Articles

checklist for good board practice

November 22nd, 2011

 Most boards could work together more harmoniously, says chairman and director, Rick Christie, who suggests these guidelines for a more cohesive and effective board.

 Relationship with Management

It is vital that boards respect the boundaries between governance and management. Sometimes these boundaries are not very clear, and boards can stray into what is really management territory, without realizing it. Micromanagement at board level is a manifestation of this.

 Try to avoid sensitive debates between board members or around issues affecting management in management’s presence. (The CEO is the exception to this, and the chairman should adjudicate if necessary and seek board-only time).

 Confidence

Directors must take care not to undermine management both inside and outside board meetings. Vice versa, management needs to be on guard about this as well.

 CEO

Support from the board for the CEO is crucial. Boards cannot be partially supportive – they either have confidence in the CEO, or they do not. The CEO is the proper conduit, for issues concerning the rest of the staff. The board should only engage with the rest of the staff by agreement with the CEO, and should keep the chairman advised.

 Management Issues

Some of the issues we are dealing with are just plain difficult. There may be no “right” answer, and whatever boards decide may have a measure of disagreement.

 Board decisions

Almost always, decisions should be by consensus. Board votes on issues are never a good idea. It is often better to defer, seek more information and/or discuss issues further. Board members registering votes against resolutions need to ask themselves why it is necessary to be on the record. Previous board decisions need to be respected. New board members should be careful not to attack decisions made by previous boards. It is easy to be wise after the event.

 Decisions should always be made in the best interests of the company, (or in the case of some statutory boards, the industry).    Board members must take scrupulous care that their position on the issues is objective, not driven by personal associations or interest.

 In most cases decisions should be made based on information provided by, or sought from, the management. Where directors have special knowledge of an issue they should ensure it can be independently verified and/or is supported by management.

 Decisions, as a rule, should not be conveyed by email, and certainly not on the basis that “if you don’t disagree you will be deemed to have agreed”.

 External Advice and Use of Consultants

Use and selection of consultants should be approved by the board, and follow a proper process. Where the advice sought from consultants is not followed, care must be taken to ensure the reasons are properly recorded, and agreed by the board.

 Generally the use of consultants should be confirmed to matters where the management and the board agree they do not have sufficient knowledge, or personal expertise.

 Communications

Communications between board members on board business outside meetings, should be discouraged, and on significant issues preferably shared with the chairman and the rest of the board, with the knowledge of the chairman. This is particularly so where there is a danger of factions developing which can destroy board unity.

 Turning up at a board meeting with a pre-agreed position between one or two other directions on a significant issue is bad practice.

 Emails can be a useful way of identifying issues or providing additional information outside of board meetings, but are not a satisfactory way of resolving matters that are best dealt with face-to-face between directors and management. Always take care in your choice of language to avoid misinterpretation or unintentionally aggravating difficult situations, particularly in emails. Some things are best not written down.

 Likewise, telephone board meetings are a poor substitute for face-to-face meetings, especially for tough issues and big agendas.

 Try not to appear confrontational or challenging. Criticism has its place but use it sparingly. It is always helpful to offer alternative approaches whenever a recommendation is not supported.

 This article has been published with the permission of Rick Christie.   Rick Christie is chairman of Ebos Group Ltd and Argenta Ltd. He is a director of Tourism Holdings Ltd.  Wakefield Health Ltd and the NZ Pork Industry Board. He has also been chairman of AgResearch Ltd, CEO of Tradenz, managing director of Cable Price Downer, and deputy chairman of the Foundation for Research, Science and Technology.

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