Avoiding Surprises In The Board Room

By DirectorCorps

March 9, 2020 Healthcare Corporate Governance

Contrary to the old adage, what you don’t know can truly hurt. If your company has employees hiding facts from the board, then real problems can persist.

That’s what Walgreens Boots Alliance may be experiencing after a review of its pharmaceutical tactics revealed concerning practices.

In late January, The New York Times published a story about how the management and staffing practices at chain pharmacies have led to a rash of complaints from pharmacists across the country. The pharmacists cited concerns that the job requirements and hours put patients at risk of receiving the wrong medicines, leading to health complications or worse. Since the piece published, at least one state — Oklahoma — has released a complaint against a CVS Health Corp. about a reported medication error.

The pharmacy chains argued that errors were rare.

Late last year, Walgreens utilizing a consulting firm, led an internal review, according to a separate report by the Times. According to the Times, this internal review uncovered issues that the organization’s director of pharmacy and retail operations asked the consultants to omit in a final report to management.

The omissions include a discussion of how employees would not follow proper procedures in an attempt to meet corporate metrics. They also removed a slide discussing “errors resulting from stress.”

A Walgreens spokesman told the Times that the items were removed because the review’s focus was on the company’s computer systems. He added that Walgreens took “any concerns seriously to ensure the appropriate parties are aware and working to address them.”

It’s unclear at this point how much Walgreens’ board knew of the pharmacy’s issues. But not receiving the information they require to effectively lead should be one of a board’s greatest concerns.

Some boards are taking steps to try to learn what they don’t know. For instances, board members at Netflix sit in on executive and senior executive meetings every quarter. At board meetings, every member receives a 20-to-40-page memo “that highlights business performance, industry trends, competitive developments, and other strategic and organizational issues,” according to an analysis from the Corporate Governance Research Initiative at Stanford’s Graduate School of Business. The board also has complete access to the company’s shared servers.

The result? The board credits the structure in easing director concerns during times when management has faced challenges. It’s also seen as a proactive tactic, preventing the company from keeping some secrets from the board.

While no system can be fail-safe, measures like these are worth considering to avert surprises in the board room.