Does the board provide enough support, scrutiny and challenge to the senior team?

‘I think boards can end up rubber-stamping [deals] because they can end up being intimidated by their executives.

'Boards should climb back into the driving seat of organisations.

'Executive directors were asked how many could manage better without their boards. Most of the hands went up.’

Inside Housing report of speech by Liz Potter, Chair of Orbit Group (June 2008)

These sorry but truthful remarks echo the conclusions of the official inquiry into the Queens Moat House group, which went under in the last recession of the early 1990s (http://www.insolvency.gov.uk/cib/inspectorreports/QMH_Report.pdf).

‘The history of major financial collapses shows that too often at their heart has been a dominant personality who created the business but was insufficiently controlled by fellow directors who proved too weak. The problem is that no one in the market wishes to see handicapped one who appears to be successful at making money. Thus, when things appear to be going well for such companies, no one seriously questions the composition of the board. Yet too frequently the appearance of well-being has been shown to be either exaggerated or without foundation. While QMH appeared to be successful little attention was paid to the need for additional non-executive directors of quality and experience. When the collapse came almost the whole board was jettisoned.’

The Queens Moat House group report captures the dilemma faced by all organisations:

‘Creating an appropriate board of directors is all a question of balancing risks. On the one hand a dominant personality may be restrained from risky actions which could prove to be genuinely profitable; but, on the other, the number of major collapses where the ordinary shareholder is left empty-handed could be reduced if not avoided.’

How well does your board balance the risk of knowing when to support, question or restrain the executive team?

  • Are all big decisions (eg, mergers, major developments, new businesses, major procurements and cutbacks) made by the board or do the executives really pull the strings?
  • Does the board debate big decisions in advance or are they rubber-stamping ‘done deals’?
  • Do the executives respect the views of the board? What is the evidence?
  • What has the board contributed to the process on big decisions? What changed as a result of your input?
  • Have the board and executive team ever disagreed on strategy? How was this resolved? Was the right decision taken?
  • Does the chair have regular one-to-one meetings with the chief executive? Has this improved the running of the organisation? Give examples.
  • How would you rate the effectiveness of the executive team (from 0 [poor] up to 3 [excellent])?
  • How do you think the executive team would rate the effectiveness of the board (from 0 [poor] up to 3 [excellent])?
  • Are the marks the same? What are the reasons for the marks? What ideas do you have for improving the relationships?
  • Does the board just challenge the executive team – or does it provide leadership?