The role and responsibilities of the board are dynamic. In a constantly changing world, new business opportunities and challenges surface all the time. The board needs to stay alert to potential shifts and adapt when needed. Apart from continuously investing in their skills and knowledge in relevant topics, the right mindset of board members is one of the most effective ways to future-proof the decisions made inside the boardroom. A shift from reactive to proactive helps to pave the way to effective governance.
What is on the agenda?
In a typical board meeting, a variety of topics are on the agenda. The executives present a thoroughly prepared analysis and synthesis of the matter, and discussions with everyone around the top table can start. The quality, frequency, and type of information that the board receives, largely determines the ability of the board members to fulfill their governance role. However, it is also understandable that the senior executives present the information in a way that supports the management’s narrative and perspective on strategy. In this way - intentionally or not - the CEO and senior executives are the gatekeepers of what is really happening behind company walls.
On the radar
As a board, you can easily become the passive recipient of what is being presented to you. Even when everyone acts in good faith and with the best intentions, the board can never get the complete picture simply because they are not part of the day-to-day business. This more distant overview is a great asset to bring oversight and new insights. However, there lies some danger in it as well: important issues sometimes only get on the board’s radar when it is already too late. Besides a negative impact on the company’s performance, in the worst case of, for example, a scandal, the board of directors can also be held responsible for the harm. Corporate missteps often lead back to the board. Of course, the board shouldn’t take the driver’s seat; that is the position of the CEO. The board has to engage, not execute. Nevertheless, a proactive approach and open mind inside the boardroom can flag problems before they become critical. How can a board be proactive without intervening too much?
Asking questions
One way for board members to be more proactive is to reflect in advance on what topics they would put on the agenda if it were up to them. What overlaps with the proposed board meeting agenda? Is the executive team not highlighting something you think you should know as a board member? What are they (and you!) missing? What metrics other than those provided would be of value? Are there any transformational challenges in the external world that can impact the company in the foreseeable future? How would you prioritize the different topics?
Both research and real-life examples show that in the run-up to a crisis, a more hands-on proactive attitude of the board yields better outcomes. Applying a proactive mindset intentionally, even if it initially doesn’t go further than a thought exercise, counteracts a passive monitoring attitude. How the board acts on their governance role is situated along a scale ranging from 100% hands-off to very hands-on actively intervening. The extremes are never desirable; different circumstances demand a different approach.
The proactive mindset
The board’s role is to provide oversight and governance, which in large part comes down to making the decisions that, when executed, will increase the value creation of the corporation. A board moving along a continuum of reactive monitoring to proactive probing depending on the situation, puts everyone around the board table and company in the best position to weather current and future storms.
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