On the director–shareholder relationship

It had to happen. Someone just asked one of 'those' questions. Should boards of directors communicate with shareholders? Great question Lex Suvanto! You can read his blog post here. Amongst his comments, Suvanto makes two quite startling observations: 

Many directors are passionately against the idea of engaging directly with shareholders.

Directors also correctly point out that the board should not say anything out of step with management anyway, so they question the value of this effort, especially given limited available time that directors can devote.

These observations, and others in the article raise important supplementary questions about how boards conceive their role and the mindset of directors—including these:

• Who is the board accountable to?
• Who is the senior-most decision-making authority in the company?
• Does the board need to understand the business of the business it is charged with governing?
• How much time should directors spend fulfilling their duties?

Ultimately, appropriate responses to these questions are straightforward if boards understand the statutory framework and directors have a clear understanding of both why boards exist and what boards (should) do (i.e., corporate governance).

​Directors are appointed by shareholders to ensure the effective operation of the company, in accordance with shareholder wishes (whatever they might be). If the senior-most decision-maker in the company is the board, is it not reasonable to expect the board to both understand what the shareholders want from their investment and subsequently provide an account to those that put them there? I think so. Suvanto's article contains some helpful suggestions to get started. I'm available if you want to chat further.