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Cayman Funds 2016

INTERNATIONAL MDAIRNEACGTEOMRESN’ DTA STEARBVAISCES become analogous (and, arguably, in some cases the sole identifying factor) with determining the capacity of a director. Numbers are unquestionably relevant and therefore it is an important question to ask, but if it is the only query raised in assessing a director’s capacity it will be of limited value. Questions are fortunately far more thoughtful and thorough now and people realise that numbers in isolation, without context or completeness, can be incredibly misleading. What are people asking now that is different from before? Queries now go beyond numbers to determine what a director does day in and day out and how their time is spent, as well as to assess the individual’s ability. Simply put, capacity is a function of time and ability. People also now consider the composition of the clients the director serves; their role within the company; what other responsibilities they have beyond serving in a personal capacity on fund boards; their model, support infrastructure; their individual and fi rm capacity constraints; whether the director has any excess capacity for times of stress; and perhaps most important, how they personally view their role as a fi duciary. Another debated issue is whether it is about the individual or the institution. What are your thoughts on this? Most consideration should be given to the capabilities of the prospective director, but I don’t think it is necessarily as simple as one or the other. There is a component of both, although with that said it is a ‘personal’ appointment and there is ‘personal’ liability that comes along with that. So the personal nature of the relationship certainly is paramount, as ultimately the individual, not the institution, has the fi duciary duties to the fund. Therefore it cannot be completely ‘institutionalised’ away. As for most things in life, the right balance is important. You mentioned ‘form over substance’, can you give an example? There are numerous examples from templated reports and agendas, to written resolutions versus meetings, etc. With respect to board meetings, if they are held just to tick a box where the constitutional documents, regulatory guidance notes, or institutional policies and procedures dictate, meetings being held for the sake of having meetings (ie, form over substance) are of limited benefi t. It seems to me as though many have lost perspective that the underpinning of fundamental good governance is about substance, not solely form. Well thought out, planned and attended, discretionary versus mandated, meetings that are timely and properly minuted (ie, substance over form) are incredibly important. Meetings certainly have their place and should be encouraged as appropriate, provided there is a thoughtful, measured, and balanced approach in the decision-making process. It could, however, be argued, and perhaps at times be justifi able, that matters can be documented in more detail by emails and written resolutions than they would by verbal phone conversations, meetings, and corresponding minutes. Regardless of the form of governance, it is important that there is always suffi cient evidence documented to support the decisions taken by a board. The latest trend of having split boards has also received a lot of attention in relation to governance. What is your take on split boards? Split boards have been the trend for the last couple of years, with investors in particular becoming increasingly interested in board composition and appointing directors with complementary skillsets from different service providers. My take is that an effective and diverse board requires competent individuals with complementary CAYMAN FUNDS | 2016 33 You mentioned in last year’s article that ‘governance is not a game’—can you expand on what you meant by that? In the past few years fundamental governance-related issues such as capacity (numbers), substance over form (form over substance), and board composition (split boards), have been used as marketing pitches. These are fundamental governance issues yet the sales side of the issue is increasingly the focus of attention. Could you provide us with your perspective on each of these— shall we start with capacity? There certainly has been an extraordinary focus on capacity since the credit crisis and rightfully so, as capacity is a critical governance issue. Unfortunately though, for some time, an arbitrary number or cap had


Cayman Funds 2016
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