Is Your Board Doing Enough?

There was a great post today by TK Kerstetter on The Board Blog: Lessons Learned from the BP Board: Déjà Vu All Over Again?

Unfortunately, it seems that board members continue to be challenged in fulfilling their responsibilities related to ensuring corporate integrity. Beyond the recent crises of BP and the financial industry, we can look back to the failures of Enron, Arthur Andersen, the dot-com boom and bust, the S&L failures, etc. And in every case we wonder how the board members could have ignored (or done little to prevent) the cultural dynamics that were prevalent in these organizations.

The challenge is not just limited to large corporate organizations — it exists in small companies as well. As a venture capital firm that focuses on expansion stage technology companies, we try to ensure that we hold the board members and senior management of our portfolio companies to the highest standards of integrity and performance. We recognize that the risks of excess and greed are lower in cultures where fairness, trust, integrity and high performance are actively promoted. We also try to develop relationships with members of the management teams that don’t always participate in board meetings, so that we can gain a less filtered perspective on the day-to-day culture of our companies.

Board members need to ask the tough questions. They can’t assume that simply because a potential cultural issue hasn’t raised itself to the board level that it doesn’t exist. They must ensure that a company’s executives are operating with utmost integrity. They should engage in active and informed discussions with the company’s auditors to ensure that they have a solid understanding of the risks taken and judgments made by management in the preparation of the company’s financials. They should address company crises swiftly and fairly (no matter if that crisis is environmental, criminal, or consumer related). And they should ensure that CEO succession planning isn’t considered when it might already be too late.

In the end, however, it is clear that board members continue to be challenged by this most fundamental of their responsibilities, and best practices process is never as widely adopted at the board-level as we might wish. The onus is not only on each board member to hold themselves and each other accountable for raising the bar, it is also incumbent upon shareholders and investors to evaluate boards of their companies with a much more critical eye.