The 5.5 Core Board Tasks

Written by on January 17, 2014 in Board Effectiveness, Board Role and Duties, Governance with 3 Comments

Black and white photo of sunset behind bare trees in winterWhat’s the Job of the Board of Directors?

I’ve written here about the basics of a board’s job.  In a quick summary, just what are the most important board tasks?

At a recent event, I had 60 seconds to introduce this topic.  So I listed the 5.5 things a board should give its time and attention to.  It’s a short enough list to keep in mind, and return to at need.

1. Strategy

This is not just a revenue budget or a sales target.  Strategy runs deeper than that.  Whoever does the development work, the board is the ultimate custodian of the company’s strategy, and of holding management to account for execution of the strategy.  More on this big subject in other posts.

2. Risk

Safety is of the greatest importance, of course.  But the risks a board needs to concern itself with go beyond workplace health and safety.  There are risks from competitors, regulators or markets, that can threaten the viability of the company itself.  There is commercial risk in every decision, whether to do or not to do.  Risk is the price we pay for opportunity.  The board has the job of clarifying the company’s risk appetite, and understanding all the major risks with their consequences and mitigations.

3. Governance

Governance sounds restrictive and boring, a brake on business creativity.  But actually, as a director, governance is your friend.  It should certainly not be an impediment to anything the company should properly be doing.  But it should be the board’s way of ensuring that everything is shipshape; that regulations are being followed, issues of concern are being monitored, funds are being used properly, and so on.  Governance is the system of oversight that catches things going pear-shaped before the real trouble starts.  Weak governance has allowed companies to be slammed into the wall by out-of-control executives – think HIH and Enron.

4. Managing the CEO

The job title may be CEO, MD, GM – whatever.  But it is necessary to entrust someone with final executive responsibility.  And who manages this?   The board.  In a government trading entity, the board often does not select the CEO; it’s a ministerial appointment.  Otherwise the chief executive is an appointment made by the board.  And whatever the recruitment process, a board that is not monitoring and giving feedback on the CEO’s performance, pressure-testing the CEO’s plans and actions, and, if necessary, removing a non-performing CEO, is not doing its job as a board.

5. Its Own Performance

Who monitors, notes and works on improving the board’s performance?  The board does.  The board can be voted out by the shareholders, but it is not the shareholders’ job to manage the board.  One of the most challenging, but potentially fruitful board tasks is to review its own performance, individually and collectively, and agree on a plan for self-improvement.  It takes courage, self-awareness and honesty.

5.5 Keep Asking Questions

Whatever the topic, whatever the task, directors are required to exercise their own, individual, well-informed, diligent judgement.  So keep asking, keep probing, keep requesting the evidence.  We saw from James Hardy that accepting the assurance of a company officer is not enough.  We saw from Centro that accepting the advice of an outside expert may not be enough.  Directors need to be more diligent than that, particularly where the risk is high (see above).

So that was my 60 seconds (OK, I’ve paraphrased a bit, but the list is the same).  Would you find that a useful mental checklist?  Let me know.

There’s a quick take on what makes a good director here.

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