The knowledge emerging from the Carillion Inquiry and other reports on the lack of traction from NEDs, casts a dark pallor over the cause of active governance by NED’s.
The oversight load and expectations on independent minded NED’s is rising daily. While we are rightly positioning our NEDs to get greater traction and insight into the culture and sustainability of their companies, we are relying heavily on an ‘old’ technology to support that insight. The level of asymmetrical knowledge between the NED and the company executive is widening daily. As the executive teams use an increasingly sophisticated range of techniques and AI to analyse and format their information. NED’s by and large receive a very large ‘Pack’ of Board information which would be familiar to NED’s of 20 years ago, with a few days to read, review, analyse and be insightful about. The ‘major’ technology advance has been that instead of physical paper this is now delivered electronically.
It is very interesting to observe a Private Equity owner operating in this knowledge and information space. As they oversee a business as a ‘Board Member’ they set-up the information flows to suit their needs, no debate, their own analysts then trawl through the information using cutting edge information analysis techniques and processes to provide their ‘Principles’ with painfully insightful analysis and questioning.
We need to recognise that the cost of effective governance includes providing NEDs with the tools and support to do the job as we envisage it. How this develops should be interesting? Do we provide the Board with its own Information Secretariat to support its oversight? A few Boards require the Internal Audit function, as a very independent unit reporting to them, to verify the veracity of the information provided to the Board.
In whatever circumstances, the old technologies of ‘feeling’ the culture is right and ‘feeling’ confident about the executive team, just does not cut it any more. While the executive teams will see this as an insult to their integrity and executive responsibility it is a reality of the modern world and the increased speed and complexity of the dynamic business environment. No longer should the disproportional strength of the AI and management information capability of the executives, upon which they have spent millions, be met with a quill pen and a blunt nib.
The fact that the world of AI and financial digital applications specifically designed for the Board is restricted to an electronic library, reflects the lack of investment and money available to our Boards to get their oversight into the modern age. Going back to the PE example, the CFO who suggests gathering appropriately designed information to create insight and effective oversight of the business was ‘too expensive’ would not be around too long.
This is a call for a more modern view of the Board NED role, the fact that that they are at the cutting edge of strategy, information management and dynamic behavioural insight should make this an exciting place for innovation and creativity.