Governance: A lesson from tennis
Tennis is a wonderful game; almost anyone can play. From schoolchildren to elite professional players, the sport is exhilarating; the excitement is often palpable.
One of the reasons tennis is attractive is that it is straightforward. The boundaries between acceptable and unacceptable play are, usually, well marked. The ball is served, and if is returned and bounces within the boundaries, play continues. If not, the score is adjusted and play is restarted with another serve. But, neither the net nor the lines play the game, players do; winning or losing is the result of two players (or four, if doubles) having played against each other within the playing space.
The distinction in tennis between the rules, the playing of the game, and the score at the end has strong parallels in governance.
Boards are charged with playing the game (that is, governing—providing steerage and guidance, in pursuit of an agreed goal) within the boundaries of various statutes, regulations and policies (the rules). The 'result' is company performance, which is usually reported in the annual report and any other reports to legitimate stakeholders. As with the distinction in tennis, neither the statutes or regulations, nor the annual report are the game. The 'game' is governance, and it is played by the board. Statutes and regulations are necessary, without doubt, but they are no more governance than rules are tennis.
Another facet of tennis is the player ranking table, which identifies comparisons between players at a population level. The very best players feature at the top; lesser players, further down. Positioning on the ranking table can be a source of motivation for players (to train harder, to embrace various tactics to improve their performance, for example), But position alone does not improve playing standards, player skill or on-court conduct.
And so it is with boards and governance. The position a company occupies on a ranking table (adherence to corporate governance standards or ESG metrics, for example) provides a comparative indication of how the company measures up against others. But that is all—to read in more is folly. The likelihood of ranking companies by corporate governance scores improving standards [compliance], for example, is about as tenuous as ranking tennis players improves player conduct. Why so? Standards and rules are thresholds; boundaries that distinguish between acceptable and unacceptable. Nothing more, and nothing less.
Tennis players wanting to improve their game focus on fitness, technique, strategy and tactics. Similarly, companies intent on improving performance need to focus their attention and efforts on purpose, strategy and execution.
Thoughts on corporate governance, strategy and the craft of board work; our place in the world; and, other things that catch my attention.