Posts Tagged ‘board members’

The second survey of Board Directors was just issued. The survey is conducted by Eisner Amper, audit, tax and business advisory professionals. They used their database and NACD's Directorship magazine's subscriber list of corporate directors. The survey reports on the opinions of 142 directors representing publicly and privately-held companies.  One of the questions they asked was which risks are most important to their boards, that is, besides financial risk (which probably begs a 100% answer!).  The chart is below. At the top of the list is reputational risk -- 69% said this is most important today. Reputational risk surpasses regulatory compliance risk (61%), CEO succession (55%) and IT risk (51%). I would posit that if this survey was done in the past few weeks, IT risk might have jumped up higher as a factor of major concern. The hacking and hobbling of computer networks at Boeing, Sony and the White House gmail accounts have had to certainly affect risk management concerns at board level.  With regard to security risks, Eisner Amper wisely says: "The tools of today's business heavily revolve around information technology, the Internet, the speed and degree of data transmission, and the pervasiveness of social media." And everything that affects business affects reputation.

Aside from financial risk, which are most important to your boards?	Board Directors
Reputational risk	69%
Regulatory compliance risk	61%
CEO succession planning	55%
IT risk	51%
Product risk	34%
Privacy and data security	33%
Risk due to fraud	21%
Outsourcing risk	14%
Tax strategies	14%

Another question they asked which I like was where board directors go to for new information. In the 2011 survey, the leading sources were company management, publications, Internet, accounting/advisory firms and conferences (at 33%).  I liked seeing the importance of conferences among the other sources because I firmly believe that getting out of the office and listening to other points of views provide opportunities for thinking beyond the same old ways about the same old problems.  I wish I did more of this myself.  We all need to close the door on our silos. For board members, this is a good sources considering how the problems they face have to be on high boil these days.

Primary Sources for New Information	Board Directors
Company management	73%
Publications	54%
Internet	46%
Accounting and advisory firms	36%
Conferences	33%
Personal network	33%
Associations	229%
Law firms	17%
Consulting firms	11%

At the end of their executive summary, Eiser Amper concludes:

"Protect. Protect. Protect. Reputational risk needs constant monitoring and analysis of the broader issues...Brand, company and personal reputation can change overnight. The speed of today's business was unimagineable in years past, but its impact is real and protection is the name of the game."

A few items crossed my desk [or should I say desktop] this week having to do with corporate governance. The first is an interesting article in the Financial Times about banning blackberries from boardrooms. The argument is that board members are charged with fiduciary responsibilities to shareholders and blackberrying or texting during meetings might be considered a breach of contract.  Board members are not doing their jobs if they are busy typing replies or reading scores of emails in meetings. I enjoyed the article because authors’ David Beatty and J Mark Weber also got into the idea of “inattention blindness” and how that might interfere with the weighty decisions required of board members in this tough business climate. One neuroscientist in the article is quoted saying that humans can not concentrate on two things at once.  I recall reading that people can only hold seven things in their head at once which is a reason most of us experience infofog a good part of the time.  At least I do. Anyhow, the point is that board members need to pay full  attention during board meetings today, particularly when the stakes are so high, and responding to electronic messages can only direct attention away from the hard work at hand.  Since board reputations are already in jeopary as one company after another failed this year, I wholeheartedly agree with the authors’ advice that boards enact “no wireless” policies in meetings for now.

 

I was also reading Karen Kane’s blog on corporate governance and totally concurr with a quote from Stephen Davis of the Yale Millstein Center that she cited.  Davis said that today “directors need the tools of a politician.” In other words, as Kane says, they need to persuade and explain why they took the actions they did. I think that in the future we will be seeing more explaining as Obamanomics works its way down to boards.  Greater transparency and clarification for stakeholders as well as shareholders will become more common in the years ahead. 

 

Now to tie the two items above together….if President Obama can do without his blackberry at times, so can board members.