In business generally, and governance particularly, the task of exerting control is often perceived as being one of exercising limits; saying 'no'; and, imposing constraints. The atmosphere in boardrooms can become quite adversarial, as managers seek approval of plans and proposals and boards try to keep managers 'on track'. This commonly-held perception of boardroom culture is reinforced by the very word used to describe that most oft mentioned board task: control. According to the dictionary, the verb usages of 'control' include:
The academic descriptions of board–management interaction, the most common of which is agency theory, exacerbate the perception. Why do many boards feel they need to behave like this? How does restraint and limitation advance the purposes of the company and its shareholders, especially given the board's responsibility to maximise business performance in accordance with shareholder wishes?
Rather than dig into these questions, the answers to which may simply serve to perpetrate the extant modus operandi, it might be more fruitful to consider another perspective. What if control is re-conceived, as a positive mechanism, whereby the board acts as a guide or shepherd, ensuring the safety of the company, guiding and steering management to stay focused on agreed purpose and strategy? Might this deliver a better outcome? If the pursuit of business performance and value creation is the primary role of the board, the answer probably needs to be 'yes'.
Emerging research (unpublished, contact me for details) suggests that constructive control is an important 'tool' for boards, if they are to exert influence over business performance. However, this would require the board and management to work together; in an environment of mutual respect, trust and empathy. Might that be a realistic aim?
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.