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The Board – Brilliant or Battling?

Date: 22/08/2019 | Corporate & Commercial, Business & Professional Services

Recent large scale corporate failures such as Carillion and BHS have brought the actions of Directors increasingly under the microscope.  These failures show that an effective board is essential and a huge asset to any business whether large or small.

Ensuring a board is well equipped to provide leadership and make good decisions is not easy.  It takes time to assess, review, develop and refresh a board, time that some may feel is better spent on other things.  Meetings spent focusing on firefighting specific issues are a tell-tale sign that the board is not working as it should and there are other red flags that trouble lies ahead.  Do any of these apply to your organisation?

Meetings:

  • Organised at the last minute with insufficient time to issue or consider board packs.
  • Unclear agenda or purpose to meetings.
  • Directors’ attention not focused on the matters to be discussed but constant checking of emails and/or interruptions.
  • Talking shop with single-issue matters taking the bulk of the board’s time, directors engaging on their individual “hot topics”.

Decision-Making:

  • Decisions regularly deferred with requests for extra information.
  • Implementation of decisions not monitored for effectiveness and impact.
  • Little constructive debate and discussion of proposal before a decision is made.
  • Directors undermining previously agreed decisions or speaking against them outside of the boardroom.
  • The executive directors tell the board what has been decided and the non-executive directors “rubberstamp” or “note” the information.

Resources:

  • Ongoing cashflow problems that are not addressed.
  • Too high or too low levels of reserves that are not aligned to an agreed policy and no clear agreement as to why there is a divergence.
  • Directors depend on the finance director and do not challenge the accuracy and robustness of financial statements.
  • High turnover rate of senior staff.

Strategy:

  • Not all Directors have a clear view of the commercial realities within which the business operates.
  • Strategic plans, operational and business plans are static or non-existent.

Board Culture:

  • Certain Directors see themselves at the top of the organisation and have little interaction with staff, funders and other stakeholders.
  • Unresolved conflicts and/or poor communication between board members.
  • Director disengagement, bullying or absenteeism.
  • Directors are unclear as to what their role is.
  • Good governance is seen as an “extra” and not integral to the running of the business.

A dysfunctional board makes life harder for those sitting around the table and can be devastating for the profitability and development of any business.  Addressing the issues can be difficult but a failure to do so can lead to even greater challenges.

Disclaimer 
The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.


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