Field Visits By Directors

Director field visit shaking hands with a colleague - Toronto Corporate Governance

By David R. Beatty C.M., O.B.E.

To understand the operating culture of a company field visits are an absolute must. Here’s why.

You can understand nothing, absolutely nothing, about the operating culture of any company by sitting around the boardroom. At the boardroom table you “eat what you are fed” by the top management team. This is why field visits are extremely important for your business.
A recent example is the Wells Fargo bank board. It turns out that some millions of fraudulent accounts were created over a decade. Along with that, thousands of employees were dismissed for failing to make targets. Did no bank director get any inkling of how the bank was run? Did any bank director ever visit a branch to have a chat with the branch manager? Did no one check the hotline? It is unbelievable that so many intelligent and seemingly conscientious men and women failed to understand the internal operating mechanics of the Wells Fargo business model.
Read More: Are You Getting All You Can From Your Board of Directors?
Every board ought to have an explicit policy that all directors get out of the boardroom and into the field. GE has long had such a policy and so has the Toronto-Dominion Bank. In each instance, the Board Chair encouraged field visits and insisted upon them. Such visits not only serve to inform the individual directors about how things actually work in the field i.e. what the operating culture actually is (culture = what employees do when no one is looking) but also helps the CEO understand what is going on in the parts of the field where he/she has not recently visited.
I would urge all institutions to pressure the companies they own to formally require such a policy and also to publish that policy in the annual Information Circulars with the expectation that in a few years the company would then be able to measure the number of these field visits by the director.
For a director to responsibly fulfill his/her fiduciary responsibilities field visits are a must!

David Beatty is an adjunct professor and Conway chair of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management. Over his career, he has served on more than 39 boards of directors and been chair of nine publicly traded companies. He was the founding managing director of the Canadian Coalition for Good Governance (2003 to 2008). A version of this article will also appear in the Winter 2017 edition of Rotman Management, published by the University of Toronto’s Rotman School of Management.