The primary shortcoming of the typical board book is the lack of external information.
ONE OF A COMPANY'S critical responsibilities is to involve its board of directors in the management decision-making process. The most valuable communication tool used in this process is the "board book" prepared by management and distributed to directors in advance of meetings. While the board book is an extremely important tool, it rarely lives up to its potential in terms of fully informing directors with regard to the internal and external factors that affect their decisions.
Prior to the meetings, a board book is generally disseminated to prepare directors for the coming discussions. Usually the board book contains an agenda listing the items that will be covered during the meeting, and, for each item, select detailed information. For example, a financial package showing the company's financial statements for the recent quarter along with supporting schedules might be provided to coincide with the agenda item relating to management's report to the board on recent performance. Other items may include proposed resolutions relating to such issues as loans and loan documents, senior management appointments, or compensation.
While the information provided in a typical board book is helpful in terms of preparing the board for the discussions that will take place, there is typically little information that would allow the directors to do much more than listen and question within the boundaries of the information presented by management.
The board book typically provides adequate detail relating to the performance of the company and other internal issues. The primary shortcoming of the typical board book is the lack of external information. While there is a tremendous amount of information available, directors often don't have the time, resources or inclination to gather, distill and synthesize that information in order to improve the quality of their input.
External Data Requirements
Given management's familiarity with the issues facing the company, the information they share with directors often presupposes a level of knowledge the outside directors may not possess. Between meetings, directors have their own dragons to kill and, while they may come across some information on their own, they are less likely to pick up on the news and events affecting the company than is management. It is therefore imperative that the company, either through...