Unclear Reporting Expectations
BOARDROOM BREAKTHROUGH: Exploring boardroom missteps and how to course-correct.
Scenario:
The board is not updated on a negative media story and its board member, Stella - appointed to the board by a stakeholder pension plan - is questioned by that stakeholder. Stella is unprepared for the question. Stella becomes frustrated by the slow notification to the board and the lack of transparency with stakeholders.
Governance is often complex, and when reporting expectations are unclear or key issues aren’t being proactively addressed with the board, directors can find themselves without the information they need or expect.
What Went Wrong?
The organization is experiencing these governance weaknesses:
Reactive Rather than Proactive Governance – Instead of anticipating and addressing board and stakeholder concerns quickly, management waits until information is requested.
Lack of Consideration – Management is not sensitive to how its directors and key stakeholders may react to a public controversy, nor to the extra pressure on stakeholder-appointed directors.
Unclear Roles and Responsibilities – Management may consider the cause of the story (e.g. disgruntled employee) to be operational in nature and not recognize when the situation deserves board involvement. Stakeholders may also not understand the limitations on the appointed director to discuss confidential matters.
What Stella Can Do
Rather than ignoring the issue or speculating on a response, Stella can take a constructive governance approach: raise the concern and ask management to promptly report back to the board. This ensures that the board can oversee the issue appropriately rather than individual directors managing concerns on their own.
How To Do Better
Boards and management teams can learn from this situation and take proactive steps to prevent directors from being caught off guard:
Provide Timely Transparent Information – Boards function best when management provides timely, transparent information and directors are confident that management will capably handle the situation.
Proactively Discuss Potential Risks – Ensure regular updates on key risks and policies, including reputational risk, workplace culture and crisis management. Proactive discussions about potential risks can ensure directors feel confident in their oversight role. Boards should also consider if and when updates or discussions should be held in advance of the next board meeting.
Clarify Governance Grey Zones – Directors need a clear understanding of their responsibilities versus those of management, especially in situations considered to be a “grey zone” between managing the issue and oversight. This may require regular discussions and scenarios to identify when the board will be informed or involved.
Prepare Directors for Public and Stakeholder Scrutiny – Organizations should have a strategy for responding to media or stakeholder concerns, and directors should be briefed on that strategy. Stakeholder-appointed directors should also be supported so they are confident in how to respond to situations where their conflicting roles and confidentiality requirements may create tensions.
Strengthening Your Board’s Governance Practices
Situations like Stella’s don’t have to catch directors off guard. Proactive governance, clearer role definitions, and strategic board reporting can help boards stay ahead of potential controversies.
How Can I Help?
📌 Free Guide
Want to improve your board’s governance approach? Download the free guide, Why the Board May Reach into Management Areas of Responsibility, at www.puimac.com/resources.
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Could you potentially benefit from governance services or coaching to help prevent or navigate boardroom challenges? Let’s talk! Schedule a meeting with me.