How to be an informed and prepared director

Aug 30, 2019

By Prasanthi Vasanthakumar, ICD

Knowledge is power, yet board directors may not always have the right information to make educated decisions. In today’s increasingly complex business environment, that’s a problem. The director role has become time-consuming and multifaceted, requiring more preparation and thoughtful analysis. Today, directors are expected to oversee and guide company performance and strategy, risk management and ethical behaviour while representing shareholder interests – a tall order if you aren’t privy to all the facts.

The information gap
But getting the right information can be hard. Chris MacDonald, Associate Professor and Chair, Department of Law & Business and Director, Ted Rogers Leadership Centre at Ryerson University notes that directors are often frustrated by the fact that they famously have trouble accessing high-quality information.

“Directors often report that they’re not getting straight information from corporate insiders, because nobody wants to report bad news to the board,” says Dr. MacDonald. “When directors resort to outside consultants, they do it as a kind of due diligence. However, they sometimes don’t have a great deal of faith in the quality of information they receive.”

Essentially, directors are stuck in an information gap – many feel they aren’t receiving the whole picture from management, but don’t trust outside information either.

TMI and how to deal with it
Ironically, too much information can also be a problem. Directors often complain that they are flooded with documents to read before board meetings, many of which lack sufficient depth.

To receive quality over quantity, boards should request reports organized by priority or require a board summary for each section that focuses on critical issues. In addition to information on past performance, materials should provide a forward-looking view to help directors spend more time on insight and foresight. The board chair can also work with management to ensure preparatory reading materials are comprehensive yet succinct, so directors can focus on strategic issues instead of getting bogged down in the minutiae.1

While these tasks may mean more work, they can give directors the information they need to better prepare for board meetings.

Netflix: A model of transparency
Board members at Netflix may not be too concerned about the quality of information they receive. Netflix employs two unique practices to maximize transparency between its executive team and board. First, board members attend some monthly and quarterly senior management meetings in an observing capacity. Second, board communications are 30-page online memos with links to supporting analysis and full access to data and information on the organization’s internal shared systems; directors can even ask document authors questions for clarity.

Netflix’s directors report that this approach requires greater preparation time, but is also more interesting. Because directors are better prepared, board meetings are shorter, more efficient, and dominated by questions and discussion rather than presentations.

This approach of genuine transparency stems from the belief that boards should know all the pertinent facts about a company and its market to be able to make the tough decisions. 2

But what if you’re not the king of modern TV?
Most organizations don’t have a Netflix approach to governance, and for many, it simply may not work – an organization’s culture, leadership and stage of development may be incompatible with this open-concept approach to information.

For directors not of the Netflix variety, independent preparation and information gathering may be the best tool for maximizing impact in the boardroom. Engaging with the multitude of resources on offer can help directors prepare, but in a world that’s pressed for time, the challenge lies in cutting through the clutter. To this end, the ICD’s resources can help directors get exactly what they need.

Professional development
Ongoing learning is often the best way to proactively prepare for a directorship. Certainly, there is no shortage of education at the ICD. For example, short courses on topical issues, such as Board Oversight of Culture and Political Intelligence for Boardrooms, can help directors better understand the implications of these factors for their organizations.

Company executives – often the keepers of the real story – can also learn strategies to effectively communicate with directors and inform both inside and outside board meetings, in ICD’s new program Board Dynamics for Executives.

“A clear, common understanding between directors and management regarding their mutual roles and responsibilities is necessary, as well as a relationship between the two groups based on candour and trust,” says Hugh Arnold, the program’s Academic Director and Adjunct Professor at the Rotman School of Management. “The joint ICD/Rotman Board Dynamics for Executives program provides senior managers with a clear understanding of directors’ informational needs, as well as insights regarding best practices for efficiently bridging the inevitable information gap between management and the board.”

Solving problems
In addition to utilizing peer-to-peer discussions, directors who are stuck on specific governance questions can contact the ICD’s BoardInfo service. Common questions cover board/CEO evaluation, director compensation and sample board policies, and members can get help with board and committee work, speeches, presentations, comment letters and industry-related comparative reviews.

“Often we get questions from members when they are trying to solve a specific problem or when they want to evolve their board practices,” says Heather Wilson, ICD’s Director, Research Services, who oversees the service. “Our resources can be especially helpful as directors try to find a thoughtful resolution to a particular issue or prepare themselves for board discussions.”

A good reading list
Most directors devour a rich array of literature to stay informed, and the ICD’s Director Journal is a solid addition to any reading list. This member publication features in-depth analysis of governance issues and trends written by experienced directors, senior executives and governance experts.

“Director Journal provides thoughtful and informed articles exploring leadership qualities as well as spotlighting the issues corporate, social and political decision-makers should be prioritizing,” says the magazine editor Simon Avery.

Staying current
From climate change to AI, the business world is constantly facing new challenges, which adds a layer of complexity to the director’s role. Webinars and networking events are an excellent way to stay on top of hot topics in governance, especially for directors who are pressed for time. The ICD offers webinars and regional meetings that cover timely issues as a way to help directors prepare for potential challenges to their organizations.

“Chapter events allow us to focus on current governance issues that are challenging directors in the boardroom,” says Catherine Connolly, Co-Chair of ICD’s Calgary Chapter. “They are also wonderful forums to network and dialogue with peers.”

Getting to good governance
Being a director is no easy task. In today’s scandal-ridden business world, the buck stops with the board. However, a board’s ability to make the right decisions can be challenged when information is scarce. When faced with this conundrum, it is often up to the director to bring his or her own informed perspective to the table.

Further reading
1 Directors Dilemma: How can we ensure as a board that we get the information we need from management? Director Journal, January 3, 2018
2 Netflix approach to governance, Stanford Closer Look Series, May 1, 2018

Source: Director Lens September 3 2019