Regulatory and public scrutiny of UK boards has increased over the past five years and this trend looks set to continue. We collaborated with Cambridge Judge Business School to assess the impact of these changes. This article, the second in a four-part series, highlights how compliance and regulation reporting and risk issues are driving longer board packs.
For the other articles in this series see:
- In The Boardroom, Size Matters
- Bigger is not necessarily better
- Boards Need To Take Time To Make Time
What’s causing board packs to increase in length?
In the first article in this series, In The Boardroom, Size Matters, we revealed that over half of board packs have gotten longer over the past five years, with some now coming close to 1,000 pages. Consequently, directors are spending up to 30% more time reading their packs in preparation for board meetings.
Our research identifies that the main drivers are more reporting on compliance, regulation, and risk. Of the board packs that had increased in length, 92% contained more compliance and regulation reporting, and 88% more reporting on risk. But even in board packs that have not gotten longer, roughly two-thirds saw an increased focus on these issues.
This is probably not surprising. In the aftermath of the financial crisis and subsequent scandals, boards became much more interested in risk — in particular, strategic risks and external threats to the well-being of the company.
In parallel, we’ve seen the introduction of legislation that makes the board and directors more directly and explicitly responsible for certain activities than they were before. This is especially true in the financial services sector with the introduction of the Senior Managers and Certification Regime, but, even before this, the 2010 Bribery Act introduced criminal sanctions if companies fail to prevent bribery.
The dangers of too much information
There are two obvious dangers associated with the sort of information inflation we have witnessed.
First, board members may simply be unable to read all their board pack, creating clear risks they miss vital information. Statistical evidence from our first article suggests almost half of the average board pack is going unread.
Second, reading the board pack can become an exercise in looking for the proverbial needle in the haystack. Compliance and risk papers tend to be long and detailed, meaning papers discussing strategy can get lost or overlooked, or, worse, crowded out from the pack altogether.
Our evidence also suggests that as well as the risks of information overload, there are positive benefits of more concise board papers. Perhaps surprisingly, our research found that three-quarters of those directors whose board packs had not increased in length over the past five years reported an increased focus on strategic matters — a higher percentage than those whose board packs had grown longer. This shows that, if enough attention is paid to preparing the papers, less can mean more.
As with everything the board does, an effective board pack requires a clear purpose. The board need to decide what issues they should spend their time on — something we will cover in the next article in this series — and what information they need to so they can sensibly discuss these key issues.
Once the priorities and level of detail have been decided, attention needs to be paid to the content and quality of these papers. The executive and board need to get to grips with the length and detail of compliance and regulation reports and risk papers to make their packs shorter, more balanced, and more manageable.
Write, our reporting toolkit, helps shorten and focus complex papers on what matters by providing best practice guidance and training to report authors.
Our one-page formula for an effective executive summary has been adopted by a variety of organisations — from Aviva to RBS and SMEs — to distil compliance and risk issues to the core information the board needs to know. This one-page executive summary prefaces the wider report to keep the subsequent detail focused on the information the board is interested in.
In our next article, we’ll look at how board meeting time is being spent, what types of discussions have been creeping up the board agenda over the past five years, and how the board can use its time to best effect.