Information gaps between management and a board, known as “information asymmetry,” can pose a risk to boardroom operations. NACD and McGladrey LLP have published a white paper outlining warning signs that the gaps in information have grown too large. These warning signs include:
- An increase in time commitment for board activities not including strategic planning and risk oversight;
- Information overload on board members;
- Issues with management’s perception of the board;
- Poor corporate culture; and
- Lack of necessary expertise on the board.
The report reflects comments made at several roundtables composed of senior members of management and corporate directors. The discussion at the roundtables focused on the attendees’ “personal best practices to enhance communications between the board and management.” Using this input, the report looks at “focus areas” where, even if the board’s relationship with management appears to be running smoothly, directors can take proactive steps to ensure that information asymmetry does not become a problem.