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Six key questions about board packs

Written by James Beck and Stephen Howell

  1. What is the purpose of a board packs?
  2. What are the biggest mistakes made by management in putting it together? And by the board in requesting information?
  3. How can you balance enough information against too much detail?
  4. What’s best practice in putting together a board pack?
  5. What role should the chair play?
  6. How, and how often, should boards review the packs they receive?

1. What is the purpose of a board packs?

The board packs – the major component of which is the board papers – is the key source of information for directors prior to a board meeting. The board pack supplies the data and information necessary to ensure that the discussion and decisions at board meetings are as productive and effective as possible.

The statutory obligation on directors to have informed themselves about the subject matter in relation to their decision making cannot be complied with unless directors have before them the relevant material upon which to base their decisions. The board must put in place procedures that enable all directors to have good notice not only of decisions that need to be made by them, but also of the relevant supporting information in the board pack. This point is made clear by Justice Middleton in the Centro judgment (ASIC v Healey (2011) 196 FCR 291 at 346; [2011] FCA 717):

A board can control the information it receives. If there was an information overload, it could have been prevented. If there was a huge amount of information, then more time may need to be taken to read and understand it.

As such, the board led by the chair should be responsible for:

  • Setting expectations and providing directions to management on:
    • The content of reports
    • The format of reports
    • The timing and timeliness of board papers
    • The amount of information provided
  • Ensuring it has sufficient information with which to make decisions
  • Ensuring management has in place the processes and controls to ensure the integrity of the information provided
  • Setting KPIs for management to report against

Where a full agenda to accompany notice of a meeting is provided prior to board meetings it is easier to ensure that the proper material is available. However, the late provision of papers, particularly if it involves complex financial material, can lead to decisions being made without any real consideration or understanding of their consequences. Directors who make decisions in this way will not be complying with their statutory duties.

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2. What are the biggest mistakes made by management in putting it together? And by the board in requesting information?

Some common mistakes management makes when putting together the board pack are:

  • Too much data in board papers – this can be solved by a streamlining of the data provided
  • A heavy emphasis on financial and operational materials – the board should also be provided with information on the organisation’s potential risks, opportunities and challenges. It should be noted that boards are also guilty of wanting too much financial and operational information, which is a failure of the board to distinguish between governance and management
  • Not giving the board enough time to read the board pack and/or tabling papers at board meetings – the timely receipt of the board papers allows directors to form an opinion prior to a meeting and to ask questions of the CEO and management about what will be discussed or decided at meetings or to discuss issues among themselves. The provision of timely and accurate information can be critical to the board’s ability to appropriately challenge and scrutinise management
  • Reliance on management for information the board needs for monitoring – an independent source can be brought in to share the responsibility with management e.g. an external expert may assist management in preparing an important report for the board.

Non-executive directors (NEDs) must remember that management has a depth of information about the company that is not available to them. Thus, there is the potential to misuse that information, if management:

  • Fails to disclose information because of its impact on staff or themselves
  • Uses information to control or manipulate the board, e.g. providing selective or excessive/irrelevant information in the board pack
  • Knowingly uses the non-executive directors’ fear of appearing ignorant to avoid questioning by use of complicated or jargon-based information.

That said, all too often the senior management team gets treated as though its time is limitless; with all board decisions or requests for information receiving high priority regardless of the managers’ capacity to drive them forward. Similarly, senior managers may have to devote several hours each month to attending board meetings as well as spending time compiling papers and/or presentations for the board.

It is important that boards recognise this when requesting information. Management’s time must be considered when asking for a paper to be developed for inclusion in the board pack. Therefore, paper selection should be based on:

  • whether the matter is reserved for decision by the board in accordance with the delegation of authority policy
  • the importance and urgency of the issue, and its implication/relevance for the company
  • whether it is a new issue, or if there is potential to consolidate a response from existing information, reports, etc.
  • the scope of the task and time available
  • resource requirements and capacity.

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3. How can you balance enough information against too much detail?

A board’s information needs will differ from that of management, so papers put to the board should prioritise issues and pay attention to the key matters of substance, rather than on operational detail. Therefore, papers presented to the board should be substantial in content (i.e. significant to the company). Where an issue is canvassed, clear advice and information about what is being done and/or recommended in order to deal with the matter should be included.

As far as practical, the amount of documentation for circulation should be limited, to ease the burden on busy directors. Further, the writers of board papers are often so familiar with the material they are writing about they assume that everyone else shares a similar level of knowledge. They do not appreciate that NEDs may not have their depth of understanding on the topic. This can be made worse if the writer uses unexplained abbreviations, technical jargon and financial or other information in graph or table format that is not summarised.

Thus, we always recommend that documentation prepared for the board should conform to the following guidelines:

  • Dot point format is preferable to lengthy paragraphs.
  • Lengthy documents should contain an executive summary, table of contents and section and page numbering system, for easy reference.
  • Key points, options and recommendations should be highlighted, bolded or underlined.
  • Any complex technical terms should be explained, preferably in a glossary.
  • Be well written – the paper should be checked for spelling errors, bad grammar, rambling sentences, etc.
  • Tell the unvarnished truth not just the “good news” – board papers can sometimes focus on the positives and gloss over the negatives.

Uniformity and consistency can be achieved by using a board paper template.

We would also recommend that boards have a board pack/paper policy – this can be a separate policy or can be incorporated into the board charter.

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4. What’s best practice in putting together a board pack?

The format of board packs tends to be fairly similar from company to company. All board packs should include:

  • an agenda;
  • minutes of the previous meeting;
  • documentation supporting submissions that require decisions;
  • the CEO’s (or equivalent) report including a report on risk/compliance (unless covered elsewhere);
  • financial reports;
  • major correspondence; and
  • other material for reading by directors.

A well-constructed board pack will have the board papers cross-referenced, with individual items readily identifiable. One useful technique is to make the agenda the key reference point by instituting a numbering system to identify each item.

Getting the board paper pack set up and to directors in sufficient time for them to digest a huge amount of information prior to their board or committee meetings can be a huge task in some organisations. However, technology is changing how board papers are presented, delivered and used in the boardroom.

The issues to consider in the electronic delivery of board papers include the time and investment involved in finding and establishing a secure system, whether via email or a board portal, as well as the associated cost of equipping directors with iPads or laptops. In some cases, there will be directors who will have difficulty adapting to the technology and therefore it may be required to have the board pack printed and sent to some directors. There are also significant security issues that must be confronted with electronic board packs. For example, what if a device containing confidential information is lost or stolen? Finally, the format (e.g. the font size) needs to be considered, since the papers must be easy to read as must any diagrams and tables.

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5. What role should the chair play?

The chair generally has two specific roles to play regarding the board pack:

  1. Choice of papers: While the choice of papers to be prepared for each board meeting will be dictated by the Board’s oversight responsibilities and the board calendar (e.g. statutory reports; performance reviews; audit), the preparation of specific papers will be the decision of the chair and/or CEO in consultation with each other and the company secretary in response to:
    1. a director’s request, or
    2. a need identified by the CEO, company secretary or senior executive, e.g. the CFO
  2. Agenda: The agenda for each meeting will usually be prepared by the company secretary in conjunction with the chair and CEO. The final decision on the agenda should rest with the chair.

The chair will also have a role in consenting to the submission late papers. However, the board may choose not to accept papers tabled at the meeting or circulated prior to the meeting, if they require decision.

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6. How, and how often, should boards review the packs they receive?

Since board papers are a formal record of the decisions taken by the board, it is important for directors to feel confident in the board’s decision-making processes. This is an enormously complex issue as the quality of the decision making is heavily dependent on the experience of the board, the complexity of the issue under discussion, the quantity and quality of information provided to support the process and the amount of time available to make the decision.

As such, boards should review the packs they receive at least annually – the content and quality of board packs are often highlighted as an area for improvement in the board reviews we conduct!

BUT to fulfil their fiduciary duties, directors should be confident they can give the appropriate answer to the following questions about the information they are receiving each time they read their board packs:

  • Can I trust the data?
  • Does it cover the critical issues?
  • Is it sufficiently up to date?
  • Is it presented in such a way that I can digest it quickly?
  • Is the information purely historic or does it assess future risks?
  • Do I receive only summarised information/data?

If not, they need to make sure changes are made immediately.

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