Questions Every Board Must Address for Effective Governance

Laura McCracken
May 6
7 min read

Updated: May 7

A tour of the Blackheath 10-Point Board Effectiveness Framework

Shortly after the 2008 financial crisis, I found myself with Carol Sergeant, then Chief Risk Officer at Lloyds — a former Bank of England policymaker and FSA Managing Director. She was lamenting a problem many firms still face: finding data-driven risk leaders with common sense and the courage to 'ask the dumb question'. “Why can’t I find someone who reads the FT? Someone who knows how to ‘ask the dumb question’?” she asked with exasperation. It’s a line that’s stayed with me. There are plenty of clever people who can build sophisticated econometric or risk models; far fewer who can challenge them or have the courage to question the status quo. This piece is dedicated to her — and to the questions boards need to ask if they want to govern effectively.

What follows is a teaser for Blackheath’s 10-point framework for board effectiveness. For each one, we've distilled the questions that cut to the heart of it. These aren't trick questions - but they are often the ones boards find the most difficult to answer honestly.

01 — Shareholder & Capital Structure

Ownership clarity, investor alignment & risk appetite

Every board member should be able to draw the ownership structure of their firm from memory — including the informal parts. Who holds qualifying interests? What rights do they carry? Are there side letters, informal commitments, or investor expectations that exist outside the formal governance framework? And critically: does the board own its risk appetite, or did the CRO write a document that no one can paraphrase?

If a key shareholder tested the board’s authority tomorrow, who would actually win?
Where do investors exert influence that isn’t formally documented — and who is willing to challenge it?
Is the board’s risk appetite something it actively owns — or something it would struggle to defend under scrutiny?

02 — Board Purpose & Structure

Clarity of role, terms of reference, committee architecture

Is your board clear on its purpose? It sounds simple, but answers vary widely — shaped by geography, size, industry, and regulatory context. In the US, boards typically exist to protect shareholder interests. In Europe, the mandate is broader: customers, employees, partners, shareholders, and the wider ecosystem. A board’s Terms of Reference tell you what it’s meant to do. The agenda tells you what it does. Yet without a shared understanding of core purpose, boards risk drifting away from what matters.

What is the fundamental purpose of your board? Does the board structure reflect the purpose?
Is this board designed for the business you have today — or the one you had three years ago?
What important decisions are being shaped outside the formal structure — and why?

03 — Decision Rights & Rules of Play

Delegation of authority, escalation & emergency protocols

Every organisation has two decision-making systems: the formal one written in the Delegation of Authority matrix, and the real one. The gap between them is where governance risk lives. The escalation path that looks clean on an org chart often looks very different when something is actually going wrong and the instinct is to manage it down rather than surface it.

Where is the gap between how decisions are supposed to be made and how they are actually made?
What was the last issue that should have reached the board but didn’t — and what does that tell you?
In a crisis, would this governance model enable clarity — or create confusion?

04 — Board Composition

Skills, diversity, independence & tenure

A board skills matrix is a useful tool. But it tends to measure what people have done, not whether they're prepared for what's coming. And independent? The FCA doesn't mandate a specific proportion of independent NEDs for most regulated private firms — but it does expect meaningful challenge. Independence in mind and appearance is a real test, not a checkbox. Tenure creep and network recruitment are where it quietly erodes.

Who on this board is no longer the right fit for where the business is going?
Which capability gap is being tolerated — and for how long?
Are appointments driven by future need — or by comfort, familiarity, and networks?

05 — Power Dynamics & Independence

The unspoken hierarchy — who really decides?

This is the pillar that standard board surveys are structurally incapable of measuring. You cannot capture power dynamics in a questionnaire. Every boardroom has an informal hierarchy — a voice that sets the tone, a dominant presence that shapes what gets said and what stays unsaid. In founder-led businesses, it's often the founder. In boards with a dominant investor, it's often their representative. The question isn't whether the dynamic exists. It's whether the Chair is managing it.

Who in this boardroom can shut down a line of questioning — without saying a word?
When was the last time someone challenged the most powerful voice in the room — and what happened next?
How many decisions are effectively agreed before the board ever convenes?

06 — Management Empowerment & Oversight

The board-management interface: trust, challenge & information flow

The CEO should be empowered to drive the business independently within the agreed risk appetite and business outcomes. If the board over-steps its bounds, the CEO cannot truly be held accountable. It’s a fine balance, but the management team must be empowered to run the business and make decisions. On the flip side, it is imperative that management is transparent with the board with respect to information. When management controls the information flow, the board's ability to provide genuine oversight is compromised regardless of how well-intentioned everyone is. RAG-washing — presenting risk and performance data in a way that looks better than reality — is rarely deliberate. It's usually cultural. And it's usually invisible until something goes wrong.

Where is the line between oversight and interference — and has the board quietly crossed it?
Is the board seeing reality — or a version of it that management is comfortable sharing?
If management withheld bad news, how quickly would this board know?

07 — Governance Framework & Hygiene

Policies, record-keeping & regulatory filings

This is the least glamorous pillar. It's also the one that causes the most immediate pain in a regulatory examination. Out-of-date director registrations, minutes drafted three weeks after the meeting, a conflicts register no one has looked at since authorisation — these are not trivial. For firms under FCA supervision, hygiene failures are often the first thing a Skilled Person review surfaces, because they're evidence of how seriously a board takes the substance of governance, not just its form.

If a regulator walked in unannounced, what would you hope they didn’t ask for?
Are governance processes taken seriously — or complied with just enough to get by?
What failure in basic governance would be most embarrassing — and why hasn’t it been fixed?

08 — Independent Assurance

Internal audit, external audit, risk function & regulatory engagement

The Three Lines of Defence is one of the most cited frameworks in financial services governance — and one of the most frequently hollowed out. Internal audit reporting to the CFO is not independent. A risk function sitting under the finance director is not a genuine second line. And a board that has never met its external auditor without the CEO in the room has never had an independent view of the firm's financial position. These structural compromises compound quietly over time.

When did the board last hear something from Risk or Audit that genuinely changed its view?
Are assurance functions independent in reality — or only in organisational charts?
What truths about the business are being softened before they reach the board?

09 — Culture & Leadership

Tone from the top — and whether it reaches the bottom

Culture is where the FCA has focused its enforcement energy for the better part of a decade — and where most boards have the least rigorous monitoring. Describing your culture with words like 'innovative' and 'integrity' is not the same as evidencing it. The question is what data the board uses, how it responds when that data signals something uncomfortable, and whether the board's own behaviour is consistent with the culture it claims to be setting.

To what extent is the culture drive by fear or reactive tendencies – controlling, complying or protecting?
What behaviours does this board tolerate that it claims to oppose?
Does the board reinforce the right culture under pressure — or reveal a different one?

10 — Strategy & Crisis Readiness

Horizon scanning, risk appetite alignment & resilience under pressure

The board's engagement with strategy should be generative, not editorial. When the board's primary role in strategy is to review and ratify what management has already decided, the firm loses one of the most valuable things a well-constituted board can provide: genuinely diverse challenge at the point where strategic choices are still open. And crisis readiness isn't a plan on a shelf. It's the muscle memory of a board that has actually rehearsed making hard decisions under pressure.

Is this board shaping strategy — or endorsing decisions already made?
If a serious crisis hit tomorrow, what would become obvious about this board’s weaknesses?
What is the board most worried about — and why is it still a risk?

Protecting the interests of key stakeholders: Customers, Employees, Regulators, Partners, and Shareholders

I’m sure Carol Sergeant has long since forgotten me since the financial crisis of 2008, but I hope these questions would meet her high bar of ‘asking the dumb question’. They should feel more like "mirrors" than checklists — the kind of questions that force a pause rather than invite an easy answer.

So — how did your board do?

If any of these questions produced a moment of discomfort, that's useful information. Not because discomfort means failure - but because governance gaps almost always sneak in quietly - long before they become expensive.

The Blackheath Board Governance Review is designed to go beneath the surface of these questions: through confidential board member interviews, documentary review, collective leadership assessment, and a structured methodology that maps what we find against the firm's regulatory obligations and its stage of governance maturity.