|Seven Deadly Sins of Boards.|
By Kevin Dwyer
Thursday, 28th November 2013
Boards get involved in levels of detail that are not their responsibility, but rather, the responsibility of management.
This is why boards should develop a formal charter of expectations that makes it clear what risks they are taking responsibility for, and then delegate responsibility for all other risks to management and stay clear. The board, of course, is still accountable for all risks. They cannot delegate accountability.
For example, in the case of poor customer service in a call centre, the board does not get involved as the risks at that level are clearly a management responsibility. However, after a spate of customer service issues in the call centre and other areas of the business that are persistent and for which the CEO has not credibly planned to tackle, the board may decide to remove the CEO. They would do this because the CEO’s effectiveness is their responsibility.
Boards act with indifference to audit reports, business control reports and complaints, and are reluctant to act against a poor performing CEO.
A prime example being the David Jones board a few years ago, who ignored reports about the behaviour of their CEO. The result was that the affected staff member had to resort to making a public complaint rather than use the internal processes of David Jones to make her case. Claims of plausible deniability did the board reputation no favours.
Boards are accountable for all risks in an organisation. They must proactively review risks at each board meeting through a combination of reporting from the management team, their own risk subcommittee and any third parties they, the management team or regulators may employ. They should revise the treatment of the evident risks each year.
Board members and boards as a collective do not fully understand what they are there for or what the organisation’s purpose is.
Boards should drive the strategy of the organisation to enable it to reach its goal within the bounds of its purpose. I have seen boards who decided that they should build schools and housing estates because they had the money to do so, rather than returning the excess funds to shareholders and leaving the government to build schools and housing.
The board is responsible for setting the vision and mission and developing the governance structures. They maintain accountability for strategy and share responsibility for strategy with the management team. Their support for other projects needs to be exercised through different means than funding appropriation.
Board members go beyond enthusiasm for their role, especially when they are new, believing they are going to be a “mover and shaker” of the status quo. They do not always take the time, however, to learn what is already underway and the motivators and blockers to change within the organisation. Their lack of patience creates many unintended negative consequences.
Board members should be enthusiastic and should be, at times, agents of change. However, it is best done within a framework of collaboration characterised by data driven robust, respectful debate in preference to opinionated argument.
Boards that operate along factional lines with mutually exclusive agendas. This characteristic sounds the death knell of boards.
Board members should set up governance practices and recruitment practices that encourage debate and discourage politics. Board members who are overtly political should have this characteristic and its impact made known to them by the chairman and should be actively discouraged from acting this way. The performance of individual board members and their ability to act in the organisation’s interests should be measured and rated externally where possible.
Board members share confidential information without authorisation. It is highly unethical and sometimes illegal for board members to divulge the contents of board meetings to outsiders without express permission of the board as a whole.
The chairman and other officers such a deputy chairman and secretary have no special rights to disclose information without agreement.
The board should appoint a spokesman, usually the chairman but in circumstances including but not limited to crisis communication, the spokesman may be someone with specific communication skills and operational knowledge. The spokesperson should be made aware of what they can and cannot divulge. Board members who repeatedly commit indiscretions should be disciplined.
Board members try to make points in the meeting by embarrassing the board chair or other member by asking a surprise question that cannot be answered quickly. The intent isn’t to gain information, only to embarrass.
A primary task of a board is to make decisions, based on information they acquire through reading, presentations and asking questions. Board members need to feel comfortable in making a decision, and it is important that any question that needs answering be asked prior to voting. The more contentious the issue, the more it behoves the member asking the question to table the question well beforehand, possibly in the previous board meeting.
We welcome your comments.
Contact Kevin by email at firstname.lastname@example.org or via phone on +61 (0)408 508 490