By Pamela R. Knecht
Over the last decade, and especially since the Enron failure, boards of all types have been working to enhance their performance. They ensure their composition is competency-based; they align their structures with their strategies; and they have robust, written governance procedures. All of these are important elements of effective governance.
Yet, the performance of many of these boards remains sub-optimal. Despite using best practices, structures and policies, they still are not providing sufficient oversight of their organizations. Evidence of this failure surfaces in reports about boards that have not performed their duties well. Some recent stories revisit the same issues that contributed to the scandals of Enron and AHERF (Allegheny Health Education and Research Foundation). For instance, a not-for-profit nursing home board in Pennsylvania recently ensured some of the organization’s creditors got paid back in full before the nursing home declared bankruptcy (just like the AHERF board).
Why, then, do even some of the “best practice” boards continue to fail? The short answer is that they do not have an effective culture. This challenge – developing a healthy culture – is now considered the last frontier for those seeking truly great governance.