This is an excerpt of Steinecke Maciura LeBlanc’s “Governance for Regulators” handbook. To view additional sections of the handbook, click here.
b. Board Role
Subject to external overseers (e.g., government, courts), the Board of a regulator is the ultimate authority for the organization. It is also ultimately responsibility for the success of the organization. However, it is important not to confuse authority for activity. The Board cannot possibly perform all the tasks of the regulator. Nor do Board members have the skills to do so well. It cannot make decisions on individual registration cases, investigate complaints, hold discipline hearings, monitor individual practitioner professional development and post precise entries on the public register. Thus the role of the Board is to find ways to ensure that these activities are performed well.
As already noted, most effective Boards perform three main functions: establish priorities, make policy and oversee the performance of the regulator. Any Board that does those three things well will be too busy to do anything else. We have already discussed how a Board of a regulator sets its mission, goals and strategies and how they develop policies. Another important skill for Board members to develop is how to oversee the performance of the regulator without interfering in the activities of the regulatory committees or the operations implemented by staff.
An illustration of this concept is the review of the financial performance of the organization. The Board will typically receive quarterly financial statements that compare the revenues and expenses in various categories against the Board-approved budget. The Board would not delve into individual revenue or expense items. For example, it would not be aware of and would not question the payment of individual invoices. Rather, the Board would look for major variances from the budget and would expect explanations for unexpected trends. Often there is a ready explanation for a variance. For example, revenues may be much lower than anticipated until annual renewal time. Or a single, hotly contested discipline case may have pushed legal fees to a higher than usual level. Only where the trends suggest a larger issue would the Board act e.g., to raise fees, cut less important programs, or to dip into reserves. In addition, the Board appoints an auditor to review the financial activities of the organization to ensure that they are accurate and in accordance with established policies. The Board does not examine day to day transactions, even after the fact, but rather relies on expert, external consultants.
This approach to oversight should apply to all aspects of the regulator’s activities. The Board should expect reports that reassure the Board that its activities are being performed well and that no patterns of concern are developing. For example, the Board would likely want to receive reports from the regulatory committees indicating the number of cases dealt with over the period, the number of cases falling within each category, the number of appeals, the number of successful appeals, budget compliance and the average backlog of cases. Where there is a disturbing trend (e.g., the backlog of cases is growing or not shrinking despite targeted efforts), the Board should ask the committee for an explanation and suggest corrective action. Where necessary, the Board should provide resources to address the concern (e.g., appoint a larger committee; hire a new staff person).
Role of Board Scenario #1
Ernie Eager, along with every other Board member, receives an email from a recently discharged employee of the regulator claiming that the employee had been fired unjustly and will sue for $25,000 if not reinstated. Ernie asks that a teleconference meeting of the Board be called to address this issue. The President advises Ernie that this is an operational issue and that the Board should not interfere. Even if the lawsuit is successful, the $25,000 amount would not be material to the overall budget of the organization.
Role of Board Scenario #2
Change the scenario. Ernie Eager, along with every other Board member, receives an email from a recently discharged employee of the regulator claiming that within the last six months 25% of the employees of the regulator have either been terminated or quit. Ernie raises this concern with the President. The President agrees with Ernie that this trend, if true, is troubling. The President confirms with the CEO that there is an issue and puts this item on the agenda. The CEO reports that she has also identified this trend and has determined that the head of human resources has a polarizing personality. The head of human resources has been let go and the CEO is proposing that an independent human resources firm be retained to provide support to the remaining employees, to assist in hiring a suitable new head of human resources and to suggest operational policies that will reduce the likelihood of this kind of situation occurring again.
These scenarios describe an appropriate level of oversight by the Board. Interfering in individual employment issues is not appropriate. But where patterns develop, the Board should approach the CEO for an explanation and expect a solution if there is a problem.
Even here, the nature of oversight should be at a policy level. For example, rather than grilling the CEO on how this could have happened and why it was not noticed sooner, “generative” questions should be asked. Examples of generative questions in this context might be:
- What measures can we take to prevent this from happening again?
- What can the Board do differently to support you better in this area?
Of course, as with most governance principles, there are exceptions. For example, where there is credible information to suggest that the CEO has engaged in a serious breach of trust, a targeted (usually external) investigation may be warranted.
As the old adage goes, the Board steers and staff rows.