CIOs have vital role to play in governance

In the US, regulations such as the Sarbanes-Oxley act are opening up opportunities for CIOs to take on more responsibility

A tad tired of those demanding Sarbanes-Oxley and other compliance implementations? Want to dramatically raise your profile with your CEO, CFO and corporate counsel? Do high-impact professional risks intrigue you?

Then consider making an offer your company’s board of directors may dare not refuse. Create a “digital dashboard” and database that puts all the information a non-executive director might need right at his fingertips: compensation levels, capital spending histories, changes in accounting rules and so on. Treat the board like a business unit. Support directors as if they were C-level peers. Turn them into valued customers and clients for your ICT shop. Learn from them. And yes, give them tech support if they ask.

The reason is as obvious as, say, an Enron trial in Houston. Litigators and regulators are making directors ever more accountable for their actions and inactions. The future of global enterprise doesn’t merely reside in better management or superior leadership; it’s now contingent upon good governance. That’s not an annoying business trend — it’s a transcendent legal principle. Companies defy it at their peril. And the importance, liability and legal exposure of non-executive directors will be even greater five years hence.

Once upon a time, independent directors with sterling CVs could successfully plead ignorance if their board-approved mergers, acquisitions, hiring, firing or audits went awry. Today, they can still plead ignorance. However, they’ll be doing so under oath before judges and juries legally empowered to interpret ignorance as negligence. Ignorance isn’t bliss. There are good reasons why directors and officers’ insurance rates have skyrocketed.

Of course, non-executive directors are free to trust whatever data they get from the CEO, CFO and the auditors. However, if you were on a board that was increasingly being held to stricter standards of accountability, wouldn’t you like to have your own information window into the enterprise? Wouldn’t you like to show a court of law that you demonstrated fiduciary “due diligence” as a director by digging deeply into the data? Yes? Then “Hello, CIO!”

The harsh truth is that the law is herding directors into investing more time and effort into more serious governance. The simple fact is that you can’t have good governance without good information.

The challenge is shockingly obvious: CIOs should be taking the lead in working with their CEOs, CFOs, corporate counsels and, yes, the auditors, in developing customised systems to support the board.

Might this put the CEO, CFO, corporate counsel and the auditors in an awkward position? Absolutely. Doing the right thing is always risky. Then again, not doing the right thing is even riskier.

Let’s be blunt: The overwhelming majority of the time, CIOs are reactors. They’re desperately responding to whatever last-minute requests come from the lawyers or the investment bankers or the CFO on some board-level issue. When they successfully scramble to deliver the goods on deadline and in desired formats, they’re taken for granted. When the data is late or missing, they get blamed. That’s life, but there’s nothing proactive about their role.

The rise of accountability-driven governance is an excellent opportunity to change that. Smart and gutsy CIOs will make the most of it. They will work with their CEOs, CFOs and corporate counsels to work with the board. They’ll be proactive. They’ll informally chat with lawyers and non-executive directors at other firms to get a sense of what kind of customisation is necessary. They’ll mock up some digital dashboards and take them into, say, the CFO’s office and ask, “What do you think?”

A CIO at a billion-dollar US retailer did exactly that and the CFO’s initial reaction was outrage. Who the heck did the CIO think he was? The CEO was more relaxed. He calculated that this proposal would make him look smart. He had the CIO present it as a trial balloon. The directors didn’t want their own system but they did want earlier access to the CFO’s numbers. So the ICT department set up a secure web page on the corporate site for the directors to log into. Everybody was better off.

The key? The CIO demonstrated initiative in a way that didn’t threaten the CEO but addressed an unexpressed desire of the board. (The CFO was reportedly still annoyed but now took the CIO much more seriously as a corporate player). The best way to accomplish this is to partner with one’s C-level peers and colleagues to better serve the board. Then again, some colleagues are better partners than others.

Of course, if the CIO really wants to raise his or her profile, maybe they should informally raise this offer to a sympathetic director who serves on the compensation or audit committee (the two board committees most likely to get an independent director in trouble.) That’s truly high-risk. Disintermediating your colleagues is corporate hardball. If the corporate counsel, CFO or CEO isn’t amenable to creative collaboration around “director dashboards”, maybe that’s vital data for the CIO to know. A serious independent director might find that informal conversation useful and revealing, too. So would a director who’s nervous about liability. Can this be done without undermining the CEO? Of course. The better question is whether your company’s board understands and appreciates that it must have executive relationships above and beyond the counsel, the CEO and the CFO.

A healthy and productive relationship with the board is a reasonable goal for a world-class CIO. Moreover, in this era of complex compliance infrastructures and global regulation, a healthy and productive relationship with the CIO is an essential goal for a world-class board.

For CIOs, productive board-level relationships are essential for professional development. While there’s a wealth of management literature about how CIOs should lead their people and better collaborate across the enterprise, there’s a paucity of information about “managing up”. Using IT to help the board manage itself may be as important for tomorrow’s CIO as using IT to cut costs and grow revenue for the enterprise.

As crucial as IT governance may be, corporate governance is even more important. CIOs should recognise that and act accordingly.

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