Mon 9 March
Tue 10 March
Wed 11 March
Thu 12 March
Fri 13 March
Mon 16 March
Tue 17 March
Wed 18 March
Thu 19 March
Fri 20 March
speaking in Winchester
meetings in London
major European city (subject to confirmation)
depart for New Zealand
A few weeks ago, I signalled my intention to return to the UK and Europe in March 2015, to fulfil speaking and advisory engagements. The trip is now confirmed: I arrive in London on Sunday 8 March, and will be available for meetings anywhere within the UK and Europe, as follows:
If you would like me address a public audience; work with a board or executive team; attend a symposium; facilitate a workshop; discuss the findings of my doctoral research; or, explore collaborative research opportunities, please contact me. I'm happy to explore any aspect of board practice, corporate governance, strategy, business performance and related topics that might interest you. I look forward to hearing from you, to understand how I can help.
The recent sentencing of former South Canterbury Finance director, Ed Sullivan, has raised an interesting issue for directors. Most professional development providers, the Institute of Directors included, teach that the board is a collective of directors and, therefore, the collective responsibility applies. However, the Sullivan case suggests otherwise. Sullivan was found guilty of making false statements (including failure to disclose a related party transaction) and deception. Another director and the CEO were acquitted. The collective responsibility—that the decisions of the board are the decisions of the whole board—has been trumped in this case. Or has it? Whereas other cases against directors have resulted in guilty verdicts across the board (albeit with variations in sentencing), fault is apportioned to one director only in this case. An approachable summary of the verdicts and basis for each judgement, has been published here.
Mr Sullivan appears to have overstepped the mark on several occasions, by making false statements or by withholding information. Justice Heath determined that Mr Sullivan acted alone, and that decisions to make statements or withhold the information were his decisions. It seems that they were not decisions of the board, and therein lies the important distinction. All directors are culpable for decisions made (or not made) by the board—whether every director was present when the decision was made or not—whereas individual responsibility applies when individuals act outside the board. This is because the board is a collective of directors and, therefore, binding decisions of the board can only be made by the board (ie. during meetings of the board).
A question posed at a faculty seminar held at Massey University recently has set me thinking. My supervisor was the primary presenter, and I was there as one of his protégés that had been asked to make a contribution. My task was explore the importance of access (to make first-hand observations of what actually happens in boardrooms) and, given access, to discuss the implications for both research and knowledge. The seminar was a low-key affair. However, one of the questions gripped me. In asking, the person demonstrated that their understanding of business was quite different from mine. The question was valid and needed to be answered (and it was), despite my judgement that is was rather inconsequential given my worldview.
This brief exchange highlighted one of the main challenges of doctoral research: communication. How does one summarise their ideas and findings into a cohesive story that will be read and accepted by three learned people (examiners!) with a critical mindset? I have a fair idea of what I want to say, but what is the best way to get the message across?
The answer seems to lie in one word: pedantry. And therein lies the challenge, for me anyway. While I know my topic pretty well—having lived and breathed it for nearly three years now—an examiner will arrive at the cover page of the thesis document 'cold'. Researchers need to take readers on a journey, starting with a descriptive title and ending with a solid conclusion. The question taught me that the journey is probably as important as the destination. The introduction should simply state the problem and position the research. The historical view of the research literature, the approach taken by me and the findings all need to be revealed in the pages that follow. The summary of findings should be reserved for the final chapter. Positioning the research is also important. The question reminded me that every term that is subject to multiple interpretations needs to be defined, to avoid misinterpretation. I've had to go back to the literature many times in recent weeks, to check things and to make adjustments. Finally, the spelling, grammar and referencing needs to be 'perfect'.
While the going has been tough of late, the good news is that I am stepping closer to the goal with every passing day, even though my arrival is now more likely to be in January. But I'm relaxed about that.
Reports are starting to emerge that the euphoria that was Google Glass might be over, before it started. I'm not that surprised, actually. Try as I might, I simply could not get past the possibility that Glass was just a gimmick, a "solution" in search of a problem.
Glass could be a metaphor for a lot of what goes on in Silicon Valley. The Valley is full of well-intentioned and well-funded engineers who spend their day drinking coffee, standing around white boards, generating ideas (lots of ideas) and writing code—because that it what they are paid to do. While many good ideas have emerged through this process (just imagine what economic productivity might be like if the personal computer and its various descendants had not been created), a reality check is probably needed.
We have become dependent on smart devices and uber-connectedness. Everything has the appearance of being urgent, even if it is not. But what of conversations with people, of long walks along the beach or some quiet walking trail, or of time out to relax and reflect on life? Silicon Valley has brought us to the brink of losing sight of these things that probably matter more than whether we've checked our Facebook account in the last thirty second, or viewed the latest (trivial) Snapchat picture. When I was sitting on the train in London last week, reading a book, I noticed that about 80% of the passengers around me were using their smartphones. One or two others were sleeping. One older man was also reading a book. When he looked up, he smiled at me. No one else did that.
I'm no Luddite, but I do wonder where this Silicon Valley-led journey might be taking us.
Te Papa, the Museum of New Zealand, is front-page news today. This time, the museum has "lifted the lid on Michael Houlihan's disastrous tenure as its chief executive"—a strong opening statement by the newspaper. Houlihan has presided over several years of poor business and financial performance since his arrival in 2010. However, two big loss-making exhibitions and the Chief Executive not coming "anywhere near meeting any of the targets we gave" led the board to its decision to agree to Houlihan's departure.
The newspaper suggests that the problem lay with the Chief Executive, by implying that he was ineffective. Indeed he may have been, but is that where the enquiry should stop? The Chief Executive is accountable to the board, so the board should not be beyond scrutiny. The board's job is to govern (to steer and to pilot). This is (or should be) an active role. Why did it take two years to act? Was it asleep at the wheel? Some further enquiry is likely to be beneficial—not as a witch hunt, but to reveal insights and provide guidance for other boards.
Thankfully, the Te Papa board has now acted. A new Chief Executive has been appointed, and the museum is looking to the future. The Minister of Culture and Heritage seems to have had her confidence restored as well, now "[new] Chief Executive Rick Ellis and Chair Evan Williams are now steering the ship in the right direction".
Research is a funny thing. On one hand, experience can be greatly helpful: knowing what one is looking for or expect to see is a boon. On the other hand, it can be a hinderance: a little knowledge can lead to biases and preconceptions, and the possibility of missing vital clues. This is one of the huge challenges of board research: the experience of the researcher. Some forty years have now gone by since researchers started investigating boards in earnest. That the answer to the question of how boards influence business performance remains elusive is an indictment on the research community, in my opinion.
If medical research is conducted by medics; cultural research is conducted by anthropologists; and, engineering research is conducted by engineers, why is it that board research is often conducted by full-time academics with little if any experience as directors? Consider these questions: how might an inexperienced observer hope to know what the normative practices of board meetings might be? Or that a subtle interaction between two directors might actually be material to a pending decision? That many board researchers have no experience as directors strikes me as an alarming anomaly. It's little wonder that much of the research has been restricted to counting things and to desktop analysis.
I would have thought that, if we are to get to the bottom of the problem of explaining how boards can influence business performance, we need to do two things. First, we need to get inside boardrooms, observe what directors actually do and identify what might be material to performance. Second, we need to do so through the lens of experience. Or do you think I am being too harsh?
Sorry folks, but I have just seen red. Rich Fields, a correspondent at Tapestry Networks, has just proclaimed that board composition will be the big corporate governance story in 2015. I'm surprised, really surprised.
For well over a decade now, the academic and practitioner communities have been exploring a wide range of board structure and composition options, in search of a causal link with business performance. Many attributes of boards and directors have been investigated including gender; CEO duality; independent director; board size; and, diversity, amongst others. Positive, neutral and negative associations have been reported in the research. Earlier this week, I wrote a thought piece on independent directors, and offered the following conclusion:
A variety of conclusions are apparent in the research. Cause has not been established. It's a bit like saying that female directors cause companies to perform better. Increasingly, people are realising that board performance is more likely to be contingent on what directors do in certain situations than on who they are or any specific board structure or composition. Like gender, the independence attribute is likely to be a proxy for something else. We need to discover what that might be, so it can be used to qualify the suitability of director candidates and inform board performance assessments.
Respectfully, I suggest Mr Fields needs to think a little harder about what is known already and what is yet to be discovered. Aspects of composition may be topical, but to suggest that board composition will be the hot topic is rather myopic. We need to move on, and turn over some other rocks, elsewhere.
I see the Italians have updated their corporate governance code. The new code, most of which comes into effect on 1 January 2015, requires, amongst other things, publicly listed companies to have at least two independent directors. This sounds like a good move; one which is consistent with codes elsewhere, including New Zealand and Australia for example. The basis for requiring at least two independent directors (also called outside directors in some jurisdictions) on the boards of publicly-listed companies sounds robust: independence is said to be conducive to improved decision-making and to transparency, and two directors have more chance of exerting influence than one lone voice.
But what of the holy grail question? Do independent directors enhance business performance?
Many practitioners think that the approach to discussions, debate and decision-making by independent directors is more deliberate and objective (than executive/insider directors), primarily because independent directors are thought to be less emotionally involved in the day-to-day business and that they have less to gain or lose. Over the last three years, I have read upwards of 50 research papers on independent, non-executive and outsider directors. While the research is not unequivocal, the general tenor seems to bear practitioner perceptions out.
However, the impact of independent directors on business performance far less clear cut. A variety of conclusions are apparent in the research. Cause has not been established. It's a bit like saying that female directors cause companies to perform better. Increasingly, people are realising that board performance is more likely to be contingent on what directors do in certain situations than on who they are or any specific board structure or composition. Like gender, the independence attribute is likely to be a proxy for something else. We need to discover what that might be, so it can be used to qualify the suitability of director candidates and inform board performance assessments. Only then will the writers of codes be able to move beyond the reasonably blunt instrument currently in use: proxies.
I am sitting the United Lounge, in the new Queen's Terminal at Heathrow, awaiting the departure of my flight home after a very productive trip to England and Europe. In the last ten days, I have been fortunate enough to speak at the European Conference on Management, Leadership and Governance in Zagreb; refine aspects of the doctoral thesis; meet with executives from the US and UK to discuss board practice matters; discuss research opportunities with UK-based researchers; and, catch up with some research colleagues and make some new acquaintances. To top it off, I attended a Holy Communion Service at St. Paul's in London and was taken on a most wonderful tour of Winchester (the ancient capital of England), including the Cathedral where the da Vinci Code movie was filmed. While trips away can be physically and mentally demanding, and I am looking forward to returning home, my mind is thinking ahead to the next trip, such is the wealth of opportunity that presented itself over the last ten days. Here's a small selection:
As a result of these opportunities (and a couple of others that I'm not at liberty to mention), I plan to return to the UK and Europe in the early Spring (probably in mid-March), hopefully with my freshly minted doctorate in hand. I expect to be based in London, and may stop over on the East Coast of the USA en route.
If you would like to explore aspects of strategy in the boardroom, board practice or business performance; or to arrange a meeting or a presentation, please contact me directly. I can travel to any major centre in the UK, or in Western or Central Europe, if required. I look forward to hearing from you.
The OECD is partway through a process of updating its Principles of Corporate Governance document. The current document dates from 2004. In the decade since, much about the way boards could, should or actually do work seems to have changed (although whether business performance has improved as a result of these changes remains an open question!), so an update makes good sense. A public consultation process opened on 14 November. It remains open until 4 January 2015.