Final summary
Directors’ ability to fulfill their duty of care with respect to strategy hinges on having the right information and opportunities to contribute to their firm’s strategy. The strategy setting and vetting process described in the article outlines the rules of engagement between CEOs and boards. CEOs are responsible for formulating strategy but to ensure boards get the right information on strategy we ask the CEO to present the firm’s strategy in a comparable, consistent, and comprehensive format that naturally lends itself to the board’s strategy vetting process. Boards are responsible for setting the firm’s strategic direction and then vetting its strategy. To ensure boards get the right opportunities to contribute to the firm’s strategy we clearly describe how and when the board should be involved in setting and vetting the strategy. Boards have three key responsibilities: hindsight, oversight, and foresight (Beatty, 2012). Hindsight involves ensuring the accurate reporting of financial information, while oversight involves monitoring management’s activities and ensuring compliance. Foresight involves managing risk, developing the firm’s talent pool, and ensuring the firm’s strategy guarantees long-term firm viability. Of the three responsibilities, foresight has the greatest impact on firm performance, butis the task boards typically struggle to master. Our proposed strategy setting and vetting process ensures the board has done its due diligence and thus fulfilled its responsibility.
