Keeping up with the evolving expectations for Boards
A directorship used to be a reward, a thank-you for years of service, and a sign that the difficult years of toil and trouble were over. But the opposite is now the case; it is not easy being a Member of the Board these days. The Boardroom is no place for a quiet, uneventful retirement. Expectations on Boards are evolving at an exponential rate, and the Boardroom, once that oasis of calm, is now Command Central, a hive of activity.
It starts with the requirement – through the insistence of legislation – that Board members demonstrate far more competency and professionalism than ever before, due in great part to the tasks that they are now expected to manage, and the attention that they have to pay to organisational matters that were previously seen as the province of management. “Companies don’t fail; Boards do” has become a catchphrase that carries with it a warning: If anything happens, the buck stops with you – you’re responsible. And it is hard to shirk that responsibility because everywhere you turn, eyes are watching. If it’s not the regulators, it’s the public concern groups; if it’s not them, it’s the shareholders.
Sometimes, there is no demarcation between shareholder and public concern because shareholders are the public, particularly the minority shareholders, and what they want is more accountability. Over these past three decades, too many Boards have been cavalier about their fiduciary duties, leading to corporate scandals that have resulted in greater scrutiny of people at the top. Shareholders – and stakeholders – not only want to know who is taking care of their interests, they also want to know how. So, Boards have to have clear strategies, and be able to show that these plans are operable, while demonstrating that they are in full control.
While Boards cannot be hands-on the way management can, the evolving expectations of Boards are prodding them in the direction of intensifying their oversight of management – which can end up rubbing those who must operationalise Board-mandated strategies the wrong way. How to tighten oversight of management performance without allowing it enough leeway to get the job done, is not always clear. Caught in this conundrum, what can Boards do, to enable themselves to fulfil their corporate responsibilities, and demonstrate that they are indeed striving to fulfil their roles? They can focus on developing a thorough understanding of the business and its needs, firstly.
Then they can assess where it needs to have a strategic overhaul, and how this should be effected. They should also identify emerging risks, and formulate plans on how to mitigate these, should they eventuate. Foresight, anticipation and the ability to respond accordingly have become prerequisites of a Board position, in addition to competence and experience. What is increasingly required of Board members now is the skill to translate strategy into performance, and oversee even more than they did before, under a greater degree of accountability. They cannot afford to put a foot wrong; there are too many stakeholders waiting and watching.
Employees look to them for leadership; management looks to them for direction. They are required to ensure the appropriate “Tone at the Top” is set – or they risk censure. They are entrusted with the organisation, but in reality, are they truly trusted? They are expected to take risks to increase revenue, and take the blame if returns are not up to scratch. Above all, they are expected to do their job in an environment that is constantly evolving, with risks that change and shift with the tide. With so many elements not in their favour, it’s a wonder they manage to get any job done at all!