NEDonBoard calls for Board Members to thoroughly review board materials as well as go beyond the reported information and ask themselves what they are not being told.
Quite a few corporate governance situations have made the headlines of UK newspapers throughout 2018. In the cases of Carillion and Patisserie Valerie, the role of the Finance Director, the accuracy of the financial information reported to the board and the auditing process have been challenged.
On Thursday 11th October, Patisserie Valerie announced that its board had found “a material shortfall between the reported status and the current financial status of the business”. The board discovered the existence of two “secret” company bank overdrafts for a total of £9.7M with HSBC and Barclays. The chair, the board and the auditors had not known that the company had bank overdraft facilities!
Labour MP Peter Kyle, a member of the business select committee said:
“Patisserie Valerie’s situation only exemplifies the need for a wholesale look at how we ensure our companies get the right governance and the right external scrutiny, so that shareholders, customers and our broader economy can be reassured that best practice is being followed. We have mostly focused on the big firms so far, such as Carillion and the like, but Patisserie Valerie shows it is not just a problem that exists at big companies”.
NEDs and board members have clear duties and liabilities. To perform in their role, board members should not only carefully and thoroughly review the materials; NEDs should go beyond the reported information. Here are the recommendations of NEDonBoard, the Professional Body for non-executive Directors and board members:
- Thoroughly review the board materials. Consider what is in there. Use judgement and ask questions if you believe that you should verify data.
- Assess and evaluate the recommendations contained in the materials.
- Ask yourself what is not in there. What elements have been overlooked or ignored? What risks have not been considered by management?
- Step out of the boardroom and listen to employees and other stakeholders. There is tremendous value in listening to stakeholders to find out what you may not be told in the boardroom and why.
Boards may consider items too late because nobody raised these items until it was too late. NEDs have a duty to promote the success of the companies on which boards they serve. Going beyond the reported information and asking themselves what they are not being told is a critical behaviour that NEDs and board members need to demonstrate.
Written by Elise Perraud
Not a member yet? Join NEDonBoard, the Institute of Board Members and have access to the latest job opportunities, events and networking.
