds that deviate from normal business – solvency and balance sheet tests are currently more challenging. Groups must also remember that group privilege is not recognised. When financial difficulties arise, the responsibility of each group company’s board to further the benefit of the said company diligently is emphasised and group accounts or lending to group companies should be re-evaluated.

The members of the board have a challenging task and they are also responsible for something that is very important to us all: well-managed companies are vitally important to Finland’s development. That is why expertise is such an asset in these challenging times.