So much is made of the board's obligation to preserve the reputation of the corporation. A new consulting firm report suggests that the board should be similarly focused on preserving its own reputation (as a body).
Proprietary research conducted by Edelman Financial Communications & Capital Markets concludes that a corporate board actually does possess its own reputation, which should be "actively considered and managed" for the benefit of the company. According to Edelman, board reputation comes particularly into play in circumstances of corporate controversy or distress, when specific board actions come under public scrutiny and have a direct impact on public trust in the company.
The research surveyed a very targeted group: institutional investors with assets under management of more than $1 trillion. To the surveyed group, trust in the corporate board was important when making or recommending an investment. Logic suggests that the emphasis on reputation should similarly apply with respect to boards of large health systems, whether non-profit, private or publicly traded. Issues such as the qualifications of individual board members and, their relative independence, integrity and motivations, are all relevant and could affect the mission and value of the corporation. In addition, public examples of past reasonable and prudent practices of the health system board (especially in times of corporate crisis or stress) may provide comfort to health system constituents and regulators.
As the report suggests, the health system board may wish to give closer consideration of the steps it can take to substantiate its own reputation within the context of the overall focus of the corporation and the activities of the senior leadership team. Nonprofit status should not be a limitation on such efforts.
The Importance of Board Reputation
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