5.d. Diligence

This is an excerpt of Steinecke Maciura LeBlanc’s “Governance for Regulators” handbook. To view additional sections of the handbook, click here.

d. Diligence

The duty of diligence is intended to ensure that the regulator is effective in achieving its mandate. The work of the regulator is so important that it cannot afford to have even one Board or committee member who signs up simply to pad their résumé. Diligence requires preparation for all meetings and other activities, ongoing knowledge and skill development, and follow-through on action items.

An early indication of diligence for a new Board or committee member is full participation in the orientation opportunities provided by regulators. Such orientation generally includes information about the activities of the regulator and the Board and committee member’s role. Orientation can also include the development of essential skills related to risk management, strategic planning and policy making for Board members. Orientation for committee members could include adjudication skills and equity, diversity and inclusion training.

Meeting preparation is another hallmark of diligence. Reviewing materials is necessary to being able to contribute knowledgeably at the meeting and to identify any possible conflicts of interest that should be discussed, disclosed or declared. If the materials appear to be missing important information, Board and committee members should inquire as to whether its absence is intentional for some reason. Conscientious Board and committee members identify the key issues to be determined and the considerations relevant to making that decision.

Attending all meetings of the Board and committee is another aspect of diligence. Where it is not possible to attend a meeting, the Board or committee member should give as much advance notice as possible so that any alternative arrangements can be made. And while there is a cultural overlay to punctuality, diligent Board and committee members make it a priority, especially if the meeting is held in a city where traffic can be unpredictable.

At the meetings themselves Board and committee members should actively participate. It is important for the Board or the committee that all reasonable perspectives are articulated. Passionate Board and committee members should not dominate the discussion.

Where a vote is taken (and it may not be where action items are determined through consensus), abstention by the Board or committee member constitutes a process failure. Rare exceptions may exist for a brand new Board or committee member at their first or second meeting as they are still learning. However, in other circumstances, not voting indicates that a failure has occurred. Perhaps the organization failed to provide sufficient information for the Board or committee member to feel informed enough to vote. Perhaps the Board or committee member failed to prepare adequately. Perhaps the Board or committee member failed to recognize the importance of voting. Perhaps the Board or committee member is worried about the fallout in the profession from a vote on a difficult issue. Perhaps the Board member believes they have a conflict, however, abstaining from a vote is not an appropriate method of dealing with a conflict of interest; the conflict must be declared and the individual should leave the room.

Diligence also includes promptly following up on expected contributions outside of meetings. This can include drafting reasons for decision, reviewing draft minutes, completing agreed upon surveys or meeting feedback forms, or conducting any requested research or inquiries.

Diligence Scenario

There is little doubt that Ernie Eager has brought a tremendous amount of zeal to his orientation. However, during his first meeting he realizes that he does not understand the financial statements. They have never been a big part of his professional life. At first Ernie is hesitant to reveal this gap in his knowledge. However, his keenness takes priority and he asks the President if he could receive some education in interpreting financial statements. The President has the CEO set up a couple of training sessions for Ernie.

Diligence is an indispensable attribute for Board and committee members. Fortunately it is one that most Board and committee members bring with them.

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