16/09/2026
WHY BOARDS FAIL AT OVERSIGHT, AND HOW TO FIX IT?
Boards rarely fail because governance structures are completely absent. More often, they fail because structures exist on paper but do not operate effectively in practice.
A board may have qualified directors, an Audit and Risk Committee, internal auditors, external auditors and extensive policies, yet still fail to identify serious financial, operational or ethical problems.
Three weaknesses deserve particular attention on my finger tips would include:
A. The Board only knows what it is told
One of the greatest challenges in corporate governance is information asymmetry between management and the board.
Management runs the organisation every day. It prepares the board papers, develops presentations, explains variances and often proposes the agenda. Directors, particularly Non Executive Directors (NEDs), generally depend upon information supplied by management.
That creates an obvious risk: if management controls the information, management can influence the narrative.
Academic research recognises that audit committees (Internal audit, external auditors) require information from management to perform their monitoring responsibilities, while simultaneously needing sufficient independence to challenge management effectively.
A strong board therefore should not rely exclusively on polished management summaries. It should periodically request raw exception reports, aged receivables, litigation schedules, whistleblowing reports, internal control exceptions, regulatory correspondence, covenant breaches and unresolved audit findings.
The question should not merely be,
“What has management presented?” but also, “What information have we not seen?”
B. When the Auditor has no independent line to the board
The second weakness arises when internal or external auditors effectively report through management rather than having meaningful access to the Board or Audit Committee.
This can create a dangerous filtering mechanism. Findings may be softened, delayed or contextualised before directors hear them.
Research demonstrates why this relationship matters.
A recent experimental evidence involving experienced auditors found that management's presence can have a “chilling effect” on auditors' discretionary information sharing, while private interaction with the Audit Committee Chair can increase the total information communicated. Other research finds that greater auditor audit committee communication is associated with reduced opportunistic auditor switching, particularly where audit committee independence and financial expertise are stronger.
I believe in practice the solution is give auditors direct and unrestricted access to the Audit Committee independence will be assured and strengthened. Worse if during each substantive Audit Committee meeting you provide an opportunity for the Committee and auditors to meet privately, without executive management present.
C. Committees that exist only on paper
I have witnessed organisations which thought by having a Finance policy and procedure manual they would eliminated override of controls by the CEO, no. Similarly, merely, having an Audit and Risk Committee does not automatically create effective oversight.
Literature has long warned that merely establishing an audit committee does not mean the board actually relies upon it as a monitoring mechanism.
I reviewed institutions operations asked how often the some committees meet, I was shocked to hear during an engagement that they never meet the entire year due to budget constraints.
Imagine an Audit and Risk Committee that meets once annually, receives a 150 page pack the night before, spends two hours discussing it and approves everything presented, such are Institutions which;
• Technically, the governance structure exists.
• Practically, the oversight is not there
• Believe you me, effective oversight requires sufficient meeting frequency, preparation time, financial competence, professional scepticism and willingness to ask uncomfortable questions.
Strong oversight is often unglamorous;
i. It is a Board that influences its own agenda rather than simply receiving management's agenda.
ii. It is an Audit and Risk Committee that receives exception reports rather than only success stories.
iii. It is a Chairperson asking: “Auditor, is there anything you would tell us differently if management were not sitting in this room?”
iv. It is directors tracking unresolved audit findings from one meeting to another and demanding accountability for overdue corrective actions.
v. None of the above necessarily requires another law, another committee or a larger Board. Sometimes it simply requires the existing Board to insist on exercising the authority it already possesses.
If your organisation's governance framework has not been independently reviewed in recent years, such a review can provide a valuable opportunity to examine whether information asymmetry, auditor access or ineffective committee practices are undermining oversight.
Ultimately, good governance is not demonstrated by the number of committees appearing on an organisational chart.
It is demonstrated by whether those charged with governance receive the right information, ask the difficult questions and act when the answers reveal problems.
(c) September 2026
