Directors don’t share a common understanding of the Board’ role.
A critical step in every governance assessment is the Director interview. In that interview we ask each Director what their understanding of the Board’s role is. We never get the same answer from any two Directors, never mind the whole Board. Good governance is impossible when this happens. It’s like having a sports team where no two players understand what the objective of the game is.
Directors don’t share a common understanding of the organization’s mission.
Mission defines what an organization does and how it does it. For Directors to oversee organizational risk and strategy, they must be clear what the organization’s mission is. Yet it’s very common to find that most Directors cannot describe a common understanding of the organization’s mission. Again, good governance is impossible when this happens. It’s like coaching a team that doesn’t have game plan.
Board composition is too narrow.
Governance is the practice of oversight. To practice oversight, Boards require a wide range of expertise including Directors capable of identifying finance, legal, marketing and operations risks and strategies. Technology expertise is a good example. All businesses now rely on technology and the risk from hacking and other cyber-threats is substantial. However, only a small percentage of Boards include Directors with technology backgrounds.
Too many Board discussions lack governance context.
It’s common to talk to Directors frustrated by the amount of time spent on seemingly irrelevant priorities. Priorities become irrelevant when they are not related to the governance function of the Board – when they are focused on operating or other issues that are not the Board’s responsibility. Fixing this depends on understanding the Board’s role clearly and establishing Board meeting and other agendas that clearly connect discussion topics to governance priorities.
The majority of Boards will have similar opportunities to improve corporate governance effectiveness. It’s worth noting though that these opportunities will not be identified in typical Board self-assessments. You can adapt your self-assessment to improve the outcome or engage an outside firm to help with your assessment.
More information on the Boardroom Metrics governance assessment process can be found by following this link.