Boards Holding Management Accountable

More and more boards of directors are holding managements’ feet to the fire. Here are some of the key ways we see this happening every day.

1.  Boards are making sure that management thoroughly understands the risks of their actions and strategies and that management has put a program in place to manage those risks.

2.  Boards are making sure that management comes to the board with presentations that describe their thinking in-depth – including the pros and the cons of everything that the board needs to approve.

3.  Boards are making sure that there is in place a succession plan for all the critical positions in the company.

It is through the use of these functions, which are carried out through committees, through financial and other reports that are presented to the board, that the board is in a position to monitor and oversee the company.

There is often within management disagreement as to what the real drivers are of the businesses and which of those drivers are primary and which are dependent on others. The board can be helpful in getting management to focus on the issues and to be clear on what the real drivers are.

The same situation exists with respect to identifying, prioritizing, and managing risks. Since there is no benefit without risk, the goal is to manage, not eliminate, risk.

With respect to presentations, too often management will bring things to the board and ask for a relatively quick decision. The board needs time to think through the implications of what they are being asked to approve. Consequently, they need to have focused materials which explain management’s rationale, but avoid getting lost in extraneous detail. Then the board can actually discuss the issue.

Also, too many companies have failed to do succession planning, both at management and board levels. That is not acceptable, and boards are starting to insist that there be a good succession plan in place fro the CEO and the other key positions.

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