Brevity and clarity are necessary, but are they sufficient?

GE, a company with a strong history of success including a reputation of being the world's best-run firm, has hit turbulent times. Profit forecasts have dropped by half in the past two years, with the inevitable knock-on effect on the share price. It seems that the size and complexity of the business, and probably some poor decisions in the past, is proving to be a challenge for the board and its ability to fulfil its duties.

Consider the following indicators, reported in an article published in The Economist:

• There is no consistent measure of performance
• Some divisions use flattering definitions of key words, notably 'profit'
• Performance is not assessed on a geographical basis
• Little attention is given to total capital employed
• Sustainability of debt levels are hard to determine
• Strength of GE's financial arm is unclear
• Risks to GE shareholders are difficult to calibrate
• Accuracy of balance sheet is unknown

How the GE board can make meaningful decisions given these indicators, much less lead the firm intentionally into the future, is hard to imagine. Sadly, this is not a unique case. Wells Fargo, Wynyard Group and, most recently, Carillion are examples of companies that have suffered through poor reporting, weak engagement and the seeming inability of the board to make courageous decisions.

Fortunately, boards finding themselves in a similar situation are not without options. If they are prepared to retake control of the firm they govern (which will probably require some decisive actions; brevity and clarity of reporting being necessary but insufficient) and take an active interest in its strategic future, then the likelihood of actually making a difference is greatly enhanced.