This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
Corporate Boards have been under siege. If you ask a Board member about the changes in corporate governance, risk and accountability, they roll their eyes and lament that the job of a Board member has become more complicated and difficult.
Let’s try and look at the experience from their perspective. Board members usually enjoy focusing on a company’s financial performance and some of the more “sexy” business issues – acquisitions, hiring and firing of CEOs, changes in business plans and financial fundamentals. These issues are the kind of issues Board members love to engage in, analyze and discuss.
Board members have been required to change this calculus and address some of the less “sexy” issues, starting with Sarbanes-Oxley and the accuracy of auditing reports. Next, Boards have been required to focus on anti-corruption compliance and the risks to companies from aggressive enforcement of the FCPA and other global anti-corruption requirements.
Add to this the mix enforcement risks arising in specific industries, as well as activist shareholders and class-action plaintiffs, and Board members have a number of headaches to offset all the benefits and perks of serving on a corporate Board.
Does that mean we should feel “sympathy” for the Board member who complains about added responsibilities, committee structures and assignments?
To be candid, I do not have much sympathy for Board members. They accepted the job with an understanding of what they have to do. The world is a riskier place for a number of reasons, not just aggressive government enforcement programs.
In fact, I would argue that it is about time that corporate Boards were held accountable. Board members have to devote more time to their jobs and make sure they carry out their fiduciary duties with proper regard for their responsibilities.
Board members should be selected with greater care and attention to the job. If they are not happy with the burdens of the job, there is a solution: resign.
The professional profile of corporate Boards should reflect the expertise needed to address a variety of issues. One seat should be reserved for a member who has ethics and compliance experience; another seat (or more) should be reserved for someone with financial expertise. That is not asking very much – these are basic requirements fundamental to the operation of an effective Board.
Most significant compliance failures can be traced back to a governance failure at the Board level. It may not be intentional, but the failure usually corresponds to an inattentive Board or a failure of the Board to follow up on an important issue.
Corporate Boards resent advice about their inattention or failures. They are not used to being criticized. They have ready answers for business or compliance failures.
The dynamic at the Board level has to change. More responsibilities have to be assumed. It is time for Board members to step up, elevate their performance, earn their salaries and protect the shareholders.