Stress testing the board governance policy
In my last column, I identified three strategies to help general counsel prepare the board and management to address board conflicts in an organized, effective manner. But how, in the real world, would general counsel implement those strategies?
January 26, 2014 at 07:00 PM
7 minute read
In my last column, “Preparing for Conflict in the Boardroom,” I identified three strategies to help general counsel prepare the board and management to address board conflicts in an organized, effective manner. But how, in the real world, would general counsel implement those strategies? This and subsequent columns will attempt to give practical tips to counsel.
The first strategy is to create an annual board interactive exercise putting the board governance policy to the test using several different crisis scenarios. This “stress testing” strategy is a way to proactively change the annual process of reviewing the board governance policy into a more proactive board exercise. The reason? Actually stress testing policies rather than merely discussing revisions to policies yields very different results, including valuable collective education of the board. Asking the board to engage in exercises to “stress test” their governance policy will help better prepare directors for contingencies and conflicts.
One of the worst experiences for a general counsel is to be in the middle of a crisis and discover that the governance policy does not clearly address the issue at hand. Or, alternatively, the policy spells out what is to be accomplished but it is unclear as to who will take the lead as between management and the board, which board members should be involved and when. Equally bad is going through a major crisis at the board level and having directors react afterwards by saying they felt they were left out of the process, did not understand what was happening or were uncertain what was their role. Actual stress testing exercises empower the board to discuss what they as directors should do during a crisis, what they can expect particular directors to do and what management will do.
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