Setting Board Priorities
What should boards of directors be focused on? Strategy? People? Competition? There might be several choices that could receive votes that you could feel comfortable about. Would you feel comfortable knowing that the board’s top priority is keeping up with new regulation?
That’s exactly what is at the top of minds in boards today. This has been growing and growing ever since the emergence of Sarbanes-Oxley but continues getting more challenging and unpredictable every day. This week I was writing my Leading Lean column for Assembly Magazine on the topic of lean in the boardroom. This topic deserved attention but I had to cut it from my column because of space. However, it deserves more attention.
You could argue for or against the merits of any particular new regulation. SOX had merit, and flaws. The current financial reform bill, consuming 2,319 pages, has both merit and flaws. Some of you would come down entirely on one side of the debate or other, as would I. However, the net impact of regulation after regulation is the impact it has on businesses ability to do what it is built to do – serve customers, create returns for shareholders, build jobs, invest in infrastructure. Boards of directors have limited time and bandwidth to focus on key issues. The National Association of Corporate Directors (through which I am a certified Professional Director) has issued a list of what it considers top board priorities for 2010. These sound reasonable, and does include dealing with regulation:
- Adapt to a changing environment
- Demonstrate leadership
- Build your board
- Understand risk governance
- Pay for performance
But boards are so consumed with only the regulation aspect of priority #4 (there are many, many other forms of risk governance that should be managed) that they have no time to build a successful company. Surveys have demonstrated that boards are spending a lot of time on regulatory issues.
Boards have more topics to cover than ever. They require more detailed knowledge than ever. They requires more breadth than ever. We cannot burden company after company with a focus on regulatory compliance above the topics that really build companies and create jobs.