The report, produced with the support of Board Intelligence and Morrow Sodali, identifies the factors that boards should consider to ensure governance arrangements encourage rather than constrain innovation, and the characteristics that are common to successfully innovative companies.
Board Intelligence is delighted to have provided research support to the IoD Centre for Corporate Governance, and extends thanks to the Board Intelligence community for sharing their views.
Commenting on the findings of the report, Dr Roger Barker, Director of Policy and Governance at the Institute of Directors, said: “Innovation is an essential driver of economic growth and productivity. It is therefore crucial for the UK to unlock the key to successful innovation to enable the many innovative start-ups and small businesses to scale up and reach their full potential, and remove barriers to the ability of larger businesses to innovate.
“Policymakers and regulators need to adequately consider the impacts of their work on innovation. The cumulative effect of regulation on boards has had indirect adverse effects, with some boards spending a disproportionate amount of time dealing with compliance issues at the expense of discussing strategy and innovation. It also influences the selection of new board members, favouring those who may be risk-averse by nature. This had contributed to the stifling of innovation in the longer term.”
Chris Hodge, Senior Advisor at the IoD Centre for Corporate Governance, and the report’s author, said: “With the proportion of UK businesses defined as ‘innovation active’ in decline, now is an important time to uncover and address the causes.
“There are many factors that will influence a company’s ability and willingness to innovate, such as access to capital, skills and support. However, the way a company is governed has a significant influence. The governance framework must be conducive to innovation, to ensure a company is in a position to take advantage of the opportunities and cope with the challenges ahead.”
Megan Pantelides, Executive Director of Research at Board Intelligence, who led the research with directors and executives from the Board Intelligence community, added: “Innovation is crucial to company survival, but many boards struggle to engage in meaningful discussions about it. This is not just about skills and expertise, ownership structures, or regulation. It’s about how we enable directors to fulfil a fundamental but often overlooked aspect of their role – to ask the difficult questions that cut through, stimulate curiosity, and focus the organisation’s brightest minds on what’s important. Boards, governance professionals, and executives must work together to create time and space for these discussions, and stimulate them with high-quality thinking and insight.”
You can download the full paper, ‘Governance and Innovation: Report of findings’, here.
In addition, the Centre will be publishing a further paper on governance and innovation, which will focus on guidance for business, in early 2023.