What are the ethical responsibilities of board members?
What will be an ideal response?
Fortune journalists Ram Charan and Julie Schlosser suggest that board members have additional responsibilities beyond the law to explore and to investigate the organizations that they represent, and they suggest that an open conversation is the best method for understanding, not just what board members know, but also what they do not know.
They suggest that board members often ignore even the most basic questions such as how the firm actually makes its money and whether customers and clients truly do pay for products and services. That is rather basic, but the truth is that the financial flow can explain a lot about what moves the firm.
Board members should also be critical in their inquiries about corporate vulnerabilities-what could drag the firm down and what could competitors do to help it along that path? Ensuring that information about vulnerabilities is constantly and consistently transmitted to the executives and the board creates effective prevention.
Board members need to understand where the company is heading and whether it is realistic that it will get there. This is less likely if it is not living within its means or if it is paying out too much of its sustainable growth dollars to its chief executives in compensation.
Failing in any of these areas creates pressures on the firm and on the board to take up the slack, to manage problems that do not have to exist, to be forced to make decisions that might not have had to be made if only the information systems were working as they should. It is the board members' ultimate duty to provide oversight, which is impossible without knowing the answers to the preceding questions.
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