Riders on the Storm: Slippy conditions, presence and papers as read
In this final diary entry for 2019, JB focuses on the importance of presence, even in a digital world, focusing on the detail, and presents a rather long list of things he would like to see change, and develop, in fund board land; and finally, he addresses the very important issue of working collaboratively with your board colleagues, but especially your fellow iNED.
Slips and spills. As we shuffle through the grips of winter, fashion quickly turns to utility. Navigating board agendas can be almost as hazardous as fighting the elements to attend meetings. iNEDs can enjoy some festive downtime but the New Year beckons one of the busiest times for Boards. A time for “good will to all men” (and women) but it is not only the lack of gritted paths that may lead to you slipping up but also the precarious journey to the first Assessment of Value.
Whilst listening to the Doors, this month I reflect on physical attendance versus remote Boards and share my love for composite Board papers (!) and how they can be improved to allow a Board to first understand the question and second get to an answer. With Board papers is form or function more important?
A wintry welcome dear FBC members!
As we conclude our board duties for 2019, a chance to reflect. I promised to share my own experiences, challenges and observations in this diary. How have you found your own journey, has it been all blue skies or more stormy weather?
The challenging weather conditions can pose dilemma for commuting and board attendance. I know all too well from bitter experience that slipping can be hazardous with two operations in the last two years. If the industry is to break out from its City clique then Boards need to embrace members from outside of the Metropolis and Home Counties. With that comes logistical questions such as travel, accommodation and remote working.
The respective merits of attendance in person (traditionally insisted upon) versus remote conferencing continue to be appraised in this ever digitalised world. What is possible today is far progressed from that even just five years ago. Whether it is cloud portals, shared digital workspaces like Slack or next generation webinars and video links. One of my boards uses a particular application to share papers and it works very well, allowing directors to make notes whilst reducing both paper and toner consumption. It is also arguably a much more secure platform than paper or email. Old papers can be archived and secured. I find that secure digital formats deal with large composite reports much more easily. You can bookmark, make notes, surf papers, quickly navigate to sections and message colleagues. I’ve written before about the impact and sustainability of traditional Boards and there is a growing argument for a more modern way of working.
However, I can attest from personal experience that being at the end of a Skype or laggy video link tends to reduce a director’s ability to fully participate and influence. You can still input, the message can still be delivered, the question can still be asked but the subtle nuances are lost in translation and you can’t read the room or properly engage the Board. It can become overly mechanistic, merely going through the motions. I recently had a hospital operation and managed this early with both Chair and Secretary. However as soon as able I will again be striding my way to my Boards. Stronger, faster, better than before!
Why is Board presence important? By now you will have discovered that your remit is often broader than simply the Assessment of Value (AoV), thus understanding other issues becomes essential. As directors our main intelligence comes in the form of the Board papers. We rely on the quality of those papers. Now, unlike many of my peers, I don’t mind a composite AoV report. Perhaps that is because I’ve worked in analytical and governance roles all my career. One of the greatest risks to effective fund governance today is that the ‘message’ becomes overly distilled from experts to the Board. Papers of 500 pages deep is too much; 10 not enough. iNEDs, like customers, need transparency to make an informed decision. At the other end, reports with no clear conclusion or ‘so what’ can only frustrate a Board. Ahh, Board papers. Things that irk me personally being:
- Composite papers where the agenda doesn’t flow easily or where obvious functions and topics are not grouped together logically
- Report silo where relevant issues in one paper are not clearly linked to another
- Items missing from the agenda
- No standard templates: I don’t like contrived standardisation but a similar start, middle and end would be nice
- Misallocation of time to each paper, which can be the fault of the author but more likely due to time management and better escalated with the Chair and Secretary
- No named author at the head of each report, especially confusing when the paper is only submitted and not presented at Board. This only leaves the Board remote from colleagues and subject matter experts
- No executive summary or key points at the front of each report
- Pages of acronyms with little explanation. Management reports are not the same as Board papers but this distinction can often be missed
- No clarity as to whether papers are for approval, or only for noting, what question is being asked of the Board?
- Some reports appear to be simply factual like market movements or changes in market risk without necessarily making the materiality to assets under management or revenues. This is common among Boards whom want to discuss investment performance. A Board is not necessarily an investment committee
- Some papers can feel like a pitch presentation for buyers rather than a board proposal
- The innate desire to share hard to read spreadsheets is alive and well in Fund Board land
- Receiving papers too close to the meeting (don’t expect too many objections to that one)
Noting my wish list is rather long; remember you have at least one fellow iNED to call for support. Work together. Reach out to report authors, and expert colleagues, directly whilst exercising your soft influence skills with Boards and Chair. Be hands on. It will only help your familiarity so that you don’t waste Board time asking what terminology or technicalities mean. Don’t simply shoot the messenger.
When the Chair notes for the Minutes that ‘papers are taken as read’ then it means papers are taken as ‘read and understood’ or else give rise to questions or challenges. Those questions can be identified prior to Board and discussed with the author. Attendance of sub-committees further aids understanding and involvement. If the paper is long or technical then ask for the author to attend and present in person.
Many report authors may come to see iNEDs as potential allies or champions for their function, issues arising or as independent arbiters when presenting to ‘the bosses’ can be intimidating. In terms of fund governance there is a natural affinity between iNEDs and Compliance and Risk colleagues for example. Liquidity reports an obvious case in point. As iNEDs, do everything you can to help make the board as approachable as possible to colleagues. In doing so you can enhance the culture of the Board and firm. Having been long on the other side of the boardroom, as a report presenter, I recall how much a positive board experience stayed with me. It makes colleagues feel empowered and the firm feel inclusive and collegiate. All very kumbaya. Good fund governance comes from transparency and a culture of escalation. For too long boards have dampened transparency by middle management abridging reports or softening the messages. In my experience this has only led to poorer fund governance and bad outcomes.
When those Board papers do arrive then scan quickly for any obvious issues, omissions and flag to the Secretary. I often contact the report author to ask additional questions and in doing so focus my preparation ahead of the Board. Digital papers offer huge advantage to navigating composite Board papers but don’t forget if you are a remote iNED then you need to work doubly hard on influencing the Board on key issues. Choose your path carefully as we march onwards into the blizzard of reporting.
JB Beckett, FBC iNED Member
iNED, Author ‘New Fund Order’
In his monthly column, Diary of an iNED, JB will record his experiences on the boards of two very different organisations as he navigates the highs and lows of a plural career at a time when the fund industry is beset with challenges and opportunities in equal measure.
JB can be contacted at firstname.lastname@example.org.