How to Ask the Tough Questions in the Boardroom | Tip #5 for Directors: Have an Attitude of Constructive Skepticism

Maureen Gershanik is a partner and a member of Fishman Haygood’s Business Section. She counsels boards of directors on corporate governance, securities law compliance, SEC reporting, executive employment matters, and executive compensation. In this biweekly series, she provides nine tips for directors as they navigate the boardroom. Click here to read Tip #4: Understand Your “Mandate.”

Public company directors are under more pressure than ever to oversee enterprise risk, even risk from day-to-day operations, which is normally addressed by management. However, directors are largely removed from the action. Critical to the role of the director, then, is the ability to face and question management.

In our last tip, we talked about the board’s role in providing business judgment about overall company strategy. As an overseer and adviser, a board member must be able to challenge management when needed. Read on for more on the importance of framing questions in a constructive manner.

Tip 5: Have an Attitude of Constructive Skepticism

The very nature of the director’s role as an overseer, rather than a manager, requires that he actively challenge management when it is important to do so. But challenging management does not mean calling them on the carpet to account for every decision, even decisions that turn out to have been bad choices. Instead, directors should frame questions in a way that encourages managers to elucidate their thought-process, and to explore whether and why they have ruled out other options. The goal is not to engage in a debate, but to elicit information that assists the board in meeting its fiduciary duties. A good management team will want the board to feel comfortable with the company’s strategic decisions and be able to articulate and defend them.

Next time, Gershanik explores how to ask the experts for help.