Director’s Diary: The executive needs training too, not just the board

Director’s diary: top governance insights designed to get you thinking as part of your governance training – brought to you by CGI’s co-founder David Duffy.

I have conducted numerous board evaluations over the last ten years or so and have always been struck by a common, serious flaw: The executive often lacks a distinct focus on the board’s role and, moreover, doesn’t actually realise the value it can get from a board of directors. 

It feeds into one of the main questions I’ll ask an executive during a board evaluation: did they get real and tangible value from board meetings? Often, the answers were far from an overwhelming “yes”. 

We must ask ourselves why this is, and for me, the answer lies in an imbalance of good training. 

Training in a modern governance setting is crucial, but I often see most of the training focused on the board – some driven by conscientious chairs and some by regulation. Meanwhile, the poor old executive is left out in the cold regarding training. The assumption is that “sure, the executive knows all about corporate governance and best practice reporting, and it will be okay on the day!”. But that assumption is frequently unrealistic. 

For example, the executive has a key role in reporting against performance, whether that’s in relation to the CEO report, business plan, financial budget or strategy. If the executive does not have the skills to put concise and well-constructed reports together, it will take the board longer to absorb the content. This wastes boardroom time and is bad for governance. 

I have sometimes found CEO reports too long, lacking focus on the key business metrics, or not immediately stating the key issues where feedback is requested.

The executive also sometimes doesn’t grasp that all their reporting should include as much graphical information as possible; it’s far easier to digest. Examples of where this applies include trend reporting like cash flow statements, budget vs. actual comparisons, and exception reporting.

Ultimately, the executive is responsible for understanding the regulatory environment in which it operates and the information the board needs to do its job. It must also ensure its reporting is accurate, timely, and concise. Less is more; the better the reporting, the more likely the board will add value. 

I have seen board reports on risk, which have had skyrocketing page counts so the writers can feel they’ve satisfied regulatory requirements… but the reports have no executive summary. That’s a huge problem, particularly for NEDs (non-executive directors) on the board. For them, it’s like looking for a needle in a haystack, and that’s not the job of NEDs. They need well-presented information to be able to ask intelligent questions and challenge where challenge is warranted.

All of this highlights just how crucial training is to executives as well as the board. Such a training plan should include instruction on developing intelligent reporting and being clear in the board papers where feedback is required. If executives learn this, the board has a great chance of engaging and adding value.  

It’s not rocket science.