Board Accountability and the Importance of Leading with Principles–LRN Podcast with Tom Fox

March 27, 2018 Marsha Ershaghi Hames

In the recent string of corporate scandals, the first question that’s raised is, “Where was the board?” In this Across the Board podcast with Tom Fox, we explore what it means for a board to be accountable—and stay accountable.

The accountability of the board of directors’ when it comes to compliance has never been more important. We’re seeing the board responsibility evolve and unfold before our eyes. Whereas boards traditionally have been focused on their fiduciary responsibility and where their businesses are going, we know where the board also should be focused and accountable. The role of boards is much more than just fulfilling their basic legal requirements. When allowing bad conduct to happen, their companies are at risk for huge reputational hits.

Failure to Act

The clear common thread we’re seeing when it comes to harassment and other recent corporate behavior failures is the board’s failure to act. Now, boards are trying to figure out what their role should be, not only when it comes to compliance and ethical governance, but culture. Cultural accountability is crucial, and boards need to take responsibility for decisions made at the top, the middle and throughout their companies.

When you look at the role of a board director, as stewards of the organization, he or she should mirror the type of behavior they expect to see from their own executives. Boards should not be simply focusing on checklists of compliance (do we have policies, training,  and a code of conduct). Rather, directors need to understand that good compliance is an outcome of a healthy culture. When you see the countless headlines of senior executives being investigated for misconduct, unfortunately boards were fully aware, and likely even authorized settling the allegations.

The Tipping Point

There is a clear lack of involvement by the board of directors when it comes to culture. Yet, we seem to be at a turning point, where social media is forcing greater transparency on boards. Social media has emerged as an equalizer, exposing negative patterns of misconduct or willful blindness and forcing greater accountability. In fact, boards have been made aware and have decided that they need to be more active, yet they don’t know what to do.

There needs to be an ongoing, two-way dialogue with the board about culture – between the workforce and leadership and leadership and the board. We need greater visibility into what those activities and conversations look like, and what the board is evaluating and taking action on as a result. Board members must realize just how far beyond checklists they must go and force dialogue among themselves – challenge their peers to see themselves as shepherds of a brand that is based on values, integrity and trust.

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