Why Boards Fall Short: Fiduciary Duty & Long-Term Value
Through their research, “Why Boards fall short,” Barton and Wiseman clearly identify that boards are not working. Their contention is that the constituents forming the board do not understand what being a board member entails. As a result, boards are failing to support management teams in creating long-term value and are instead focusing on short-term gains. This matters because boards sit at the intersection of oversight and strategy: when they drift toward myopic decision-making, they can unintentionally steer the entire organization toward actions that look good now but weaken the company later.
This write-up focuses on the most important idea identified by the authors, fiduciary duty of the boards, followed by practical applications of these ideas in the marketplace, and finally a set of gaps that should be considered when applying the recommendations. The objective is to turn a conceptual governance critique into a repeatable operating rhythm that board members (new and incumbent) can actually follow. The intent is not to moralize “short-term versus long-term,” but to define what the board should do, how it should behave, and how it should make decisions that compound into durable value.
The Core Fix: Grasping Fiduciary Duty
To reverse the myopic foresight of boards and the “boards failing” trend, Barton and Wiseman suggest that each board member first and foremost needs to grasp the idea of their “fiduciary duty.” Being fiduciaries of the company, board members have to be loyal and prudent—meaning their focus needs to be the company’s long-term success. Loyalty drives the company’s interests ahead of the personal interests of board members, while prudence ensures diligence in business decisions.
That shift is foundational because it changes the board’s default “operating system.” Without a shared understanding of fiduciary duty, board participation can drift into status, networking, or episodic commentary—none of which reliably helps management build long-term value. With fiduciary duty made explicit, the board becomes less about opinions and more about stewardship: protecting the long-term health of the company through disciplined oversight and guidance.
With this shift in mindset, boards are positioned to support management teams in setting direction for long-term value creation rather than getting pressured by the market to deliver short-term financial gains. Defining the fiduciary concept is critical precisely because it reframes board success as long-horizon value creation, not quarter-to-quarter optics. The authors also identify this as a working model in emerging markets, enabling reinvestment for long-term growth.
The practical implication is simple: boards should stop treating “long-term” as a slogan and start treating it as a set of behaviors that can be operationalized. Long-term thinking is not vague patience; it is a sequence of consistent choices—especially under pressure—that preserve optionality, fund reinvestment, and reinforce strategic coherence. When fiduciary duty is the anchor, the board’s job becomes to help management resist destructive short-termism while still maintaining accountability and performance discipline.
Application: Starting Every Meeting with Purpose
From a practical application standpoint, every board meeting should start by first reiterating the purpose of the board—its fiduciary duty. This helps incumbents and new board members internalize their roles and responsibilities to the company. It also creates a consistent forcing function: before any agenda item is debated, the group is reminded what it is optimizing for (the company’s long-term success) and what it must avoid (personal agendas and short-term temptations that undermine durable value).
In practice, that “fiduciary reset” can be a short, repeatable opening: a statement of duty, a reminder of long-term goals, and a quick acknowledgement of any conflicts to be managed. The goal is not ceremony; the goal is governance clarity that prevents drift. Over time, this habit trains boards to ask better questions—especially questions that link decisions to long-term value creation rather than short-term narratives.
Selection: Experience and Perspective
Second, prior to electing board members, it is pertinent to ensure they have relevant experience in the market and target segment and/or adjacent organic markets/segments. New perspectives and relevant knowledge can provide insights that might not otherwise be available or considered by the sitting board (think representative inclusiveness). The key point here is not simply “hire impressive people,” but “choose people who reduce blind spots” and “choose people who can contribute to strategic decisions with contextual intelligence.”
A board can only guide what it can understand. If directors lack experience in the market context, they may misread competitive dynamics, underestimate operational constraints, or overreact to short-term noise. Relevant experience and inclusive representation improve the board’s ability to interpret reality accurately—and accuracy is a prerequisite for prudence.
Capital Allocation: Understanding the Financials
Additionally, Christensen and Bever in their article “The capitalist’s dilemma” state that companies are sitting on unused capital. As such, boards must understand the financials of the company and make bold recommendations to management that allow for long-term growth and value creation in the marketplace. This point is an important complement to fiduciary duty: a board cannot credibly advocate for long-term value if it is not willing to confront capital allocation and reinvestment choices that determine whether long-term growth is even possible.
Bold recommendations do not mean reckless bets. They mean decisions that are sized to matter, informed by financial reality, and aligned with strategy rather than incremental comfort. When boards understand the company’s financials deeply, they can help management distinguish between “safe” moves that quietly erode competitiveness and “disciplined” investments that build capabilities over time.
Four Levers for Change (and Where They Gap)
Barton and Wiseman suggest four areas that can drive changes in boards: selection of the right people, strategy, engagement of long-term investors, and higher payouts. These are novel suggestions, though it is important to consider that applicability for all size companies might not be valid. The value of the four-part recommendation is that it treats board effectiveness as a system: people, direction, capital alignment, and incentives.
However, governance systems behave differently depending on the company’s maturity, ownership structure, and access to talent. What works for a large, mature organization may be structurally unrealistic for a startup or a smaller firm. So the right question becomes: how do these four levers adapt across the company lifecycle without diluting the core principle of fiduciary duty?
Talent Constraints: For example, a company just starting out might not be able to attract the same talent pool for its board as mature organizations. That does not eliminate the need for “the right people,” but it changes how “right” is defined—often toward operators and domain experts who can contribute immediately, rather than high-profile names that primarily signal prestige. In early stages, capability and availability frequently matter more than brand-name credentials.
Strategy Pivots: Pivoting in strategy is much easier in the embryonic stages of a company, yet shareholders might still force the hand of the board and management to deliver on financial results. This tension is real: early companies need adaptability, but they also face external pressure, limited runway, and high uncertainty. In that environment, fiduciary duty must be practiced through clarity—ensuring pivots are tied to learning and strategic logic, rather than reacting to short-term pressure that undermines the company’s long-term viability.
Investor Misalignment: In the same breadth, if venture capitalists are primary investors in the company, their targets are short-term financial gains so they can recoup their cost “x” folds and move to the next venture. This creates a structural mismatch that boards must manage explicitly: aligning governance with long-term company health while operating within investor expectations and time horizons. When time horizons differ, the board’s prudence is tested—because the temptation is to optimize for near-term valuation events rather than durable value creation.
Payout Realities: Last but not least, higher payouts for startups and smaller companies might not be an option until they turn profitable. Even then, they may need to reinvest profits to sustain growth. That means the “higher payouts” lever is often unavailable or even counterproductive early on, and boards must instead focus on the levers they can realistically pull: selecting practical contributors, strengthening strategy discipline, and building credibility with the right kind of long-term aligned capital.
Conclusion
A practical way to apply these ideas without violating stage constraints is to convert fiduciary duty into a repeatable set of board behaviors. Examples include: routinely linking major decisions to long-term value creation, requiring diligence on downside scenarios (prudence), and openly managing conflicts (loyalty). This also makes onboarding easier: new board members can be trained into the system rather than expected to “figure it out” informally.
Finally, this lens also exposes the core gap in many governance conversations: boards often discuss outcomes (stock price, quarterly results, exit timing) without consistently discussing the operating mechanisms that generate long-term value (capability building, reinvestment discipline, and strategy execution). Fiduciary duty is the bridge between those two layers because it forces the board to prioritize the company’s long-term success and decision diligence over short-term optics. When boards act as true fiduciaries, loyal and prudent, they become a stabilizing force for management, not an amplifier of short-term pressure.
References:
Barton, D., & Wiseman, M. (2015). Where boards fall short. Harvard Business Review, 93(1/2), 98–104.
Christensen, C. M., & Bever, D. V. (2014). The capitalist's dilemma. Harvard Business Review, 92(6), 60–68.
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