Information Governance Time for a fresh look at Board Papers
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www.pwc.com/ie
Information Governance
Time for a fresh look
at Board Papers
May 2012
1Information Governance - time for a fresh look at Board Papers
As Directors fight for their organisation’s survival, and regulators How you handle your Board Papers? Box 2
demand greater accountability of them, the importance of the humble
Board paper has been overlooked. It’s time to take a fresh look. • Board Papers are distributed in paper form • Little assurance exists that Board Members are
rather than by using secure Board portals retaining and destroying Board Papers in line
with Board Policy – in practice, Board Papers
• E-mail and documents are communicated to
In this article, the dangers of poor board papers are described in light of new Board Members using non-commercial email
are sometimes kept in unsecured locations in
Board Members’ homes
demands for so-called ‘Information Governance’ and a framework for better accounts (such as Gmail, Yahoo and Hotmail)
without password protection or encryption • Board Papers are accessed and stored on
Board papers is outlined. Board Members’ private mobile devices and
• No provision has been made to accommodate
personal home computers
In a sweeping broadside of corporate
Your Board Pack? Box 1 the secure receipt of sensitive Board Papers
outside normal channels – in practice, Board • Where electronic means are used, unsecured
governance following the recent economic Members travelling overseas use hotel wifi and wired networks are used
• Papers are enormous - anything over networks and internet cafes to access and
crisis, Sir David Tweedie directed his 120 pages or even up to 250 pages • Board Members private mobile devices and
download Board Papers
home PCs are not encrypted (presenting
criticism widely: • Individual papers are inconsistent particular concerns when lost or stolen)
in layout or unclear as to purpose
“Executive boards failed, non-executives were (for discussion? for noting? for decision?)
kept in the dark, audit committees failed, • Papers resemble more a ‘dump’ of data,
auditors fell asleep at the wheel, or let with no coherent narrative – for example,
If any three in either box apply to you, • although board packs averaged 132
voluminous budget variances are provided
problems go, credit rating agents did not too without proper analysis it’s time for an overhaul. pages, some were as large as 500 pages.
well, analysts missed it, the SEC failed to
• Papers are written in language more • although 49% of Boards distributed
regulate, and the investment banks and suited for management than Directors It’s often only when you examine some
lawyers (and consultants) were part of of these issues that the need for change their packs by email, this was not in
• The layout changes from month to month
the problem, helping companies with their with new reports appearing alongside becomes apparent. That’s certainly the a secure environment.
questionable deals . . . it wasn’t just one routine reports
message coming from independent surveys • only 30% were confident Directors
little piece gone wrong. The whole system • Information presented is ‘massaged’ to destroyed their board documents in
present the best picture rather than an
on the issue. In one study for examplei:
was collapsing.” objective assessment of issues needing line with company policy
robust dialogue
It’s hard to believe this could have • 50% thought it was likely that Board
• Papers are heavily oriented to financial Members accessed their papers on
happened if good Board Papers (essential and backward-looking data – at the
for Information Governance) were being expense of non-financial measures insecure networks.
used and robustly discussed. and forward-looking data
• The effort to produce the pack is significant
In practice, whether Manager, Director, (Board and subcommittee work occupies a
Company Secretary or Chairman, the major part of the Company Secretary’s time)
challenges around Board papers can be • Papers are often superseded by more
up to date versions produced on the
all too familiar – both in relation to the day of the meeting
papers themselves and how they are
handled (see the following boxes).
2Information Governance - time for a fresh look at Board Papers
‘Information When the FRC revised the latest version of The Company Secretary’s role is spelt • Non-executive directors should insist
Governance’ – the Combined Code, they introduced some out too: on receiving high-quality information
no place to hide? significant changes in relation to the sufficiently in advance so that there can
“Under the direction of the chairman, the
provision of information. Some be thorough consideration of the issues
In the past, weakness in Board Packs or the company secretary’s responsibilities include
commentators speculated this change was prior to, and informed debate and
handling of Board Papers might have been ensuring good information flows within the
precipitated by Non-Executive Directors challenge at, board meetings.
little more than an inconvenience. Now it board and its committees and between senior
who defended their performance during the High-quality information is that which
could be a major problem. Why? Because management and nonexecutive directors, as
recent economic crisis claiming ‘information is appropriate for making decisions on
of a shift in expectations around so-called well as facilitating induction and assisting
asymmetry’ –because management the issue at hand – it should be accurate,
‘Information Governance’. with professional development as required.”
allegedly presented incomplete (or, in clear, comprehensive, up-to-date and
It is commonly accepted that the FRC some cases, misleading) information It doesn’t stop there. A later paper timely; contain a summary of the
set the standards that Board Members to the Board, they could not have acted providing guidance on how to assess contents of any paper; and inform the
need to address. Just about every Code any differently to the way they did. the effectiveness of Boardsii spells it director of what is expected of him or
of Governance refer to the FRC’s need for out in even greater detail: her on that issue.
The FRC introduced provisions that
the Board to be • The company secretary should
profoundly impact all the key players: • The chairman’s role includes . . .
ensure the presentation of
“supplied in a timely manner with ensuring a timely flow of high-quality
On the question of Board Effectiveness, high-quality information to
information in a form and of a quality supporting information
the Chair of the Board is now charged the board and its committees.
appropriate to enable it to discharge • The CFO has a particular responsibility
with responsibility:
its duties.” to deliver high-quality information to And to nail the point once and for all,
“for ensuring that the directors receive the board on the financial position of the FRC insistsiii that this dimension be
accurate, timely and clear information”. the company. specifically addressed in the evaluation
of effectiveness.
No escape.
3Information Governance - time for a fresh look at Board Papers
Steps to improve Many have enumerated the characteristics
Board papers: Good Practice Box 4
Board Papers of good information in Board Papers. One
such guidev provides a useful set of criteria • Relevant – information presented should • Reliable – information should be of good
Production of Board Papers is more of
(see Box 4). But a number of trade-offs be sharply focused. It should reflect the enough quality for the Board to be confident in
an art than a science. A typical pack is organisation’s objectives and overall strategy. it. This will depend on its source, integrity and
must also be mastered to create a good
easy enough to define in general termsiv • Integrated – the systems and processes
comprehensiveness.
Board Paper, notably: • Comparable – Both financial and non-financial
(see below). used should satisfy both internal and
internal reporting needs. reporting should include appropriate
• Being comprehensive but succinct comparable data, e.g. prior period, budget,
An effective Board will vary this basic pack • In perspective - information should be
– enough information must be provided presented in a relevant time context forecast, plan etc)
according to a predefined Board Calendar
but not to the point of overloading • Timely –better for the Board to receive
• Clear – Reports should be written clearly and
that addresses all the routine and once-off simply, supported by judicious use of graphs
Directors whose time is at a premium information that’s imperfect (but within
activities in a typical year; it will also be acceptable tolerances of precision) in and charts. Key indicators and trends should
adjusted for irregular items, as appropriate. • Being accurate but timely – there is no good time, than completely accurate be obvious.
magic answer to this trade-off – the key information too late.
is to strike a balance that the Board
Typical Board Pack Box 3 understands and finds usable
• Assuming common understanding but A sample template for a Board Paper Conclusion
• Agenda
providing detailed background – some is set out in Box 5. Board preferences
• Minutes of previous meeting Even doing all this still does not guarantee
Boards like to use a standard template. will vary but the template contains
(with a separate list of follow-up actions) the best decisions. Much has been writtenvii
This enables Directors familiar with the the key elements of what is
• CEO’s Report on cognitive bias in the boardroom:
background to deal with the issue considered best practicevi Even if
• Financial Report • Confusing values with facts
quickly while those less familiar can such a formal approach is not
• Other operational reports, as appropriate
spend time on back-up papers. adopted fully, it will still provide • Rosy retrospection
• Board Papers that require Board input
benefits in refining the thought • ‘Status Quo’ partiality
(for noting, discussion or decision) • Using accepted abbreviations without
process that goes into Board Papers.
excessive jargon - newly appointed • ‘Sunk cost’ effects
Directors often struggle to familiarise • Wishful thinking
themselves with jargon that experienced
colleagues use without thinking While Walker insisted that appropriate
boardroom behaviours are an essential
component of best practice corporate
governance, failure to prepare good
Board Papers will defeat even the best
intentioned Board.
4Information Governance - time for a fresh look at Board Papers
Sample Board Paper Format Box 5
Agenda Item No. Agenda Item Paper Ref.
[#] [Title] [unique ref]
Sponsor [Insert Name and Title]
Draft Resolution [Insert exact wording of proposed board resolution ]
Executive Summary [Insert terse description (4-6 lines) summarising the intention of the paper and the requested
action by the Board (for noting, discussion or approval/decision)]
Background [Provide link to any previous Board consideration of issue.
Provide key information to enable Directors to understand key issues.
Identify any subject matter expert reports and any other supplementary information available.]
Issues and Options [Describe relevant issues that Directors are asked to consider.
Provide details of the risk assessment undertaken in relation to strategy, financial, operational,
compliance and reputation issues, including impact on budget, cash flow etc Comment on
emerging risks and on risk ‘velocity’ (how quickly a given risk has changed / is likely to change)
List the Options open to the Directors.
Explain the rationale for the option selected by management.]
Recommendation [State the recommended option.
Indicate who will take responsibility for the chosen option, including risk remediation measures
(include the Executive and the Operational Manager).
Identify KPIs and proposed reporting, including timing]
Signing of Board paper CEO Date
Sponsor Date
Strictly Confidential to [Organisation] Board
5Information Governance - time for a fresh look at Board Papers
i
“ Better Board Governance: v
“Performance Reporting to Boards: A
Communications, Security and Guide to Good Practice”, CIMA, 1997
Technology in a Global Landscape of
Change”, Board Governance Survey,
vi
“HB 403 - Best Practice Board
Thompson Reuters, Sep 2011 Reporting”, Standards Australia, 2004
ii
“Board Effectiveness”, FRC, 2010
vii
“Cognitive Bias in the Culture of the
Boardroom”, Chief Executive, 2007
iii
“Board Effectiveness”, FRC, 2010
iv
“Taming the beast of board papers”,
Mary Morel, BoardRoom, Jan 2010
Key Contact
Bob Semple
Partner
Tel: 086 810 6434
Email: bob.semple@ie.pwc.com
www.pwc.com/ie
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
© 2012 PricewaterhouseCoopers. All rights reserved. PwC refers to the Irish member firm, and may sometimes refer to the PwC
network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 03999.
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