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Strategic Oversight by Boards: Who’s Minding the Store? Dr. Chris Bart, FCPA

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woman lost control of her BMW and careened off the Florida Turnpike around 5 a.m. one morning. The car landed in the middle of a canal in the pitch dark. The woman had only a few minutes before the car’s electrical accessories would begin to fail, and not much more time before the car would sink. Frantically, she dialed 911 on her cell phone. Emergency operators shouted at her to tell them her location. She couldn’t, because she didn’t know where she was. Yet, rather than focus on getting her out of the car (“Ma’am, can you swim? Can you get your windows down and climb out? How far are you from shore? Activate your emergency flashers and alarm so we can see and hear you. Do you see any alligators?”), they persisted in trying to determine her location. The car sank and the woman drowned - with her rear window completely rolled down. This story serves as a metaphor for the way many corporate board directors seem to be viewing their responsibilities these days. They are focusing exclusively - even obsessively - on knowing a firm’s “location,” or financial status, rather than identifying the changes taking place in either an organization’s external environment or its internal competencies - and then responding in a timely fashion. Why do boards act this way? I’ve observed, and served on, several boards over the years, and that experience tells me there are a number of curious reasons for this state of affairs. The most frequently cited excuse is that, remarkably, directors often do not consider a corporation’s strategy as part of their mandate (“That’s the CEO’s job!” many quip.), and therefore allow themselves to remain uninformed about its quality and implementation; second,

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too many directors lack competence and/ or agreement about the strategy concept itself. Yet, the formulation and execution of an organization’s strategy is at the heart of ensuring every entity’s long-term survival and competitiveness. Without a clearly articulated strategy, an organization won’t have the sense of purpose and direction it needs to forge strongly ahead. And it goes without saying that if all members in an organization do not know and understand what the strategy is, they will lack the sense of mission needed to implement it in a concerted, cohesive manner. The result? Chaos and confusion. So, when things go awry, corporate directors who have failed to formulate, evaluate and revise their organization’s strategy cannot in good conscience put all the blame on the CEO. The fact that strategy gets so little attention from boards (take a look at your last four meeting agendas for proof of this) is actually not that surprising, in large part because there’s often a lack of understanding and interpretation of the term itself, never mind its components. Here is an example: A report by one “blue ribbon commission” on the role of the board in corporate strategy was found to be woefully deficient in its attempt to define its key topic. The report’s explanations were so confusing that any board member would have trouble determining whether strategy is concerned with mission, vision, goals, objectives, business definition and selection, tactics, or some combination of these. To the extent that this confusion exists in the boardrooms of our nation, it’s no wonder so little time is devoted to discussion of strategy. Adding to the definition chaos is the fact that the independent directors appointed to boards typically come from a variety

of organizations and backgrounds. Consequently, while they may use the same words, they often attach many different meanings to these terms. Rarely do they take the time to come to a consensus on how certain terms should be used. As a result, the board communication process is hampered. I have also observed that in the interest of keeping meetings moving along smoothly and peacefully, board members too often avoid debating the strategy terms that might create dissension, therefore meetings continue to focus on nonstrategic trivia.

“Buddy Boards” There’s another reason, however, why boards virtually ignore the issue of strategy. CEOs simply do not want their boards involved in such discussions. This would certainly explain why many CEOs

Dr. Chris Bart, FCPA is a recognized governance authority, the Founder of The Directors College of Canada and CoFounder of the Caribbean Governance Training Institute, both of which currently offer the Chartered Director Program that leads to the internationally recognized “C. Dir.” designation. For more information, please visit CGTI’s website: http://www. caribbeangovernancetraininginstitute. com/ or phone Lisa at 758 451 2500

St. Lucia Business Focus 82  

Our special feature in this issue is the 10th Anniversary of First Citizens Investment Services Ltd. which has grown into a regional powerho...

St. Lucia Business Focus 82  

Our special feature in this issue is the 10th Anniversary of First Citizens Investment Services Ltd. which has grown into a regional powerho...

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