09 Mar An Antidote for Poor Corporate Governance
The recent corporate governance failings in the Nigerian Airline, Arik Air, may make a case for considering the corporate governance culture of large private companies in Nigeria. This post presents one antidote for poor corporate governance in any company, Effective Board Reporting.
The ability of Board Directors to effectively discharge their duties to the company is directly linked and correlated to the need to receive the appropriate and necessary information to perform those duties. The Board is required to make decisions that promote the success of the company and in basic terms, this means, assessing information presented to the Board at a given time and deciding primarily based on the facts presented. The Board cannot be expected to make decisions based on information not presented to it, or based on circumstantial information outside of the reports laid before it.
“Information is a source of learning. But unless it is organized, processed, and available to the right people in a format for decision making, it is a burden, not a benefit.”
Effective Board Reporting
Board Directors do not exist in isolation, they require high-grade and timely information to help them monitor the strategic direction, and performance of the company. The information presented by the Board fall into two primary categories: Performance Monitoring, and Decision Papers.
Performance Monitoring Information which would cover the high-level performance indicators for any company including financial, risk, compliance, sales, resource management, customer satisfaction should always be presented to the Board at each of its meetings. The Board should always consider this information against the strategy, financial plan, and business plan, set by the Board, for the company. The Board would also expect to see benchmark information on the high-level performance indicators for same-sector competitors.
Decision Papers which would cover approvals for any strategic decision matters, Board-level financial matters, and other matters specifically reserved for the Board should always be presented to the Board at its meetings. The Board will need to know the correlation between the approval being sought and the strategic direction of the company, the legal implications, the risk implications, and the financial implications of the decision being made by the Board.
The right information, delivered to the Board, in the right way will enable:
- more efficient use of time.
- more effective reports providing insight.
- better quality conversation in the boardroom.
- better quality decision-making.
Poor Board reporting will result in:
- inefficiency in the use of the time of the Board.
- lack of insight in the business of the company by the Board.
- poor decision-making by the Board.
- an ineffective Board overall.
The quality of the performance reporting or decision papers presented to the Board can affect the survival of a company in any competitive environment especially with globalization and emerging markets.