By Paul Dubal, Governance Coach
A Board orientation is a great forum for getting directors up to speed, and invariably involves a great deal of reading and knowledge gathering around the company, its products and services, its industry, the strategy etc. There is lots to assimilate for a new director. It is also important to remind directors of their fiduciary duties, to act in the best interests of the company and to exercise independent and objective judgment in decision making. However, most orientation models I have seen do not coach the director on what is, in my view, one of the most important ways of fulfilling those duties, which is the responsibility of asking the right questions at the right time.
Good questions can test assumptions and possibly avoid disaster (how many times did a silent board sit passively by as their organization became synonymous with another corporate scandal like, Bre-X, Enron, Wells Fargo or Danske Bank)? They can help to explore new opportunities and stimulate fresh thinking. Yet often directors don’t know the right questions to ask or how to articulate them. They may be intimidated by their more senior peers or face humiliation at asking a supposedly naïve question. It takes bravery to stick your head above the parapet and exercise good governance by asking questions in the heat of the boardroom, not days later when you wished you had voiced that nagging doubt you were feeling.
There are plenty of compelling reasons not to ask questions, and it feels far safer to acquiesce and nod along, especially if others are doing so. Maybe it is the wish to avoid making someone uncomfortable or to appear to doubt their veracity, or you see that the board’s appetite for debating the issue has diminished. Maybe your intuition suggests it does not feel right, but it is hard to articulate what your feeling, so it is safer to stay silent. However, the benefits of asking good questions can outweigh these concerns.
The following may help in considering when and how to ask the right questions:
- Exercising diligence and your fiduciary standard of care. The board is ultimately accountable, and blindly accepting what management puts in front of them is derogating from this standard. Use this duty to ensure you are well informed and can make sound business decisions based on the proper level of information and debate.
- Overseeing the strategic direction of the organization. You need to feel comfortable that the organization is employing its resources effectively, that it has considered stakeholder relationships, has sufficient quality of products and services. You need to ensure that the company acts ethically and has a good reputation, and its performance is on track and aligned with the strategy. If not, why not?
- When overseeing the risk profile of the organization. This involves scanning the horizon for emerging risks and how they might impact the organization in the future. Conversely, what opportunities are available as a result of environmental shifts (such as climate change opening up new northern oil and gas fields that were previously inaccessible). Directors must get comfort that the company is managing its risks today and preparing itself adequately for tomorrow’s challenges.
- Read and analyse the materials thoroughly. Be prepared and clear about what you wish to ask. Think about what you wish to achieve with the answer and be prepared to probe further if you are not satisfied.
- Respect the process – timing is critical. Be mindful of the time and keep questions concise and well-paced. If the debate is closed, it is probably too late to ask a question on the issue – it may be disruptive. Listen well so you can be certain your concerns have not already been covered.
- Ask the questions in a neutral way that is non-personal and non-confrontational. Remember the purpose of the question is to seek information and/or to provide comfort on a decision. You are not there to attack or corner someone. Therefore, tone is important, but so is persistence if you feel you are being fobbed off. A personal or aggressive question will meet with a defensive response.
- Phrase the question in a positive way so it is empowering and points to a solution. Questions such as “whose fault was it?” or “Why did this go wrong?” are rarely helpful. Questions such as “what can we do to make this better?” is likely to elicit a more solution minded approach.
- Phrase your questions to get to the heart of the issue. A general question such as “what happened?” may yield a long-winded reply on an issue the director did not wish to know about. If we ask a question such as “what are the key steps we are putting in place to prevent a recurrence?”, this will sharpen the focus for the response.
Asking the right questions at the right time can be empowering and elevate your status as an effective director. At The Governance Boutique, experts in getting you board ready, we can provide individual coaching and guidance specifically geared to your needs, to help you cultivate an approach that asks empowering and relevant questions, supports continuous learning, and enhances your board performance.