CEOs often complain about their boards’ intrusion into management’s affairs. During over 150 extended interviews we did of CEOs, directors, and General Counsel, one CEO said it best: “My board is meddling in the minutia! They need to let me run the company.”
How does that CEO help his board get out of the minutia? By looking at the decisions he is asking the board to make; that is, from board and committee meeting agendas. We analyzed the complaining CEOs’ agenda from a year of board and committee meetings. We saw that he was asking his board to spend time on many topics that management can handle better. In short, this CEO was unwittingly filling board and committee agenda with “Execution” agenda topics. Execution is one of three major Board Priorities that we use in FORESIGHT’s proprietary board analytics. (The other two Board Priorities are Leadership and Strategy. More about those in later posts.)
Execution agenda topics tend to have a short time horizon: today, this quarter or this year. The board, as a body, has the least impact on these agenda topics as they require day-to-day attention. The board’s role here should generally be “noses in, fingers out.”
The Execution priority includes monitoring (but not managing) three focus areas:
|Profitability and Disclosure||Balancing short-term profits and long-term growth/gain. Ensuring integrity and accuracy in disclosures.|
|Compliance, Quality & Integrity||Leveraging these to create a competitive advantage.|
|Transactions||Evaluating and approving transactions consistent with the company’s strategy.|
These agenda topics are not about the goals, processes, systems or people to spur a company’s future growth and innovation. These Execution agenda topics relate to the past. They are indicia of results – and management’s success or failure. They are well suited to scorecards and summaries. These Execution topics are suitable for vigilant monitoring by the board rather than deep intrusion. The key is management’s ability to summarize the relevant information in pre-meeting materials in a manner that the board trusts so the board can spend less meeting time to effectively monitor management’s performance.
Here’s one important exception to the “fingers out” maxim: if as it monitors these Execution agenda topics, the board sees a warning sign of business or leaders going off course, then it must address an emerging problem. More importantly, if the board doubts management’s information, quick board action is required.
Companies must strive to establish the appropriate balance among the three Board Priorities: Leadership, Strategy, and Execution over time. No one of the three Priorities should dominate the others. That is why we developed FORESIGHT as a tool for understanding, analyzing, and adjusting the board’s agenda. Our analytics tell the CEO, the board and its leaders, the General Counsel and the rest of the C-suite what the annual, meeting by meeting priorities of the board were as the year progressed, compared to their intentions.
Overemphasizing Execution agenda topics deprives the board time and energy for agenda topics in FORESIGHT’s Leadership and Strategy Board Priorities. The board can add more value when considering these agenda topics and should elevate them above Execution.
So, to the CEOs who complain about their boards “meddling in the minutia”, we say “You must measure how you are asking your board to allocate its attention amongst the three Board Priorities (Execution, Leadership and Strategy).“ Let FORESIGHT help you rework your board and committee agendas and get your board working on the agenda topics that can better leverage your board members’ strengths and drive your company’s success.
© Corporate Governance Partners, Inc., 2019
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