Directors demand better engagement: how TXU Corp. is making sure that its board sees the right things at the right times and in the right way.

• Author: Rucker, Kim K.W.
• Position: INFORMATION FOR THE BOARD

LONG GONE ARE THE DAYS of directors accepting a one-way conversation from management to board, poorly focused board meeting materials, unclear lines of accountability, awkward communications, and no input into the information process. Many boards have dramatically altered former practices by demanding a different approach from management.

Having directors with a wealth of expertise who are more active should lead to better governance. There is a risk, however, that a more involved board becomes a victim of its own activity if that activity is not carefully channeled. Without the ability to focus on the most critical matters, directors run the risk of drowning in a sea of data dumps and endless compliance matters.

The best managers and boards work together collaboratively to ensure alignment on their respective roles and emphasis on the most significant matters. Although there is no single "best" method, these collaborative efforts produce confidence among directors and clarity for management. These boards are seizing the opportunity for value-added engagement.

The challenge of overinclusiveness

To some extent, directors are held captive by what they do not know. When reviewing materials, directors often have little idea of what items have been left out or the decision-making process that produced the board materials. On most matters, management has the best information and determines what items are presented to the board.

Particularly in today's environment, management often errs on the side of overinclusiveness, or just supplements historical practices, which often leads to gargantuan amounts of material sent to directors. Management may be spending unnecessary time preparing and presenting materials that directors view as less valuable. Faced with a mountain of paper, limited time, and little explanation as to relative significance, directors become frustrated with management, miss critical items, and lose an opportunity to make a difference.

While a board must take certain actions and review certain matters to meet legal and regulatory requirements, the most significant issues--strategy, executive compensation, and CEO selection and management succession planning--have few specific legal mandates. Without specific statutory guidance, some companies and their boards are left with differing views on a board's level of involvement.

Bringing into harmony

Both directors and management must be invested in the process by which critical items...