Posted originally as note on a LinkedIn Policy Governance® thread,
7/12/12
Boards
often (usually?) have the idea that "you've got what you get" as board
make-up, so they strive to appoint at least some, or even most, people with
business competencies relevant to running the place. But Policy Governance boards
must represent
ownership (in a wise way) and so must look for people who are part of the
broader ownership but who can rise to the conceptual challenge of creating
and understanding great Ends and how they direct the organization - not
necessarily financial statements or investment
policies. This former approach creates a tension
and the potential for boards to abrogate their decision-making and
accountability concerning business-related polices and monitoring to the
domain "experts" on the board.
Over the years, after working with a big
auditing firm (Capin
and Crouse) and fellow consultants, we concluded we needed to change the
paradigm concerning board member "expertise." - That, instead, boards, as a
whole, seek and get sufficient training in the domains in which they need
enough understanding to know whether the reasonable interpretations and data
the board is getting meets reasonableness criteria and are satisfied by the
supporting data. Management's monitoring reports should aid in this process
but not enough. The IPGA workshop I did with Eric Craymer on risk governance
stressed this point. The workshop that Sue Radwan did with Paul Siers at the
Detroit IPGA Annual meeting on investment policy development had the same
message.
A board, in its entirety,
needs enough knowledge to know what it is talking about in its policies and
understanding of the monitoring it receives. Yes, you can teach a mom to
read a well done financial status monitoring report so she doesn't need to
default her governance to the CPA on the board.
RMB
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