Why Boards Should “Preset” Not “Reset”

In a fireside chat delivered at a conference late last month, Piyush Gupta, Chairman of Keppel and past-CEO of DBS, urged boards to “preset” rather than “reset” in response to a changing business and regulatory environment and return to their fundamental stewardship role, as reported by The Business Times.

“The board is an agent to the shareholder, and their job is to steward the company for creating shareholder value,” Gupta said, while noting that the role can extend to broader stakeholder interests. Boards “need to be responsible for strategy, direction and creating value,” he added, and “cannot just be policemen.” He argued that boards have become too focused on oversight at the expense of their broader role, amid growing regulatory demands and increasingly complex risks.

Gupta pointed to the volume of information reaching boards as one consequence, noting that bank audit and risk committee reports can run to as many as 1,000 pages. He recalled that, shortly after joining the DBS board, some directors said they had been unaware of losses related to the bank’s Middle East exposures because the relevant information had been buried in board materials. His response was to distill reporting into clearer executive summaries and foster what he called an “open the kimono” culture, in which management highlighted the issues directors most needed to understand. The aim, he said, was to create greater “openness and dialogue” so no director could later say “we did not know.”

On board composition and culture, Gupta argued that directors should be viewed as a “collective of talent,” with skills and experience selected according to the needs of the company. He also stressed the importance of trust between boards and management, arguing that people need to feel they are “in a circle of friends” if they are to speak openly.