One of the humbling privileges of working with boards and directors is the opportunity to participate in discussions and provide guidance on themes as varied as corporate purpose, strategy, corporate governance and board effectiveness. The overarching aim is straightforward: to help boards become more effective in the important role of steering and guiding the organisation they govern towards its intended purpose.
Recently, the topic of reporting seems to have been front of mind for many directors. I've been asked who should determine the structure and content of the board pack (the board), and what the appropriate amount of detail to include in the board pack is ("sufficient"—see the maxim below).
In responding to these questions, the first consideration is that the board report is no different from any other communications channel between two parties: the purpose of the report is to transport information to both inform the receiver and enable decisions to be made. Like other communications channels, the effectiveness of the exchange between management and the board is determined by the receiver, alone. Did the board understand the contents of the material in the board report?
If the board is to have any hope of doing its job well, it needs to ensure the chief executive understands what information it requires for effective decision-making. Otherwise, what hope has the chief executive got of knowing or, worse, of the board of making high-quality decisions? If the chief executive has to second-guess the board, the likelihood (from bitter experience) is that the board pack will be structured in a form that suits the chief executive and the information may not be readily usable.
The remedy to ensure the board pack meets the board's needs is straightforward: a 'board pack review' item should be included in the annual work plan. While one review per annum is appropriate, a brief review should be undertaken whenever a new director joins the board. The board should discuss the contents and structure of the board pack to ensure directors understand the information and can readily navigate their way around the pack as presented. If there are any concerns, changes should be recommended for the chief executive to act upon. This simple task should ensure the board gets what it needs to do its job properly and the chief executive knows what to prepare.
The second question (detail) is similarly straightforward. On this question, the following maxim applies:
If you would like some more information, including examples of how to structure the chief executive's report and financial report, please get in touch.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.