Peter Crow
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ICGN'15: Inside the boardroom black box

5/6/2015

 
For many of us, the boardroom is an opaque structure, whereby those on the outside can only but guess what might (or might not) happen on the inside. And that's the way many directors like it: strong norms of privacy and claims of confidentiality are held up as defences against such things as professionalism and accountability. While many boards try to do their job well, some directors are victims of hubris, arrogance, laziness and, in some more extreme cases, a perception of being above or beyond the law (the slippery slope that often leads to fraudulent activity). It's little wonder that the level of distrust (of directors) is at an all-time high.
The second plenary of the second day of the ICGN conference tackled the topic of what does (well, should) happen in boardrooms. The panel prized open the corner of the blackbox.Here's some of the takeouts from the discussion:
  • Directors, you need to think about who you represent (Clue: the constituency that put you there is not the correct answer).
  • Many boards focus on risk (at the expense of future performance, value creation and shareholder wishes) far too much.
  • All boards have a culture, but not all board cultures are aligned with corporate culture.
  • Groupthink is an ever-present problem for boards. Diversity can help.
  • The highest standards of integrity and probity are crucial, and especially so for the chairman. If either of these are compromised or perceived by others to be compromised, then the director concerned needs to leave the board, immediately.
  • High levels of trust between directors and with the chief executive are crucial, to provide a suitable foundation for vigorous debate to occur.
  • Boards need reliable / accurate / unfiltered information to make informed decisions. That which is received via the chief executive is, often, biassed in some way. The panel thought board–staff conversation was to be encouraged (within an agreed framework or protocol) as a means of eliciting a more complete picture.
  • "What happens in the boardroom stays in the boardroom".
My experience, both as a serving director and as a silent observer is that the characteristics listed above are probably necessary to board effectiveness. However, they are by no means sufficient  nor do they necessarily guarantee business performance outcomes will be achieved.
I was surprised that little attention was paid by the panel to time splits (compliance / monitoring / forming future strategy) or to the importance of strategy as a board agenda item. This would have been useful guidance for serving directors. However, it is probably a touchy subject. Most directors 'know' how much time they perhaps should spend on strategy (and they'll 25–40 per cent if asked), whereas most boards actually spend far less time on this activity (typically five per cent). Perhaps this discrepancy is a source of embarrassment to directors and, therefore, it does not get discussed. Notwithstanding this, this discussion as probably the most useful of the conference to date—because it was about boards and what boards [should] do (ie. corporate governance).

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Peter Crow PhD CMInstD

Company director | Board advisor
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Photos used under Creative Commons from ghfpii, BMiz, Michigan Municipal League (MML), Colby Stopa, MorboKat
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