Proper conformance and compliance by Boards is necessary and important. However, the exclusive adherence to these ‘technical’ factors will not provide the optimum governance of the organisation.
For example, the Pergola (2009) study of 400 US major business failures revealed 100% compliance with Sarbanes Oxley, one of the most detailed and prescriptive compliance frameworks in the world.
Clearly, a strict compliance regime does not ensure superior board performance or the avoidance of adverse Director liability. The critical missing elements in traditional approaches to Board performance are cultural factors based on the traits of the Directors as individuals and the behaviour of the Board as a team.
The performance factors in Blackhall & Pearl’s model encompass:
These factors function as leading indicators. When properly structured and applied during a board performance review, they can provide an insight into how the Board will perform in the future.
Blackhall & Pearl has conducted one of the largest board performance research projects ever undertaken in the field. Underscoring the importance of culture in the boardroom, the survey found that whilst most directors felt they spent the majority of their time on conformance related issues, they overwhelmingly believed that performance (i.e. culture) factors were more important.