In 1912, the Olympic, the predecessor sister ship to the Titanic, was designed by the Right Honorable Alexander Carlisle who remembered a board meeting where lifeboat capacity was discussed “for five or ten minutes,” whereas the time allotted for the discussion of the decorations for the liners ran up to five hours.

This is one in a number of articles in Lyceum’s Well-Tuned Corporate Governance Series that spins around Lyceum’s Well-Tuned Corporate Governance Wheel visiting, in depth, each spot of the wheel. Many boards fall into the trap of spending too much time on less critical issues, leaving insufficient time for more complex, strategic discussions. A flight to the familiar is common when complexity and uncertainty lie ahead or when the situation is overwhelming. As a result, time and attention are directed to more trivial matters because we know more about them than the important matters.

The bias evident in this boardroom context is called Parkinson’s Law of Triviality, also known as “bike-shedding.” The term was coined by British historian C. Northcote Parkinson in his book Parkinson’s Law: The Pursuit of Progress (1957). He illustrated the concept through a hypothetical scenario of a committee tasked with approving plans for a nuclear power plant. Instead of focusing on the complex, critical aspects of the project, the committee devoted most of their time to discussing a relatively simple issue: the design of a bicycle shed.

The general thesis of Parkinson’s humorous and cynical book is that bureaucratic inefficiency and the expansion of administrative structures are inevitable within organizations. The book is filled with witty, satirical observations on the absurdities of organizational life, making it both an entertaining and insightful critique of bureaucracies and institutions.

Where Lyceum encounters biases that infiltrate decision-making processes, we seek for methods or interventions designed to mitigate the impact of those biases and improve decision-making through unencumbered rational and systematic thinking. This article explores the importance of a well-planned board meeting agenda for its value as a “cognitive debiasing technique,” the role of the Chairman and the CEO in its development and execution, and how disciplined adherence to the agenda enhances board effectiveness.

In addition to the Olympic, there are many historical events where the lack of board prioritization led to significant consequences. Boards can draw valuable lessons from history as support and rationale for creating a focused and disciplined board meeting agenda, while ensuring adherence to it. Lyceum draws on historical examples to minimize the risk of affecting the reputations or careers of individuals who may still be living and working.

The Penn Central Transportation Company (1970). Penn Central, a major American railroad company, collapsed due to mismanagement and financial difficulties, leading to what was then the largest corporate bankruptcy in U.S. history.

The collapse of Penn Central offers a clear example of how lack of effective boardroom discussion and oversight can lead to corporate failure. In the lead-up to the merger between Pennsylvania Railroad and New York Central, which formed Penn Central, there were significant managerial and financial missteps that were not adequately addressed in the boardroom.

For instance, despite warnings to the board and other executives from key financial officers about the financial and operational challenges that the merger would present, including the huge capital expenditures involved, the warnings were not given due attention, and the board did not fully appreciate the potential consequences of their decisions.

The board did not exercise sufficient oversight over the company’s financial health. There was a lack of proper information flow to the board about the company’s financial operations, leading to unchecked managerial practices and the accumulation of unsustainable debt. This lack of proper scrutiny and in-depth discussion at the board level contributed significantly to the operational dysfunction and financial instability that followed.

Finally, the merger was executed without a clear plan for centralized or decentralized operation, leading to confusion and inefficiency. The decision-making process was hindered by the absence of cohesive, forward-thinking management practices, which could have been mitigated by more rigorous boardroom-level strategies and discussions.

This historical example underscores the importance of improvements in the planning and allotting for detailed, informed, and strategic discussion and oversight by a board of directors, particularly in the context of major corporate decisions in situations such as mergers and acquisitions. Process improvements in this area fall squarely into the realm of the Board Meeting Agenda.

The Corporate Board Meeting Agenda: One of the Keys to Board Effectiveness

The Board Meeting Agenda is a critical board process that contributes to the overall effectiveness of a board. It serves to guide directors through the various issues requiring their attention. But it is also a planning tool which, applied well by the Chairman/Lead Independent Director and the CEO, ensures that crucial issues are prioritized to be discussed in depth, while less important matters are dealt and dispensed with efficiently.

Common Challenges in Agenda Planning and Execution

Despite the apparent benefits, many boards struggle with effective agenda planning and execution. Common challenges include:

1. Overcrowded Agendas. Boards often try to cover too many topics in a single meeting, leading to rushed discussions and superficial treatment of critical issues.
2. Lack of Prioritization. Without clear prioritization, meetings can become bogged down in less important matters, leaving insufficient time for strategic discussions.
3. Insufficient Preparation. When board members are not provided with adequate background information or time to prepare, discussions can lack depth and fail to lead to meaningful decisions.
4. Deviation from the Agenda. Discussions can easily veer off course, especially when complex or contentious issues arise, leading to time management challenges.

Improved Governance: A Well-Planned Agenda’s Implications for Board Effectiveness

1. Improved Governance. Effective agenda management enhances the board’s governance capabilities by ensuring that all directors are engaged and informed, and that decisions are made based on thorough discussions. This leads to a more robust governance framework that supports the company’s objectives.
2. Strategic Focus and Prioritizing Critical Issues. One of the primary purposes of a board meeting agenda is to prioritize the most critical issues facing the organization. By carefully planning the agenda, boards can allocate sufficient time to strategic discussions and decisions that impact the company’s long-term success. Too often, boards fall into the trap of spending disproportionate time on routine or trivial matters, leaving insufficient time for substantive issues such as strategic planning, risk management, and performance evaluation.
3. Efficient Use of Time. A well-structured agenda helps ensure that the board’s limited meeting time is used efficiently. Time allocations for each agenda item can help keep discussions focused and productive, preventing meetings from running over schedule. This efficiency not only respects the directors’ time but also fosters a culture of discipline and accountability.
4. Enhanced Decision-Making. By clearly defining the topics to be discussed and the objectives for each discussion, the agenda enhances the board’s decision-making process. When directors know what to expect in a meeting they come to meetings better prepared, having had the opportunity to review relevant materials and think critically about the issues at hand. This preparation leads to more informed discussions and better-quality decisions.
5. Accountability and Follow-Up. A detailed agenda that includes specific outcomes for each item helps ensure accountability. It becomes a reference point for follow-up actions, allowing the board to track progress on decisions made and initiatives launched during previous meetings.
6. Director Satisfaction. Directors are more likely to feel satisfied with their contributions when meetings are well-organized and focused on substantive issues. This satisfaction can improve director retention and attract high-caliber individuals to the board.
7. Organizational Performance. Ultimately, a well-functioning board that focuses on critical issues contributes to better organizational performance. By providing strategic direction and holding management accountable, the board plays a vital role in driving the company’s success.

Epilogue

“The only thing wrong with accomplishing nothing at all at a board meeting is that you never know when you are finished.”

~ Robert Kirk Mueller