Any governing body – whether it be a Board of Directors or a City Council – can only make good decisions in the best interest of the organization if the Board or Council is appropriately informed. Having just completed four governance reviews, I have to say, sadly, that the material which management was providing to the Boards had significant failings. Additionally, I recently led a workshop for the Board of a major public sector body on, interestingly, the topic of “Informative Information for Effective Decisions and Oversight.” A couple of recent news items highlight the need for “informative information.’ JPMorgan Chase & Co, which is a major multi-billion dollar bank, and which was bailed out by taxpayers during the debacles of 2008 and 2009, recently admitted that it had neglected to convey important information to its board of directors. The Securities and Exchange Commission (SEC) investigator stated that JPMorgan’s top management “broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the company’s problems.” Closer to home, Hamilton City Council could not deal with a request for $1 million from the Police Services Board to fund an expanded Taser program due to insufficient information.
The information which Council has wisely requested is not unrealistic, and actually, is information that I would have expected the Police Services Board itself would have required in order to approve the decision with due diligence and considered thought. Did that Board simply superficially consider the issue and then pass the buck? Why is it left to Hamilton City Council to undertake the necessary due diligence? A governing body is to hold management accountable and to ensure the organization conducts its operations to benefit the stakeholders and to create value for the shareholder. In some cases that shareholder is the community. The purpose of a Board meeting is for the members of the Board to come together, to duly consider information provided by management, apply independence of mind in assessing the information, and perform due diligence before a decision is made. Through reading hundreds of packages of material for Board meetings, and interviewing numerous Directors, I have, at times, described the information provided to the Board as obtuse, vague, insufficient, overly detailed, distracting, and stale dated.
I have also seen information delivered in a timeframe that makes it impossible for Directors to read the material, interpret it, and be able to ask thoughtful questions for due diligence purposes at the Board meeting. Such information leads to Boards being uninformed or worse, misinformed. Weak information can only lead to poor governance decisions. What the Board needs is succinct information from management covering the right material and written at a governance level. Does a Board really need a 200 page Board package – I am serious – I have seen 100 page and 200 page Board packages. This generally means that management is giving the Board everything including the kitchen sink and then the Board can’t say that management “hid” anything. In fact what it does is essentially hide information in plain sight, as most Directors cannot hope to work their way through 100 pages and actually filter out the things that matter.
A weakness of many Boards is the inability to articulate the information which it needs to perform its duties. I coach Boards on how to articulate what information the board members need to fulfill their role and responsibilities; it is not management’s responsibility to guess at the information which the Board needs. Management holds all the information but the Board needs to identify the “informative information” it needs. Also the Board needs to obtain a sufficient amount of assurance from independent sources, like outside experts, and internal auditors, regarding the worthiness of the information which it is receiving. Good information includes relevancy, timeliness, accuracy, ease of understanding, and reliability. Boards need to ask for the right information to enable good governance. JPMorgan is now facing a potential $11 billion settlement with the SEC and the decision to fund the $1 million request to implement Tasers for the Hamilton police has been deferred. All for the lack of providing “informative information” to the governing body. My advice to Boards – seek expert help.