Are boards overstepping the governance mark?

If boards are liable for the organisation’s culture, then anything that impinges on that culture is logically of interest. But, asks Shaun McCarthy, are boards seeking information on topics of genuine relevance to them or are they overstepping the mark?

Board Directors are responsible for governance, the CEO and management are responsible for operations. Sounds straightforward, right?

But hang on – individual directors can be held legally and financially liable for occupational health and safety at work; the impact of the organisations culture; harassment; discrimination; environmental sustainability and corporate ethics, to name a few, not to mention the usual fiduciary requirements around solvent trading and responsible behaviour.

It’s no wonder boards are seemingly becoming more involved in what some would see as operational issues.

 It’s been our observation that more and more, our clients are telling us, “We can’t commit until the board’s had a look at it.”
Time and time again, proposals are being rewritten as board papers.

Given that we operate in the leadership and culture space, it’s not surprising. If boards are liable for the organisation’s culture, then anything that impinges on that culture is logically of interest.

That’s actually a good thing. The question is: are boards seeking information on topics of genuine relevance to them or are they overstepping the mark?

The answer lies in the kind of relationship that exists between board and management.

If the relationship is low in trust and can even border on adversarial, then the typical loop is for management to bury the board in voluminous board papers that are designed to swamp the board, whilst the board looks for what management may have left out, or ‘buried in the back of the file’.

This becomes the typical vicious cycle with neither achieving a sense of satisfaction from what they are doing.

It’s a dysfunctional form of delegating upwards. As boards sort through the heavy detail of what management provides, they inevitably get drawn into conversations that are very tactical and no longer strategic (the realm of the board).

On the other hand, if the relationship is high in trust and mutual respect, then such games are seen as the waste of time they are. It is no longer a competition, but rather two teams working as one. Everyone saves time. Shorter board papers with clearer conclusions and recommendations save time for both teams and the discussions tend to be more about strategy than tactics.  

We’ve always had to live in a world of change, but current circumstances mean that we also live in a world of constant uncertainty.

We simply don’t know what we don’t know, so the more boards and managers can collaborate and work in a framework of trust, the better it’s got to be.  

Trust is not some vague concept. It is based on one-to-one respect.

The relationship between the chair and the CEO is of course at the core of this.

Trust is at a professional level (sometimes referred to as a ‘critical friend’). There are oversight issues if the CEO and chair are best buddies.

The board must be able to hold the CEO accountable and the chair is the key conduit between the board and the CEO, so the board must be able to trust the chair.

Trust must be constantly earned and displayed through truthfulness, being ‘up front’, frequent communication, respect and responsiveness.

It also requires clarity and shared understanding of everyone’s role. A clear board charter should illustrate the governance roles and responsibilities and how the connection between board and management should work.

The rest is all about culture and how it drives thinking and behaviours at the management and board levels.

Many boards do not realise the impact they have on their organisations’ cultures. Boards have both a direct and indirect impact on culture. Direct impact is through:
•    Appointing the CEO (in our own likeness).
•    How they behave as a team during board and subcommittee meetings (in the room).
•    How they behave with senior executives when they join board meetings for reports and presentations (board – management interplay).
•    Board members own values and beliefs (the board as role models).
Beyond this, boards also have an indirect impact on the organisational culture through:
•    How they manage the interplay between strategy and culture (shaping the values).
•    How they manage performance monitoring (shaping the priorities).
•    How they manage remuneration polices (shaping the behavioural norms).
•    How they manage risk (shaping the agenda for innovation).

Accepting the reality that their own behaviour contributes to the culture, more progressive boards look to avail themselves of behavioural feedback tools.

Individually they can get feedback from each other and the executive team, and collectively they can get feedback on how they function as a group. Coaching around the feedback then identifies areas for improvement and strategies/actions for improvement are implemented.

Gone are the days when board members saw themselves as being beyond the need for development.

The keys of clarity, communication, respect and culture hold true for boards in all spheres – public, private, Governmental, Not for Profits and sports organisations.

Added layers of complexity exist in family businesses where family members may be on the board or in executive positions, potentially leading to issues associated with family versus professional interests.

It is also important to recognise that relationships are never static. Trust can be lost. It can be gained. It can be recovered.
If lost, it might need some external help such as a coach at the individual level or a facilitator at the group or inter-group level.

It can be restored by focusing on key principles – clarity of the common purpose, honest, upfront communication, respect for each other and understanding that often people behave the way they do because of the way we behave to them.   

Shaun McCarthy is the chair of Human Synergistics Australia & New Zealand which provides behavioural feedback tools such as the Human Synergistics Life Styles Inventory.

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