Why Board Effectiveness Remains a Global Governance Paradox

Key Takeaways

• Board Purpose Is the Foundation of Effectiveness: Without a clearly defined purpose, boards can only be evaluated on activity and process rather than on meaningful oversight and outcomes.
• Most Governance Frameworks Avoid Defining Board Purpose: Regulators and standard setters emphasize structure and process while leaving the board’s reason for being largely implied.
• Ambiguity Persists Because Purpose Creates Accountability: Clearly defining board purpose would make oversight testable and expose gaps that process-driven governance allows to remain hidden.
• Process Compliance Has Replaced Real Oversight: Box-ticking and formal governance rituals create the appearance of effectiveness without demonstrating that governance actually works.
• Stakeholders Lack Transparency Into What Boards Believe They Are Accountable For: Investors and other stakeholders rely on boards but are rarely told how those boards define their role.

Deep Dive

Earlier this week, I shared a brief post on social media reflecting on a question that has stayed with me throughout my career, "How can we evaluate effectiveness without first being clear about purpose?"

The post pointed to a deeper issue that deserves more careful treatment. Whenever I am asked to assess effectiveness, I start in the same place. Before looking at structure, process, or performance, I ask a simple question, "What is the purpose of what I am being asked to assess?"

That question applies whether the subject is a company, a department, a risk management function, internal audit, or a board of directors. Without a clear understanding of purpose, any discussion of effectiveness quickly becomes superficial.

This is why I continue to find it surprising, and increasingly concerning, that boards of directors so rarely articulate their own purpose. Boards are widely described as the foundation of good governance, yet in practice their reason for being is often left implicit. Disclosures tend to rely on familiar phrases (oversight, fiduciary duty, compliance) without ever explaining what the board believes it is fundamentally accountable for.

Over the past year, I reviewed public disclosures from companies listed on major stock exchanges around the world to see how often boards clearly describe their purpose. The answer was simple, not often. Only a small number of companies offered anything approaching a plain-language explanation of why their board exists beyond standard, boilerplate language. I then looked to regulators and governance standard setters for clarity. With one notable exception, it was largely absent there as well. Most governance frameworks devote significant attention to structure, composition, and process, but stop short of answering the most basic question of all.

South Africa’s newly issued King V governance code comes closer than most to articulating the purpose of governance and the board itself. Elsewhere, the question remains unresolved. This creates an odd paradox at the heart of global governance. If effective boards are truly the cornerstone of good governance (a belief that is almost universally accepted) why is the board’s purpose so rarely defined?

This matters more than many people realize. Anyone with investments in public markets, or even in private companies, relies on boards whether they think about it or not. Yet most stakeholders have little visibility into how the boards they depend on understand their role. Do boards see themselves primarily as monitors of management, strategic advisors, stewards of long-term value, or overseers of risk tied to mission-critical objectives? Without clarity of purpose, stakeholders are left to assume, and governance operates in a fog.

The absence of clearly defined board purpose is not accidental. It persists because defining purpose carries consequences. Once purpose is explicit, accountability follows. Effectiveness can be assessed against outcomes, not just against whether processes were followed. Oversight becomes something that can be tested rather than assumed.

Ambiguity, by contrast, is comfortable. Much of modern governance has evolved in ways that prioritize structure and process precisely because they are easier to document and defend. It is far simpler to demonstrate that meetings were held and committees established than to demonstrate how boards actively oversee uncertainty and risk in relation to what truly matters to the organization.

That ambiguity also supports a quiet but common governance dynamic. Management does not always want to provide boards with clear, regular insight into risk and uncertainty tied to mission-critical objectives, and boards do not always insist on receiving it. Both sides can point to formal governance processes and claim diligence, while difficult conversations about trade-offs, uncertainty, and performance are deferred or avoided altogether.

Regulators face their own discomfort. Clearly defining board purpose forces hard questions about responsibility and accountability, and where the line is drawn. Avoiding those questions has often seemed easier than confronting them directly. At the same time, entire advisory ecosystems have developed around process-driven governance models that work best when purpose remains vague.

Ironically, courts are increasingly stepping into this vacuum. Through litigation and enforcement actions, expectations around board oversight are being clarified after failures occur, often with significant consequences. In effect, board purpose is being defined retroactively, through judgment rather than design.

The result is a governance model that too often emphasizes form over substance. Boards are assessed on whether processes exist, not on whether governance actually works. Effectiveness becomes a matter of box-ticking rather than meaningful oversight. This is governance theatre, and it does little to protect shareholders or stakeholders.

Defining board purpose does not guarantee good governance, but failing to define it almost guarantees that effectiveness cannot be evaluated in any meaningful way. Once purpose is clear, it can be tested. And once it can be tested, familiar defenses disappear. Claims of ignorance lose credibility, and “we didn’t ask” is no longer an acceptable explanation.

Regulators and governance standard setters should be calling on boards to define and disclose their purpose, whatever they believe it to be. Stakeholders deserve that transparency. Boards are the foundation of governance, and when that foundation rests on ambiguity, governance becomes fragile. In some cases, it becomes fatal. You cannot evaluate board effectiveness, or governance more broadly, through process execution alone. Without a clearly articulated purpose, governance risks becoming performance rather than reality.

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