The quality of information reported to the board (whether in a board pack or a boardroom presentation) directly impacts the trust the board places in management and the quality of board decision making.
When directors receive timely, relevant, well structured and digestible information, confidence grows in management’s capabilities and the board will likely view management as being transparent. However, unreliable, uneven or obviously biased reporting undermines trust. How can management build trust through transparency in board reporting?
Define Information Needs
Management should request that the board clearly define the information it needs so contributors (management, committees or consultants) understand requirements.
The board should identify the:
type of recurring reports it needs to help it gain insights on strategy, risks, finance, performance, compliance, culture, external landscape, etc.
optimal reporting frequency - weekly, monthly, quarterly etc. (a board calendar and board reporting policy) should be used to capture this.
expectations it has around depth, format, visualisations, length and style.
It should also make note of any external expertise or data to incorporate beyond management’s lens and the circumstances warranting special ad hoc reports.
Document this guidance in a board reporting policy so expectations are accessible. Review annually to realign with the board’s evolving needs.
Focus on Relevance
Management can build trust by focusing board reports on relevant insights matching the board’s oversight role versus operational minutiae.
Management should work to highlight issues with substantial strategic, financial, legal, regulatory or reputational implications requiring the board’s judgment.
While operational details are important, determine which data the board specifically needs for governance decisions rather than inundating with volumes of raw data for data’s sake. Contextual synthesis and visualisation brings key interrelationships to the fore.
Emphasise Balanced Perspectives
Reports perceived as biased or selectively highlighting the positive while downplaying potential red flags can breed skepticism from the board rather than trust.
Management can foster confidence by presenting balanced perspectives. Alongside facts favourable to management proposals, proactively share contrarian views, worst-case scenarios, and alternative options. Disclose weaknesses alongside strengths. Discussing risks and missteps demonstrates transparency and maturity.
Inaccurate or sloppy reporting destroys trust rapidly. Before presenting any data, diligently verify its reliability, methodology, sources, recency and integrity. Avoid conveying preliminary analysis as definitive until rigorously validated.
Err on the side of over-caution around accuracy - it may be better to delay providing emerging information until thoroughly vetted rather than risk credibility gaps through inaccurate reports that require restatement.
However some situations may demand that emerging information is included before it can be vetted. In these cases clearly flag that the data or information may be incomplete or emerging. Remember to also caveat any unverified data as provisional.
Make punctual delivery of quality board packs and board papers a non-negotiable deadline and establish a clear and well documented timeline for board pack delivery. Late or rushed reporting indicates poor planning and under preparedness. It impairs directors’ ability to properly review materials.
Build lead time into report creation schedules to allow for the inevitable unforeseen delays. Assemble drafts earlier to permit sufficient review and revisions cycles. Allocate extra editorial time for polishing visual appeal, accuracy and accessibility.
Address Issues Transparently
When reporting missteps occur (and they inevitably will even in the most effective organisations), avoid tempting to conceal them. Rising above mistakes demonstrates humility and wins respect.
The board will expect management to be forthright in disclosing and explaining any reporting deficiencies without making excuses. Provide remediation plans detailing how deficiencies will be addressed through improved policies, training, tools and quality control.
The chief executive officer must exemplify commitment to transparent reporting in deeds and words. But transparency expectations must permeate across the management ranks. Consider adding a standing agenda item at senior leadership meetings to discuss improving reporting quality.
It is worthwhile considering whether to make transparent reporting a part of staff performance evaluations and incentives. Recognise teams and individuals role modelling integrity in board communications.
Listen to Feedback
Solicit board member input on reporting quality. Probe perceptions of gaps, biases, accuracy concerns, accessibility issues or other transparency shortcuts. Welcome critiques recognising transparency and improvement is a continual journey.
Analyse feedback systematically to identify recurring weak spots. Refine contributor guidance and templates to address concerns. Demonstrate responsiveness to elevate reporting accuracy and objectivity.
The Rewards of Transparency
While instilling transparency discipline requires dedication, the trust dividends are immense. Directors who trust the information received can fully focus cognitive resources on deliberations and guidance rather than questioning underlying facts. Accurate, balanced information illuminates blind spots helping to ensure quality discussions in the boardroom and to elevate the boards strategic decision making capabilities.
Trust built through diligent reporting transparency translates into confidence in management’s capabilities and reliability. This carries through to mutual understanding around information needs in both directions. Ultimately, truth and trust are the bedrock of governance excellence. They enable the board to provide stellar guidance securing stakeholder interests.
Transparency in reporting is important because it builds trust between management and the board. Complete, accurate, and unbiased reports demonstrate management's capabilities and enable the board to provide effective oversight and guidance.
What is transparency in good governance?
Transparency in good governance means management provides the board with timely, relevant, and high-quality information. This allows the board to properly carry out its fiduciary duties in overseeing the company's strategy, finances, risks, and compliance.
What is a good example of transparency?
A good example of transparency is management proactively disclosing contrary perspectives, worst-case scenarios, and weaknesses alongside strengths in board reports. Admitting imperfections and being forthright about missteps demonstrates humility and commitment to continuous improvement.
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