Norman Marks on Governance, Risk Management, and Internal Audit

Words of wisdom are spoken in an interview in Board Intelligence of Vindi Banga. As the article explains, “He is the chair of UK Government Investments and Marie Curie, as well as a non-executive at GlaxoSmithKline and The Economist Group. Prior to this, Vinda sat on the board of the Confederation of British Industry, Thomson Reuters, Marks & Spencer, the Mauser Group, and spent 33 years at Unilever where he was a member of the Executive Board.”

Here are a few excerpts of note, with my emphasis:

• A great meeting does four things….. First, it spends the bulk of the discussion time on the maximisation of opportunity, rather than on the minimisation of risk. Risk is the “comfortable topic” that boards naturally default to, and having it on the agenda is obviously necessary, but it’s not what drives a business forward.
• Second, it balances long and short-term. The urgent will always creep onto the agenda, and it shouldn’t be allowed to crowd out the important. As a rule of thumb, at least half of a meeting’s time should be spent on long-term issues.
• Third, it’s well-managed. Yes, you need board material to stimulate the conversation, but it’s a colossal waste to use your meeting to simply share information. So, demand papers that are concise and available before the meeting — because there’s no point putting information together if you don’t give board members time to read, digest, and probe it. Keep presentations snappy. And give the floor to the discussion.

There is more, but I want to focus on the first and third points.

I love the point about focusing on the “maximization of opportunity”. Talking  about risk absent the context of how you will achieve objectives is missing the point. Organizations need to take risk to succeed, but it needs to be the right level of the right risk so you can succeed.

Management consistently, in my experience, fails to provide the board with papers that are “concise and available before the meeting”. It was a constant struggle to get the CFO and his team to send the audit committee the materials at least a week (and preferably more) in advance of the meeting. As Mr. Banga says, it is a waste of the board’s time to be reading the papers during the meeting, when the members should be discussing what they mean and what actions, if any, are appropriate.

Board members told me that they routinely would receive board packages of well over a hundred pages, packed with detail, only a day or so before the meetings. If they were lucky, they could read them on the flight to our offices.

Practitioners contribute to the problem when they:

• Share details the members don’t need to know
• Use their allotted time to talk about their work (assuming, perhaps accurately) that the members have not read and considered everything they sent in advance, rather than giving the board members all the time they need to discuss with management what it means and what should be done

My advice to practitioners is to:

• Discuss with the board members what they need to know
• Provide them with that information in a concise form, at least a week and preferably two in advance
• Ask the members to contact you before the meeting with any questions so you can explain before the meeting
• Keep your presentation short and help the members understand what is needed by them, such as a decision or other action. If you are providing information just so they are informed, make sure they really need to be informed, explain that its for information only, and make it easy for them to consume it.

Our job is to help the board members discharge their governance and oversight responsibilities. Do what that takes and then stop.

I welcome your thoughts.