Information governance: Time to take a fresh look at board papers - with Bob Semple, FCA

This article was first published by Chartered Accountants Ireland, May 2012.

As Directors fight for their organisation’s survival, and regulators demand greater accountability of them, the importance of the humble board paper has been overlooked. It’s time to take a fresh look.

In this article, the dangers of poor board papers are described in light of new demands for so-called ‘Information governance’ and a framework for better board papers is outlined.

In a sweeping broadside of corporate governance following the recent economic crisis, Sir David Tweedie directed his criticism widely:

“Executive boards failed, non-executives were kept in the dark, audit committees failed, auditors fell asleep at the wheel, or let problems go, credit rating agents did not too well, analysts missed it, the SEC failed to regulate, and the investment banks and lawyers (and consultants) were part of the problem, helping companies with their questionable deals . . . it wasn’t just one little piece gone wrong. The whole system was collapsing.”

It’s hard to believe this could have happened if good board papers (essential for information governance) were being used and robustly discussed.

In practice, whether Manager, Director, Company Secretary or Chairman, the challenges around board papers can be all too familiar – both in relation to the papers themselves and how they are handled (see boxes below).

Box 1 - Your board pack?

  • Papers are enormous - anything over 120 pages or even up to 250 pages
  • Individual papers are inconsistent in layout or unclear as to purpose (for discussion? for noting? for decision?)
  • Papers resemble more a ‘dump’ of data, with no coherent narrative – for example, voluminous budget variances are provided without proper analysis
  • Papers are written in language more suited for management than Directors
  • The layout changes from month to month with new reports appearing alongside routine reports
  • Information presented is ‘massaged’ to present the best picture rather than an objective assessment of issues needing robust dialogue
  • Papers are heavily oriented to financial and backward-looking data – at the expense of non-financial measures and forward-looking data
  • The effort to produce the pack is significant (Board and subcommittee work occupies a major part of the Company Secretary’s time)
  • Papers are often superseded by more up to date versions produced on the day of the meeting

Box 2 - How you handle your board papers?

  • Board papers are distributed in paper form rather than by using secure board portals
  • E-mail and documents are communicated to board members using non-commercial email accounts (such as Gmail, Yahoo and Hotmail) without password protection or encryption
  • No provision has been made to accommodate the secure receipt of sensitive board papers outside normal channels – in practice, board members travelling overseas use hotel networks and internet cafes to access and download board papers
  • Little assurance exists that board members are retaining and destroying board papers in line with board policy – in practice, board papers are sometimes kept in unsecured locations in board members’ homes
  • Board papers are accessed and stored on board members’ private mobile devices and personal home computers
  • Where electronic means are used, unsecured wifi and wired networks are used
  • Board members private mobile devices and home PCs are not encrypted) presenting particular concerns when lost or stolen)

If any three of the above, in either box apply to you, it’s time for an overhaul.

It’s often only when you examine some of these issues that the need for change becomes apparent. That’s certainly the message coming from independent surveys on the issue. In one study for example[i]:

  • although board packs averaged 132 pages, some were as large as 500 pages.
  • although 49% of boards distributed their packs by email, this was not in a secure environment.
  • only 30% were confident Directors destroyed their board documents in line with company policy
  • 50% thought it was likely that board members accessed their papers on insecure networks.

‘Information governance’ – no place to hide?

In the past, weakness in board packs or the handling of board papers might have been little more than an inconvenience. Now it could be a major problem. Why? Because of a shift in expectations around so-called ‘information governance’.

It is commonly accepted that the FRC set the standards that board members need to address. Just about every code of governance refer to the FRC’s need for the board to be “supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.”

When the FRC revised the latest version of the combined code, they introduced some significant changes in relation to the provision of information. Some commentators speculated this change was precipitated by Non-Executive Directors who defended their performance during the recent economic crisis claiming ‘information asymmetry’ –because management allegedly presented incomplete (or, in some cases, misleading) information to the Board, they could not have acted any differently to the way they did. The FRC introduced provisions that profoundly impact all the key players: On the question of board effectiveness, the Chair of the board is now charged with responsibility:

“for ensuring that the directors receive accurate, timely and clear information”.

The Company Secretary’s role is spelt out too:

“Under the direction of the chairman, the company secretary’s responsibilities include ensuring good information flows within the board and its committees and between senior management and nonexecutive directors, as well as facilitating induction and assisting with professional development as required.”

It doesn’t stop there. A later paper providing guidance on how to assess the effectiveness of boards[ii] spells it out in even greater detail:

  • The chairman’s role includes . . . ensuring a timely flow of high quality supporting information
  • The CFO has a particular responsibility to deliver high quality information to the board on the financial position of the company.
  • Non executive directors should insist on receiving high quality information sufficiently in advance so that there can be thorough consideration of the issues prior to, and informed debate and challenge at, board meetings. High quality information is that which is appropriate for making decisions on the issue at hand – it should be accurate, clear, comprehensive, up to date and timely; contain a summary of the contents of any paper; and inform the director of what is expected of him or her on that issue.
  • The company secretary should ensure the presentation of high quality information to the board and its committees.

And to nail the point once and for all, the FRC insists[iii] that this dimension be specifically addressed in the evaluation of effectiveness. No escape.

Steps to improve board papers

Production of board papers is more of an art than a science. A typical pack is easy enough to define in general terms [iv](see box 3).

Box 3 - Typical board pack

  • Agenda
  • Minutes of previous meeting (with a separate list of follow-up actions)
  • CEO’s report
  • Financial report
  • Other operational reports, as appropriate board papers that require board input (for noting, discussion or decision)

An effective board will vary this basic pack according to a predefined board calendar that addresses all the routine and once-off activities in a typical year; it will also be adjusted for irregular items, as appropriate.

Many have enumerated the characteristics of good information in board papers. One such guide[v] provides a useful set of criteria (see box 4).

Box 4 - Board papers: Good practice

  • Relevant – information presented should be sharply focused. It should reflect the organisation’s objectives and overall strategy.
  • Integrated – the systems and processes used should satisfy both internal and internal reporting needs.
  • In perspective - information should be presented in a relevant time context
  • Timely –better for the board to receive information that’s imperfect (but within acceptable tolerances of precision) in good time, than completely accurate information too late.
  • Reliable – information should be of good enough quality for the Board to be confident in it. This will depend on its source, integrity and comprehensiveness.
  • Comparable – Both financial and non-financial reporting should include appropriate comparable data, e.g. prior period, budget, forecast, plan etc)
  • Clear – Reports should be written clearly and simply, supported by judicious use of graphs and charts. Key indicators and trends should be obvious.

But a number of trade-offs must also be mastered to create a good board paper, notably:

  • Being comprehensive but succinct – enough information must be provided but not to the point of overloading Directors whose time is at a premium
  • Being accurate but timely – there is no magic answer to this trade-off – the key is to strike a balance that the board understands and finds usable
  • Assuming common understanding but providing detailed background – some boards like to use a standard template. This enables Directors familiar with the background to deal with the issue quickly while those less familiar can spend time on back-up papers.
  • Using accepted abbreviations without excessive jargon - newly appointed Directors often struggle to familiarise themselves with jargon that experienced colleagues use without thinking.

A sample template for a board paper is set out in box 5. Board preferences will vary but the template contains the key elements of what is considered best practice[vi] Even if such a formal approach is not adopted fully, it will still provide benefits in refining the thought process that goes into board papers.


Even doing all this still does not guarantee the best decisions. Much has been written[vii] on cognitive bias in the boardroom:

  • Confusing values with facts
  • Rosy retrospection
  • ‘Status quo’ partiality
  • ‘Sunk cost’ effects
  • Wishful thinking

While Walker insisted that appropriate boardroom behaviours are an essential component of best practice corporate governance, failure to prepare good board Papers will defeat even the best intentioned board.

Box 5 - Sample board paper format

Organisation name

Agenda item no. Agenda item Paper reference
# [Title] [unique reference]
Sponsor [Insert Name and Title]
Draft resolution [Insert terse description (4-6 lines) summarising the intention of the paper and the requested action by the Board (for noting, discussion or approval/decision)]
Background [Provide link to any previous board consideration of issue.
Provide key information to enable Directors to understand key issues.
Identify any subject matter expert reports and any other supplementary information available.
Issues and options [Describe relevant issues that Directors are asked to consider.
Provide details of the risk assessment undertaken in relation to strategy, financial, operational, compliance and reputation issues, including impact on budget, cash flow etc comment on emerging risks and on risk ‘velocity’ (how quickly a given risk has changed / is likely to change)
List the Options open to the Directors.
Explain the rationale for the option selected by management.]
Recommendation [State the recommended option.
Indicate who will take responsibility for the chosen option, including risk remediation measures (include the Executive and the Operational Manager).
Identify KPIs and proposed reporting, including timing]
Signing of board paper CEO

Srictly confidential to [organisation] board

  • [i]"Better board governance: Communications, security and technology in a global landscape of change”, board governance survey, Thompson Reuters, Sep 2011
  • [ii] “Board effectiveness”, FRC, 2010
  • [iii] “Board effectiveness”, FRC, 2010
  • [iv]“Taming the beast if board papers”, Mary Morel, BoardRoom, Jan 2010
  • [v]“Performance reporting to boards: A Guide to Good Practice”, CIMA, 1997
  • [vi] “HB 403 - Best practice board reporting”, Standards Australia, 2004
  • [vii] “Cognitive bias in the culture of the boardroom”, Chief Executive, 2007

Bob Semple, FCA is Partner, PwC