Audited Financial Sign-off Season: ’tis the Season to be Jolly (Overwhelmed)!

Whether you’ve been naughty or nice this past financial year, the mysterious and elusive Santa Claus of the audited financial sign off process (Saint Tick‑n‑Flick?) ever more generously (??) bestows ever greater gifts (??) of endless data upon the hapless company director at this time of year.

Perhaps now is the moment to pause a moment beneath the metaphorical corporate mistletoe, with a (real) glass of replenishing punch, and ask yourself how well – or not – this endless data download has armed your board with the information it really needs. Perhaps, you might even ask, to what degree are we positively inundated with excessive information that we do not need to fulfil our important accountabilities to shareholders and others who rely on the company’s financial statements. The right question is not only whether we have we got enough information but maybe even too much information often at the expense of being able to identify what is the right information. The Great 21 Century Company Director Conundrum.

Certainly, the data is MUCH bigger in the 21 century, but our brains quite frankly are not.

Oh but of course there’s the joy of the modern‑day board portal that causes management to chime in gleefully “Good news: we’ve cut down the board pack by a couple of dozen/hundred pages this year” – only to add in a quickly mouthed stage whisper that the couple of dozen/hundred pages is “…there in the portal under ‘discretionary reading’ just in case anyone wants to read it”.

And thus directors are revolting! (But, of course, I hear you say, management always knew that!)

I must admit that for me this time of year is yet another reminder of how the key governance decision‑making job of the board today has surpassed the point of reasonable. We all know that the Centro case provided a salutary reminder that, no maĀer how complex the organisation, the buck stops at the board table. And yet, it so often feels like the board holds only a few paltry cards in its hands whilst management holds the rest of the deck from which it may pick and choose what it will drop on the table in front of the board.

A recent conversation with a very experienced senior executive reminded me how frequently the management team believes the board is like a quaint and faintly annoying elderly relative (out of date) that has come to stay (always for too long) over Christmas and is always frightfully critical of the way you do things (always doubting management), resistant to change (risk averse) and being a finicky guest that eats you out of house and home (constantly wanting more, or different, or differently prepared information). Many even very senior executives are shocked when you suggest that this is because the job of the board is more than merely to act as the cheer squad for the CEO; that it is the job of the board to stand accountable to the owners (and others) for the company’s performance.

Against this backdrop, the question remains how directors can discharge this important accountability in the face of sheer data overload. How might we even begin to address this Great 21 Century Company Director Conundrum during this festive financials sign‑off season? A few suggestions:

  • Shut down the discretionary reading section of your board portal. Shut it down now. It is either required reading or it shouldn’t be there. It can of course be put by request in an individual director’s folder on the portal (yes, somewhat radically, I would suggest that it’s time that board portals responded to board needs).
  • Break the cycle of discussions being in formal meetings only. Try the use of a less formal board/commiĀee EOFY briefing session, well before the formal sign‑off meeting occurs, and without the ‘cast of thousands’ at the table, inadvertently stifling the always useful questions of the less financially ‘expert’ at the table. Only the board/commiĀee, the CEO, the CFO and the auditor (without all the rest of their team) to discuss the structure of the financials and the points to look out for.
  • Try using shared or social technologies, webinars or other new solutions that don’t require everyone to aĀend in person at one physical table in order to start the dialogue, raising questions etc, well before the formal sign‑off meeting begins.
  • Hardest of all it seems, board and committee members have a discussion and be disciplined about what you don’t need or want at the board table and steadfastly refuse to allow ‘bracket creep’ to occur in the form of inclusion of papers ‘just in case’ someone wants them.

I’d love to hear other ideas to help directors get the veritable information cornucopia (aka data overload) back under control.

In the meantime, and if that all sounds like far too much fah‑la‑la‑la for you, well no more pondering over the punch under the mistletoe, but let it roll around your already full to bursting mind as you get back to the very hard reality of the festive financial sign‑off season.

Happy sign off to all…

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