The Diligent Dozen: What Board Directors Need to Know

These are the questions that every director should be able to answer—with a “yes,” in the case of the first nine, and with a reasonably comprehensive explanation in the case of the latter three.

1. Strategic Direction: Does management have a comprehensive strategy and operating plan for the company to realize its performance potential?
2. Resource Allocation: Are the necessary human, financial, physical, and other supporting resources provided and properly allocated to achieve success?
3. Management: Does the chief executive provide the leadership required by the company and does the organization have a succession plan for this position?
4. Financial Accountability: Are financial information systems, control processes, decision delegations, and reporting responsibilities established and audited?
5. Operational Controls: Does management utilize an effective system of key performance indicators to monitor and control operating performance?
6. Constituency Protection: Are mechanisms in place to ensure conformance with legislation and regulations protecting customers, employees, and the community?
7. Litigation and Disputation: Does management adequately report, control, and provide for all material disputes of a legal, financial, or regulatory nature?
8. Crises and Contingencies: Are effective risk management processes in place to prevent or correct physical and financial crises?
9. Management Priorities: Does the board adequately understand and support resolution of the near-term, intermediate, and long-term priorities of management?
10. Past and Present Performance: What has been the company’s financial and market performance compared with its historical performance, projected performance, and competitors’ performance?
11. Underlying Causes: What specific competitive strengths and weaknesses, market forces, or drivers of profit dynamics determined performance results?
12. Performance Potential: What are the reasonable objective for and limits to the company’s growth, profitability, and appreciation of shareholder value?

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