When Boards Forget Who They Work For and Why Communicators Hold the Mirror

What you will learn from this article:

• How communicators can help boards confront the “agency problem” and bridge gaps between shareholders, management, and stakeholders.

• Why corporate governance today depends as much on communication strategy as on legal oversight.

• Practical ways CCOs can increase their influence with boards through transparency, stakeholder insight, and truth-telling.

So, a director on a corporate board and the company’s chief communications officer (CCO) walk into a bar.

“Boy, have I got a problem,” says the board member.

“How can I help?” says the CCO.

“It’s an agency problem,” he says.

“Now wait a minute,” says the CCO. “You can’t tell me what to do with my agency!”

Exasperated, the board member says, “What!?”

And the CCO replies, “Don’t what me. If you want to talk agency, that’s my domain.”

Puzzled, the board member says, “Well, if you want to deal with it, be my guest.”

Proud of himself, the CCO says, “I’m glad we got that settled.”

A few weeks later, the two meet again in the same watering hole.

“Our reputation is tanking,” exclaims the board member. “I thought you had this agency problem under control.”

Furious, the CCO says, “Hey, last I looked our shareholders were saying, ‘Where was the board?’ not ‘Where was the agency!’”

Confused, the board member says, “But I told you we have an agency problem!”

They both give each other puzzled looks. Then the bartender interjects, “I bet you guys haven’t heard this one before:

A shareholder asks a board member, ‘Why did you approve the CEO’s $50 million compensation package when the company lost money?’

The board member replies, ‘Well, we benchmarked it against peer companies, formed a special committee, hired three consultants, and held extensive deliberations.’

‘And?’ asks the shareholder.

‘And the CEO picked a really nice restaurant for our board dinners.’”

“Hilarious, right?” says the amused bartender.

“Somehow I don’t find jokes about agency problems very funny right now,” replies the board member.

Hearing that, the CCO wipes the smile off his face and looks more confused than ever.

The “agency problem” has plagued boards for years. Ostensibly, the board works for shareholders, but often board members are selected by management. Lucrative compensation packages can blur who works for whom. Is a board member an agent for shareholders or for management? Can you be an agent for both? And what about other stakeholders—who’s watching out for them?

Boards wrestle with this challenge every day. In many cases, the communications function can help, but typically they’re in the dark.

While it’s an age-old lament that communications doesn’t have a “seat at the table” when critical decisions are made, the role of the CCO is gaining greater authority within the C-suite.

A recent study from Korn Ferry reported that 41% of CCOs now report directly to the CEO (up from 37% in 2015), and 83% say their influence in the C-suite is growing. That’s the good news.

The bad news is that in most organizations, CCOs rarely attend full board meetings. Attendance at one or two meetings per year is typical—and usually for very specific presentations. The CEO and general counsel remain the primary conduits between management and the board, and communications leaders often learn about board decisions after the fact.

But in today’s hyperconnected world, corporate governance can no longer be the sole domain of the board, even with effective guidance from the legal department. After all, governance has always been more about the court of public opinion than the court of law. And the court of public opinion has always been the domain of the communications function.

So how can a CCO and their team help a board solve its agency problem? With the types of insights only the communications team can provide. Here’s how:

Make the invisible visible.

Board members (and management, for that matter) often don’t realize how their actions look from the outside. CCOs need to fearlessly hold up the mirror and forecast reality—from stakeholder mapping to real-time sentiment analysis from earnings calls—to translating governance “wonk-speak” into plain English that highlights reputational risk.

Champion transparency as an accountability mechanism.

Practice the hard conversations in the boardroom, not in the press. Push for more transparency that drives alignment across all stakeholders. For example, use plain language in proxy statements to explain—not obscure—compensation rationale.

Break down echo chambers.

Communications must do what it does best: add an outside perspective. CCOs can bring unfiltered employee sentiment from surveys or town halls, share customer and community concerns, and provide competitive intelligence on how other companies handle similar issues.

Tell the truth.

When conflicts arise, CCOs can facilitate difficult conversations about whether a decision truly serves shareholders and help boards distinguish between protecting the company and simply protecting management.

Did you hear the one about the CCO and the board member who walked into a bar?

The board member says, “I’ll have whatever the CEO’s having.”

The CCO says, “I’ll have whatever I can defend to the media tomorrow.”

The bartender looks confused and asks, “Wait, aren’t you two supposed to be on the same team?”

The stakeholders seated at the bar look up—none are laughing.

CCOs who want to make a difference need to order a glass of corporate governance—in fact, make it a double.