“Get your facts first, then you can distort them as you please” – Mark Twain
Corporate boards have to be more involved and informed. I know this sounds like a profound grasp of the obvious but corporate governance needs to move forward. This is not rocket science – we have all faced difficult issues and challenges. Corporate governance reform is not one of those types of issues.
It all starts with the premise that corporate boards have to ensure proper oversight and monitoring functions. That does not mean, “running” the company like senior managers but it does require exercise of its fiduciary obligations to ensure ethics and compliance, as well as a host of other important issues.
Potential board nominees have to be a serious value-add to the board’s governance structure. That is not a controversial requirement. It reflects the fact that board members should have specific roles and talents they bring to the boardroom.
The board’s commitment to proper oversight and monitoring requires that the board has access to accurate and reliable information needed to exercise its responsibilities. That does not mean that large numbers of documents are uploaded to the board repository for documents as proof that the board was provided adequate access to information.
To the contrary, the inquiry should focus on providing the board accurate, current and relevant information. Every document must have a purpose and fit within the proper scope of review. Of course, board members should request important information and ask questions in advance of the board meeting to ensure that the board (or a relevant committee) is provided with the information they need before the board meeting.
In too many companies, the need for information has translated into mountains of documents, many of which are irrelevant, outdated or misleading. Senior management has a responsibility to prepare reports, provide reliable information and respect the need to focus the documents on the issues to be considered.
Corporate boards have to push back against this trend. Corporate counsel are partly to blame as they use documentation as a defensive strategy designed to protect the board against post hoc litigation over decisions made or issues ignored.
A corporate board cannot lead from a defensive posture. A board has to embrace its responsibilities, act with confidence, and refrain from defensive board governance. Lawyers get in the way in this process and need to let the board members exercise their judgment and expertise – after all that is why they were nominated and appointed to the board.
When the right balance of information is applied, board members will ensure they review carefully the documents, retain the information and use their knowledge and experience to exercise careful judgments. Information is power – and that applies in the corporate governance context. Board members need to tailor the production and review of information to those responsibilities reasonably expected of an effective board.