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The board should tell us what it has done

If a CEO and an FD are forever at odds, problems are inevitable. Likewise, if the relationship between them is such that they fail to adequately challenge and test each other’s ideas and assumptions, then bad strategy goes unchecked. The same goes for the non-executives or independent directors and how they work with the executive. Again, board members who are mistrustful of each other accomplish nothing; board members who fail to probe and question risk everything.

That much is surely obvious, but it came to mind on reading the Penrose report on the crisis at Equitable Life. Quite simply, the non-execs accepted what they were told by the chief executive – that questions surrounding the valuation of the firm’s liabilities were not within their remit but the head actuary’s. Is it only with hindsight that seems extraordinary?

A few weeks ago, the appointment of Helen Weir as FD of Lloyds TSB was nearly scuppered by negative press comments reporting some institutional investor doubts over her robustness in the face of a determined chief executive. Regardless of whether those concerns are valid or not, the point is that there is now growing interest in the interaction in the boardroom.

But there is virtually nothing in any annual report that tells you anything about the people who run the business and how they work together. The directors’ biographies page is nothing more than a series of CVs and job titles. Wouldn’t it be nice if just one annual report were to talk openly and candidly about what the directors actually do and what they each regard as their main achievement – and failing – in the year? Just keep the auditors and regulators away from it.

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