Questions every board should ask

Being a non-executive board member isn’t easy. You have responsibility for an organisation but limited time and the means to really understand it.  The reporting provided by the executive will form your understanding of what is going on. But how aware are you of what’s really happening in the company you’re responsible for governing?

Boards will only see the information they’re presented with by the CEO and the executive and can easily become passive recipients of agendas. How often do boards stand back and ask if they are getting the information we need to do our job?  Not that often, based on my experience.

The board of directors is responsible for governance, oversight, and major decision-making, representing the interests of shareholders and stakeholders. 

The board should not be a passive participant in the governance process.  Its job is to support the CEO and the executive in executing matters such as the strategic plan, annual business plan, organisational finances, risk, ESG etc.

The role of the board is to be enquiring, curious, inquisitive, challenging but constructive and supportive in all aspects of its work.

Of course, the quality of the board reporting will be critical in this. The more transparent the reporting, the easier it will be for the board to know how the organisation is performing.

So what are the types of questions a board should be asking of itself, the chair, company secretary?

1. What is the process for setting the board agenda?
2. What items should be on the board agenda but do not make it?
3. How well do we know and trust each other?
4. What is the executive not telling that the board needs to know?
5. What is the actual relationship between the chair and the CEO?
6. Is the boardroom environment appropriate to discuss any elephants in the room?
7. How would the boards describe the organisation’s culture? Would all the board members describe it the same way, and is the culture consistent across the organisation?
8. Does the board spend enough time on strategy and policy issues and not get consumed by management and operational issues?
9. If the board were to write the agenda, would it be the same as that produced by the CEO, who typically has a significant influence on it?  Issues such as management development and succession, longer-term competitive and technological threats, and environmental and regulatory issues can get lost in the scrum
10.  Was the last board evaluation an accurate reflection of how effective the governance of the organisation actually is?

Equally, here are some of the techniques that the CEO can do to avoid tough questions from the board:

1. Distraction – distract the directors with other “important matters” or an AOB that has to be discussed.
2. Divide and rule – bring up a topic you know will get the board arguing about. If the board is divided into factions, they will spend their emotional energy focusing on the opposing faction and not the issues.
3. Bring up’ fascinating subjects’ – bring up a possible future strategic option that the board could consider and watch as the board members compete with each other to come up with fantastic future strategies.
4. Flattery – it will get you everywhere.
5. Arrange an ambush by a favoured director – but rescue the director, and they become a grateful supplicant.
6. Draw a line – suggest the non-executive director should not meddle in ‘management or operational issues’.
7. Suggest that a governance review should take place and distract the board.  It’s actually the chair’s job to initiate a governance review.
8. Bring up the chair’s favourite topic  – move the focus of the board meeting to the chair’s favourite subject.
9. Announce a restructure – suggest a business restructuring (that may never take place).
10. Take control of the agenda – so that topics you want to avoid do not get scheduled, or if not, make sure that they are the last item on the agenda in the hope that the board runs out of time.

David W Duffy FCA is the co-founder and CEO of The Corporate Governance Institute.