Board Governance: The Critically Informed Board of Directors

Board Governance: The Critically Informed Board of Directors

 

“Listen to many, speak to a few.”  William Shakespeare, Hamlet

 

According to BoardSource, “too many board members and boards . . . don’t have a strong understanding of their roles and responsibilities.”  A challenge for board members on both for-profit and nonprofit Boards of Directors is having enough visibility into an organization to be engaged and valuable without being micro-managers.  It’s a struggle.  As a board member I have dozed through many a dry report accompanied by 20 pages of data and still not been able to derive enough information from that data to feel like I understood the underpinnings of an organization.  And I do this for a living!  How can board members be better informed about the nonprofit organizations they oversee without overwhelming them with too much detail or bogging them down with too vast an array of information?

 

 

 

I sat through an on-boarding (also known as organizational socialization if you prefer fancy phrases) meeting earlier this year where new board members were presented a strategic plan that contemplated exploring innovative revenue models.  New board members don’t even know the current revenue model, how can they even participate in a task of exploring new revenue models?  How can they get up to speed enough with the business model of the organization without being immersed in the organization too far?

 

 

 

From my perspective, I believe new and existing board members are best informed about programmatic and functional operations of a social or for-profit enterprise by the senior staff members responsible for these functions.  A CEO is charged with knowing all, but it is not healthy for an organization for all of the information provided to a Board of Birectors to come only through this single person.

 

 

 

Most importantly, for a member of a board of directors to meet his or her fiduciary duty, he or she must be informed.  I would add that to be effective board members (and not just legally complying), all board members need to be “critically” informed.  To be critically informed means that a board member has a sufficient amount and depth of information to be able to critically examine the information presented to the board.

 

 

 

The levels to which a board of directors is informed can be delineated as follows:

 

    • Limitedly Informed;

 

    • Selectively Informed;

 

    • Critically Informed; or

 

    • Overly Informed

 

 

 

 

To reach the optimum of being Critically Informed, board members need to hear from and receive information from staff members other than the ED or President.  Too much information or at too granular a level and board members will be too overloaded to critically examine the information.  Not enough information or information at too cursory a level and board members will not have enough information to probe strategically.  Information filtered through an Executive Director or President might be sterilized for consumption by board members which will result in board members being selectively informed and unable to critically examine the information they are receiving.

 

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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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