Should your board be more proactive on governance?

Doc WorkflowA key role of a board is to provide corporate governance. Along with setting strategy, this is recognised as one of its main responsibilities.

But how well does yours deliver on this? 

Should it be more proactive on governance?

Are non-executive directors too passive when it comes to good governance?

A recent article in Board Agenda magazine thinks so. The author, Anette Mikes, is professor of risk management and accounting at the University of Lausanne.

She believes that the way different boards approach governance and oversee senior management activity can vary hugely from firm to firm. And that, ‘Often… boards tend towards the passive monitoring of management decisions’.

Do boards need to be more proactive; more hands-on when it comes to questioning management choices?

It’s something that others have suggested. The International Business Attitudes to Compliance Survey 2017, published earlier this year, asked whether boards are failing when it comes to compliance. And in January, the Financial Reporting Council’s annual report suggested that boards need better governance.

Meanwhile, corporate scandals – like the VW emissions scandal and the financial crisis – have called into question the decisions made at companies’ highest echelons. Maybe it is time for boards to take a stronger stance.

Firms in crisis drive more proactive boards

The article looks at an interesting case study – a financial services firm, which saw its board forced by crisis from its usual position of ‘approving and endorsing’ management proposals to one of proactive interventionism.

It says that ‘During a period of crisis there is clear evidence to suggest that an active, interventionist approach may be essential for a firm’s survival’.

While this level of intervention may only be needed (or desired) during times of crisis, there are strong arguments for a board that takes a more proactive role. How can you help yours to achieve this?

Information is key

One point the article makes is that ‘The type, quality, and frequency of information received by the board is central to the board’s ability to fulfill its governance role’.

Making sure your board has the right information to make decisions is essential. This might mean ensuring that data isn’t filtered – presented through the lens of management – but gives raw and first-hand insight. This can be particularly important when looking at financials.

Then you need to ensure your directors get this information in the most usable way. Identify how your board members prefer to receive information and make sure you deliver. Briefing your directors effectively for meetings is the first, essential step in helping them to make proactive decisions.

Explore techniques for better decision making 

All too often, phenomena like groupthink – where members of a group go along with choices they don’t totally agree with – can derail board decisions.

Make sure you are helping your board to make the right decisions, using techniques like situational intelligence.

Our blog on how to make your board more efficient has more tips on how you can help your fellow directors make timely, effective strategic decisions.

Use technology wisely

Technology can help to drive improved governance. We explored this in our blog looking at how you can improve corporate governance with a board portal. Increasing security; delivering best value; keeping a compliant audit trail – these are just some of the ways that taking an online approach to board information can help to deliver stronger approaches to governance.

Do you need a compliance specialist?

In a blog back in January, we looked at why you might need a compliance expert on your board. This is another approach worth considering if you want to become more proactive on governance.

Take small steps to make big governance improvements

Improving board governance doesn’t have to be the herculean task it may appear. Take some small but crucial actions and you will make progress towards a board that can give a stronger steer to your business.

If you want to read more about the ways technology and better information sharing can help deliver this proactivity, you can download our Board Portal FAQs. The FAQs document is free and available here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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