This blog is based on Episode 8 of theThe Corporate Director Podcast, “Modern Governance Around the World (LIVE! Sydney Edition), where we interviewed Susan Forrester, a board member of several listed companies.
One problem plaguing boards working towards modern governance is that directors are looking backwards too much, and not looking forwards enough. Another issue is quality of information. If boards have to make decisions based on data, then they need the most accurate and relevant information possible.
>> Listen to Episode 8 on Apple Podcasts.
That’s what Dottie Schindlinger, co-author of Governance in the Digital Age, got to discuss with Susan Forrester, the chair and director of several listed companies, at an event in Sydney, Australia to celebrate the book. Forrester also serves on the advisory board for Diligent Institute, Diligent’s think tank and research arm.
“The only way we can make good decisions is by [having] really good quality information,” Forrester said. “How do I make sure I’ve got the most up to date, real time information that I need, but still remembering that my job as a board member is to govern, not to run the company?”
How Many Boards Is Too Many Boards?
Depending on the director, the answer ranges widely… Forrester currently serves on six listed boards (with two more shortly forthcoming); these companies range in industry/type from veterinary care to chocolates to patent and trademark law. “So they’re all very diverse, but in some ways they’re all very similar,” Forrester said.
“I think there is a healthy number, but I think we need to be mature enough to actually work out what’s right for us,” Forrester said. Also, be sensitive if your co-directors drop you some hints that they haven’t seen you around very much. Generally, though, Forrester says that more experience is better.
“If you want to be a professional full-time company director, the best way to learn is to have a really diverse, interesting portfolio,” she said. “It’s amazing how many times the same issues come up.” What you learn on a childcare board can be applied to a tech space board, for example.
“If you want to be a professional full time company director, the best way to learn is to have a really diverse, interesting portfolio.”
— Susan Forrester, Corporate Director
The Metrics for a Good Director
It obviously takes more than breadth of experience to be an excellent board member.
A good director will take on the commitment with an understanding of how much time the role will actually take: “The days of turning up at the board meeting, attending the board meeting, and reading the papers beforehand are long gone,” Forrester said.
It’s digital technology that puts you on duty all the time. Some weeks nothing happens, and other weeks the information flow is pretty constant.
There’s a lot of reading and research that goes into being a good director. You’re always on the lookout for information about your companies and issues that could affect them: “It’s like being a consultant and having a range of clients and constantly serving them,” Forrester said.
With the responsibility to make decisions about looking forward (strategy) and to make observations about looking back (monitoring and compliance), good information is essential.
The key relationship for a board member to have is with the CEO, for the sake of trust and candor. But the company secretary is equally as important, as he or she is the one actually providing the information and serving as the communications conduit.
Finally, the board chair is clearly a critical player. “The key to the way we make good decisions is having a really good chair who can liaise with a company secretary,” Forrester said.
“The only way we can make good decisions is by really good quality information.”
— Susan Forrester, Corporate Director
Real Time Information
The kind and quality of information that directors are getting from their companies is getting closer to real time. (Naturally, boards still need three to five working days to actually read the information before they show up.)
It’s the new CEO–likely to be in their forties–who’s probably driving the format of information. “What we’re getting at the moment seems to be much more like PowerPoint presentations with the various KPIs and bullet points with a bit of narrative,” Forrester said.
These look far different from the prose type board reports of old. But they still aren’t quite real time. “Some of the dashboards are real time, and a lot of the boards I’m involved with do have great tech systems,” Forrester said. “By the time we meet, the papers are five, seven days old. But the CEO will often bring the latest dashboard and put it up on the screen to talk about,” she added.
The Shift to Forward Thinking
A modern director needs to influence boards to spend more time looking forward. But how?
Boards are meant to be high-performing teams, but they’re actually just a completely disparate group of people who only meet for four or five hours once a month. And based on this, they’re expected to make amazing decisions. “The boardroom model of meetings and how it operates is really up for disruption,” Forrester said.
1. Meet Less Often
Meeting six to eight times a year is plenty, in most cases. “The information we get in quarterly reporting is far richer and it’s far less lumpy,” Forrester said.
2. Replace Agendas with Questions
Good questions to ask yourself before you get through the CEO report, the CFO report, and the various management reports: What’s keeping you awake at night? What do we need to be looking at? What do you want the board to decide?
Asking three or four strategic questions is far more future focused than reviewing three or four reports.
3. Balance Your Vision
“The proportions in terms of forward looking and backward looking should be 60% forward and 40% back on the basis of the quality information you should be monitoring and checking,” Forrester said. Committee meetings can be where the heavy lifting happens in terms of monitoring and compliance and risk management, whereas the larger meetings themselves can be focused on asking those forward-looking questions.