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Why good boards fail: part 2

Why good boards fail: part 2

Each month, Jan Bladen, takes us through one of the top 10 reasons good boards fail and how to improve your chances of survival

Today’s boards need to reinvent their work on the fly while their companies face unprecedented change and challenges across the Middle East.

Boards can make or break an organisation, and most board members now care substantially more about their personal reputation and the impact of being associated with an organisation that fails.

Read: Why good boards fail: Part 1

It is also the case that boards are increasingly under pressure from regulators, shareholders and stock markets to be held accountable for corporate performance. The global drive in governance standards has substantially raised the requirements for board performance, driving the rapid evolution of the role of corporate boards and board members.

Investors are now openly stating their requirements for the appointment of high performing boards, with institutional investors seeking reforms to enable them to elect independent non-executive directors to challenge the executive and hold them accountable for results.

Corporate governance is continually evolving and board members need to be aware of the latest developments at all costs – both within their own companies and across the wider landscape of governance.

Principle 2: Board members ‘not up to date’

Board members need access to the right information, at the right time, at the right level of detail in order to make the right decisions. The board agenda and its associated board papers form a substantial part of the information boards members receive to make those decisions.

The board agenda will determine the issues to be discussed; this document is commonly assembled by the chairman and the corporate secretary with input from the executive. A chairman would also typically offer board members the opportunity to suggest additional items, as it is each board member’s responsibility to ensure that the right matters are tabled. The chairman’s role in this is important to ensure the right agenda balance and further safeguard that the executive is not overly controlling the board’s agenda and possibly avoiding or reinforcing  certain subjects.

Board papers should be summarised and formatted in a standard structure so that board members can readily grasp and focus on the most significant issues during the board meeting. The volume of information is not necessarily related to its quality or value. Less information, if structured and presented appropriately, may be better. Board papers should therefore be short, timely, concise, material and action focused.

I have worked extensively with one board (financial services industry) that requested that every board paper presented by the executive to the board also include a final paragraph entitled “recommended board resolution”. This recommended board resolution paragraph was to be written in a format that could be included in board minutes if the board resolved to accept the recommendation. This not only crystallised the executive’s recommendation in writing in one paragraph, but also allowed the board to focus on the specific subject at hand. 

Jan Bladen is managing partner of Governance Creed 

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