Magazine Article | June 1, 2023

In Discussing A Strategic Initiative Presented To The Board By Management, Such As A Bolt-On Acquisition, What Are The Three Core Questions That Boards Should Always Ask?

Source: Life Science Leader

STRONG BOARD CULTURES ARE IMPORTANT TO THE SUCCESS OF CORPORATIONS as they can then enable authentic and superior governance. Respect and candor drive these strong board cultures, and trust between the board and management is earned when there is respect and candor. While members of strong boards always have the customary bias toward supporting management, it is part of their “duty of candor” to ask incisive questions, especially when a strategic initiative, such as a bolt-on acquisition is being presented by management.

The three core questions in this instance could be:

  • What gives us the “right to win,” and will we be a better owner of this asset than someone else?
  • How are we going to be ready for Day One, and what will success look like Year One and Year Five?
  • How good are the financials and what are the risk mitigants if unexpected adverse developments occur?

Respect and candor enable a trust-based board culture — all for the good of the company. Asking tough questions of management leads to better decision-making.

FRED HASSAN is managing director at Warburg Pincus.