The corporate blowtorch that has for so long been trained on employees, with massive redundancies, and customers, with depleted services, has now been pointed at senior management - with a vengeance. But this time it's different. It's not just "management" that's being labelled "crooked" and "incompetent" but, specifically, CEOs, boards, individual directors and chairs of boards.
With names like Enron, WorldCom, HIH and One.Tel ringing in their ears, is it any wonder that shareholders and the general public are wondering: Are there any competent CEOs out there? Are all boards and directors either crooked or asleep?
Mindful of the load media scrutiny is now placing on boards and CEOs of small and large businesses alike, we're reluctant to add to it. But add to it we must because shareholders have a right to demand better from boards and CEOs when it comes to strategic planning. Why better? Most current levels are not meeting best practice standards and are significantly short-changing shareholders.
This leaves CEOs, boards, individual directors and board chairs open to further claims of incompetence and knowing underperformance.
This article reviews the current state of practice in strategic planning and explores the risks directors face in this vital area of management and director responsibility. It is based primarily on our Australian experience but applies equally to New Zealand.
What if a board failed to ensure that:
1. An organisation had a strategic plan, or
2. The strategic plan was an effective one, or
3. The strategic plan was implemented, or
4. The strategic plan was modified in the light of changed circumstances?
As an organisation's strategic plan is the central instrument for achieving competitiveness, financial success and shareholder returns, would any of the above conditions constitute grounds for action by shareholders of companies, members of associations, and so on? (I refer to "shareholders" throughout this article, but I include these other groups as well.)
The answer is "yes" A board has at least the responsibility to ensure that an organisation's strategic plan is formulated by following best practice procedures, that its content is in line with best practice and its implementation is reviewed and continually monitored.As evidence of a board's responsibility consider the 1992 Australian case of Rogers CJ ruling in the AWA Ltd v. Daniels & Ors (trading as Deloitte Haskins & Sells). He ruled that the board's function was fourfold:
* set the goals of the company
* appoint the company's chief executive
* oversee the plans of managers for the acquisition and organisation of financial and human resources towards attainment of the company's goals
* review at reasonable intervals the company's progress towards attaining its goals.