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Managers can do better in communicating with board

FINANCIAL STANDARD
By Lewis Kamau | November 27th 2018
Lewis Kamau

“I would have loved to write you a shorter letter, but I didn’t have the time” is a witticism attributed to Mark Twain.

It points out the paradox that writing a short and thoughtful communication takes much longer than writing several pages of a rambling, unfocused document.

This should resonate with many directors as they ruminate and agonise over the typical board information package (board pack) received from management prior to board meetings.

It is regrettably the case that many directors find the typical board packs hard to digest.

Numerous problems have been cited in relation to the typical board paper. It comprises, often of masses of raw data thrown at the Board with little or no analysis.

It is without any indication of the purpose of the paper; no attempts at persuading the board and no indication of the action the board is being requested to take.

Directors are unable to work out whether the paper is being circulated for information, discussion, and decision or for a board resolution.

Directors, however, need effective management support to discharge some of their legal obligations. This is a regrettable state of affairs as directors have serious and onerous obligations under the law.

Disciplined team

 In discharging these responsibilities it is essential that they have the support of a knowledgeable, ethical, competent and disciplined management team.

Working with such team directors are able to demonstrate they have exercised appropriate due diligence and are prioritising the interests of their investors and stakeholders.

Managers should, therefore, receive adequate training in preparing and presenting effective board papers. It should be noted that quality board papers are vital to the board’s decision-making process.

The board should be provided with adequate background and justification for any proposed course of action.

Options, pros and cons should be included together with managements’ firm and unambiguous recommendation.

 Implications of the proposal on the finances, strategy and risk should be spelt out. Directors need adequate time to review such papers which should be circulated 10-14 days in advance of the meeting.

No board paper should reach the boardroom without the chief executive officer’s approval. He or she should co-sign the paper as the sponsor.

This avoids the unseemly scenes that sometimes occur in the boardroom where chief executive officers have sometimes joined other directors in throwing brickbats at a manager who has stumbled in presenting a board paper.

Need to respect roles and boundaries

The Board, on its part, must probe, question and seek clarification from management on their recommendations. Only when fully convinced should they approve managements ‘proposals.

They should not substitute management’s recommendations with their own without involving management.

At a forum the author attended recently, Mr Simon Indimuli, Head of Governance at the State Corporations Advisory Committee (SCAC) cited a an issue involving  a chairman of a State corporation who was adamant he was entitled to prepare and present board papers to his own board, even over the objections of the corporations chief executive officer.

It took the equivalent of a cease and desist order from SCAC to get him to stop the practice and get back to his lane.

Such improvements in communications will generate a positive boardroom culture. The trepidation that afflicts managers as they endeavour to present a board paper will dissipate.

Board meetings will be shorter, productive and a more constructive experience all-round. They will become more of a team sport and less of a trial by ordeal for managers.

The winner will be the shareholder and all others with a legitimate interest in the Company.

-FCS Kamau is a Member of the Institute of Certified Secretaries.

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