Trust is one of those social interactions that is both crucial to group members working together well and to the group being perceived by others in a positive light as well. Boards are not exempt. When directors need to make strategically-important decisions, and do so with less-than-complete information, they need to rely on their board colleagues, the chief executive and any other advisors that may have been invited to contribute. However, the reality is that trust both between directors and with external stakeholders is somewhat lower than it should be, as this article written by the team at the Epsen Fuller Group deftly points out. Sadly, some directors do themselves no favours.
Board directors today face a variety of challenges. Whether it is a case of corruption or the increasing threat of cybercriminals, their performance in dealing with these issues is the subject of considerable attention, explained The Huffington Post (Jan. 25, Loeb). Investors, consumers and NGOs alike are looking to boards for accountability in terms of company performance. Yet, a recent study found that public trust in boards of directors is lower than that of CEOs. A mere 44 per cent of survey participants claimed to have trust in a company's board—five per cent less than trust in CEOs. Influential constituencies are demanding that boards perform at exceptional levels while maintaining distinct independence from company executives. In order to remedy the current performance-expectation gap, boards should take a few key steps. For starters, boards should adopt some form of both internal and external assessments. Measurement criteria should span from trust to overall effectiveness at achieving board objectives. In order to ensure optimal independence, term limits should be instated and enforced to help safeguard against excessively friendly relationships between board members and executive leaders. Implementing improvements in a similar vein to the ones mentioned above can help boards work toward a future of increased transparency, which will hopefully translate to a rise in trust among powerful constituencies.
As you can see, the Epsen Fuller commentary includes recommendations to enhance trust levels—meaningful evaluations, term limits and independence of thought being amongst them. Although not explicitly stated, the board should also reach agreement on the company's core purpose, the strategy to be pursued to achieve said purpose, and the values that will underpin everything the company does and stands for. Then, the board needs to lead from the front by ensuring the way it behaves and the decisions it makes are totally consistent with these agreed positions.
Perhaps if more boards embraced Epsen Fuller's recommendations and worked with the company's best interests to the fore, the trust problem that generates so much tension (not to mention news stories) would gradually become a thing of the past. Is this expectation worth striving for, or do you think it is too ambitious?
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.