What makes a board tick: Why culture matters more than compliance

In an earlier column, I wrote about how hard it was to pin down what made a board effective. Governance researchers have spent decades looking for a link between board structure and company performance, without much luck. The board size, an independent chair, and director age — none of these reliably explains why one board performs better than another. As David Larcker and Brian Tayan put it, years of hunting for links between board structures and performance have “yielded disappointingly little”. 

Directors themselves seem to agree that good governance is about more than compliance. Boards now deal with risks that move fast — artificial intelligence-driven decisions, geopolitical shocks, and reputational crises that go viral within hours — and policy manuals struggle to keep up. So, board effectiveness is increasingly judged not by how a board is structured but by how it actually works: The quality of its discussions, the decisions made, and the outcomes that follow. 

A recent EY study — “The Effective Board: A Guide to Drive Board Performance” — surveys this from the director’s lens. Based on a survey of over 100 directors and interviews with experienced board leaders, though it’s a United States (US) study, the lessons apply just as well to Indian boards. It asked the directors three things: What matters most, where their board is strongest, and where it needs to improve. 

The directors are united on what matters most. Nearly three-quarters ranked the quality and flow of information from management among their top priorities, and 62 per cent pointed to board culture and dynamics. EY says the two go together — good information lets directors engage meaningfully with strategy and risk, but it is culture that decides whether they use it to ask hard questions rather than just say “yes”. 

The contradiction regarding information deserves far attention: Half the directors call the information they receive “strength”, but 39 per cent also call it “weakness”. That sounds contradictory, but it isn’t really: Boards aren’t short of data, they’re drowning in it. Board papers often run into hundreds of pages, and that volume is itself the problem. 

The directors are usually clear about which matters need decision, which need discussion, and which are purely informational. What boards seem to want are simple yet concise, decision-focused papers that lay out the issue, the options management considered, the tradeoffs, and where the board’s judgement is needed. 

More than half the directors (54 per cent) said committee functioning was one of their board’s strongest areas. This is not surprising; boards have spent recent years reworking committee structures, rewriting charters, and renaming committees to handle new responsibilities like cybersecurity and artificial-intelligence oversight. 

India tells a similar story, at scale. IiAS, the firm where I work, has counted around 626 committees across BSE- and National Stock Exchange-listed companies — many are just differently labelled versions of the same charter, and a few exist only for a narrow, one-off task. Still, the same patterns show up here: A handful of regulator-mandated committees (audit, nomination and remuneration, corporate social responsibility, and risk management) do most of the real work; complex areas get their own dedicated committee; and new issues usually get folded into an existing committee’s charter rather than triggering a new one. 

On culture, the directors said it did not happen by accident — the best boards worked at it constantly, like deliberately asking every director for views, setting aside time for the counter-argument, and making sure quieter voices get heard. Boards with directors from varied backgrounds also seem better at avoiding groupthink, since different perspectives make blind spots harder to miss. 

When they were asked to choose three areas where their board needed improvement the most, board composition and director succession planning were at the top, cited by 52 per cent of the directors. Close behind were board evaluation and the culture of continuous improvement, identified by 44 per cent of the respondents. And 39 per cent of the directors identified the quality and flow of information from management to the board as the third-most common improvement area — the same area 50 per cent of the directors called “strength” earlier in the survey. Information flow, in other words, is both the board’s best asset and its most common complaint. 

An important finding in EY’s study is where directors want to spend more time. Artificial intelligence tops the list, followed by talent and geopolitical risks. In earlier years, cybersecurity and data privacy ranked higher than talent and sustainability featured more prominently. 

What is noteworthy is that across all three questions — what matters, what’s working, and what needs fixing — the directors kept returning to people and practices, and information and judgement, and not to regulatory mandates. Even categories that sound structural, like committees or composition, the focus was on behaviour, not compliance. 

None of this is to belittle the structural safeguards Indian regulators mandate like independent director quotas, related-party disclosures, and committee mandates. But this survey is a reminder that structure alone doesn’t guarantee oversight. And it points to the shift from governance being narrowly viewed as a monitoring exercise or a checklist, to a judgement exercise.

The author is with Institutional Investor Advisory Services India Ltd. The views here are personal.

X: @AmitTandon_In