Reading Minds

5 Ways to Understand a Board of Directors, from the Inside-Out 


Compliance managers and leaders offer a common complaint in our roundtables: “no one really listens to us”. It would seem this isn’t imagined. Steven Cohen, Assistant Director of the SEC, said recently, “We are very mindful of the fact that compliance staff often aren’t listened to.”

One of the best ways for compliance to be heard by a Board is to understand them from the inside-out. Here are 5 ways to do just that.

1. Understand their Pressures

Boards are responsible for the oversight and strategic support that is supposed to create long-term value for a company. Yet when McKinsey interviewed over 700 board directors in 2013, the results were surprising:

  • 66% of surveyed directors though the boards on which they served did not fully comprehend their companies’ strategies
  • 78% said their boards were not completely aware of how value was created
  • 84% believed their boards did not have a strong enough understanding of the industry in which the company operated

As you can see, a vast majority of board directors believe that the boards on which they serve do not fully comprehend the company strategy, how value is created, or the intricacies of the industry in which the company operates.

This shows an opportunity. The Board needs more than just data. By helping them to understand what the data means, and where opportunities exist, compliance leaders and managers can demonstrate a far greater value of both your department and it’s value in creating stronger corporate profits.

2. Understand Their Relationship to Risk

According to board members themselves, they believe they need to devote more attention to risk than they currently do, which is hardly surprising given some of the recent court rulings, fines, and major corporate scandals.

Yet compliance is about more than managing risk. If you think about the carrot and the stick, too often the Board looks at compliance through the lens of a stick: where are we exposed to risk, what is being done to mitigate it, what incidents have we had and how are we responding, and so on. In other words, how can we lower the risk of any major incidents that might impact reputation or legal liability?

The carrot approach is about the creation of value. It is being used by today’s best-in-breed compliance departments. This is when compliance supports employee retention and loyalty and a transparent and healthy culture that makes trainings work better. The data is clear: the more a company has a strong compliance culture, the more likely it is to be profitable, because its stability appeals to investors and ensures business decisions are more rounded.

3. Understand How They Make Decisions

A Board of Directors is only as good as the information they have. Bad or missing information can translate into bad decisions, which helps to explain why things go wrong — from a too aggressive acquisitions strategy to a growth culture that unintentionally encourages unethical behavior.

Conversely, when Boards are well informed by both good data and good analysis of it, they are well-prepared to steer a company into growth and profitability.

Boards face enormous pressure and have limited time to make decisions. They have to take the data they have and empower the executives to make fast and sometimes sweeping decisions. But few Board members have backgrounds in compliance, which offers compliance department new opportunities to educate the Board on how compliance can evolve from reactive into proactive. It comes down to having good data, and knowing what the data means.

4. Understand Why Solutions trump Data

At the end of the day data is just data. For instance, if we pull a company’s financial reports, they’d serve as the starting point for a conversation instead of the the end of it.

What does the compliance data show? What story is it telling? Where are the places where compliance is coming up short, and what can you do in the next quarter and the next year to address them?


  • Incidents
  • Investigation
  • Resolutions

Misconduct reporting and investigation trends are continuously cited by CCOs as one of their go-to metrics for program and risk management effectiveness. Without some additional context, though, they may be missing opportunities to address the cultural, behavioral, or operational factors that enable or exacerbate the misconduct from occurring in the first place:

  • Issue trends by location, business unit, organizational title, employee demographics (tenure, salary, etc.)
  • Number and type of sanctions applied by incident type, location, business unit, organizational title, employee demographics, etc.
  • Relationships between disclosures and incident trends
  • Impact of training, policies, communication and incentives on number and types of incidents, contributing factors and resolutions reached
  • Demographic or behavioral trends among involved parties (reporters, witnesses or subjects)

Our white paper explores these in far greater detail.

5. Understand How Compliance Drives Profits

One easy concept that most boards get right away is that compliance failures can be very costly: bad ethics is bad for business. Though the cost of a breakdown can come in various forms, the key takeaway here is that fines, remediation, investigations, valuation losses, stock price losses, and shareholder lawsuits can take an enormous toll on a company’s health.

The opposite point, that good compliance is good for business, can be harder to drive home but is just as demonstrably true.

At the very least, a compliant and ethical culture reduces negative pressures on employees to succeed at any cost, and leads to greater employee satisfaction, higher productivity, and greater loyalty. Satisfied employees have been shown to outperform their less satisfied peers. Additional perks might include being one of the World’s Most Ethical Companies or a listing on the FTSEGood or Dow Jones Sustainability Index, both proven investment drivers.

“The business environment is rapidly changing,” says Mark Royal, senior principal at Hay Group. “Our research shows that many companies don’t currently have the right strategies in place to respond to the challenges [growth] brings through arguably their most critical asset—their people. Firms rated highest for engaging and enabling their staff achieve 4.5x the revenue growth of their lowest scoring counterparts and see up to 54% improvement on staff retention.”[1]

Reading Minds Means Knowing Them

The bottom line is simple: by understanding your Board better, from the inside-out, you can be well-prepared to not only defend your company’s compliance, but to offer proactive solutions that will help make it a more valuable and necessary part of your company’s overall business strategy.

Download our comprehensive white paper: Reporting to the Board: A Comprehensive Guide to Presentation, Persuasion, and Making an Impact.

Convercent offers comprehensive and integrated compliance management, reporting, and defense for compliance departments who want to become best-in-breed. Our bi-weekly blog offers cutting edge information for compliance professionals.