One of the joys of being a researcher is that you get to read widely. Alongside the governance and research methodology material that comes across my screen every day, I see articles about related topics like philosophy, strategic management, start-ups and leadership. 

One particular article about start-ups and venture capital caught my eye today. The WSJ correspondent cited new research from Harvard Business School that three out of every four VC-backed companies fail to return their investor's capital. That's right, three out of four. And that's the good news. The failure rate of non-VC-backed companies is worse.

"Venture capitalists make high-risk investments and expect some of them to fail, and entrepreneurs who raise venture capital often draw salaries". Why is this? To my arguably naive mind, expecting a business fail is just plain dumb. Why aren't VCs more discriminating? Surely, some more effort up front, to assess an opportunity more rigorously and ensure a robust strategy is selected, would make sense? Or is that akin to asking an adrenalin junkie to avoid high-risk pursuits? Perhaps it is, but more so, perhaps it's time for the VC community to adopt a less cavalier attitude with what is often other people's money in the first place. I suspect the failure rate associated with pushing unsustainable ideas would decline. And if that happened, we'd all be better off, I'm sure.

Does the holding of company shares automatically compromise a director's independence? And when is a director no longer independent?

These questions have troubled shareholders, prospective directors, legislators, and researchers for many years. I suggest the answers depend on what one means by the words "independence" and "independent", because there is a world of difference between acting independently (independence of thought and decision) and being independent (no vested interest).

If a director holds no pecuniary interest in the company then it is reasonable to expect them to act independently in their considerations, discussions and decision-making. Things can get a little more complicated when a director holds shares. They are no longer independent (by definition), however they may still act independently. In my experience, there is no hard-and-fast line, beyond which independence is automatically compromised. Some directors with small shareholdings (1–3%) struggle to act independently, whereas others with larger holdings (5–10%) seem to be able to act independently, even though they are not independent.

I would be interested to hear the views of others, particularly behavioural specialists, to debate these questions, and determine whether finding answers actually matters (or not).

Does gender diversity in the boardroom improve company performance? This question has been comprehensively researched and debated for many years, however definitive evidence has remained elusive—until now, perhaps. A comprehensive research report just published by Credit Suisse shows that companies with gender diversity in the boardroom perform better than companies with all-male boards, using data from 2360 companies from 2005–2011.

While the results show some definite trends (the benefits of diversity within management, for example), the researchers stopped short of attributing the increased performance to the presence of women on boards. Clearly, diversity is having an impact, but how and why? As the report states, "there is not one easy answer to why gender diversity matters". Could it be that a wider set of experiences and viewpoints is contributing to a more vigorous debate; or that the presence of women leads to a greater level of engagement by board members? The results from the Credit Suisse report are helpful, but the bottom line is that we simply don't know—yet.

A very interesting discussion is underway in one of the LinkedIn groups at present. It has arisen out of a survey conducted by PwC, which showed many discrepancies between what Boards actually do and what directors think they should be doing or concentrating on. While attitudes are starting to move, actual behaviours are lagging well behind.

Several researchers and practitioners (including me) are exploring why Boards concentrate on monitoring and control, when the respondents said they want to spend more time on strategy. Others are discussing the Board's role in IT oversight.

These are important issues for Boards. I suggest you have a look, and contribute your views!

One of the challenges that many businesses face is keeping up with the moving competitive landscape—and matching strategy to the competitive environment. All too often, something changes and businesses don't see it coming.

As with any potentially destructive natural events like earthquakes and tsunamis, businesses need to monitor the landscape carefully to detect the emerge of competitive threats early—to maximise their response. The helpful article published by HBR this week encourages strategists to think carefully about how tomorrow's industry could be structured. The world-class authors posed five questions to help work through this. I commend the article to you.

Have you experienced the pure delight, the visual symphony, of looking to the horizon after reaching the pinnacle on a seemingly unending trek? When the view changes from the near detail of the next step to the overall context? Yesterday, I had exactly this experience with my research. After spending several weeks wading through a great pile of weighty tomes, academic articles and handwritten notes, feeling somewhat daunted by the seeming lack of progress, a penny dropped and the fog that'd been masking my view lifted.

All new knowledge needs to be built on a worldview (technically, an ontology and an epistemology). In my case, discovering the most suitable starting point for my governance research. I've been struggling with this, because the theory of knowledge doesn't come naturally to me at all. Much of the governance research to this point has employed positivist (financial analyses), post-positivist (structure and composition research) or constructionism (boardroom behaviour) worldviews. Unfortunately, much of the research to date has revealed very little about the impact boards have on performance. Therefore, my work needed to look at the problem quite differently if any progress was to be made. The new lens finally became clear during a meeting with my Supervisor yesterday, when we explored a couple of seemingly left-field ideas that I'd been investigating in recent days. An intense 30-minute discussion around the whiteboard was all it took. The path forward became clear. And in case you're interested, the worldview is pragmatism, supported by a multiple-case study design and grounded theory.

With the launching point now clear (in my mind, at least!), it's time to pause for a coffee and admire the view, before heading onward and upward again to face the next challenge. Thank you to everyone who has encouraged me in recent weeks, I (now) appreciate it.

Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.

During the wide-ranging discussion, several participants suggested that governance should be professionalised, like medicine, accountancy, law and several other professions. I support these calls—strongly. Why? Well, stories like this get under my skin. While the majority of directors fulfil their legal and ethical responsibilities well, sadly there are a few bad eggs that discredit governance in the public's eyes.

The mechanism would be relatively straightforward, involving perhaps:

• entrance tests (competency, references and interviews)
• maintenance of professional standards (on-going education)
  
• periodic re-registration (two- or three-yearly)
• tiering (a general registration, and a higher level for directors of large, widely-held or publicly-listed companies)
• a disciplinary tribunal (with teeth and a propensity to act)

The IOD's optional accreditation scheme provides a useful starting point, but it falls short because participation is optional. In my opinion, governance must be professionalised, with a robust body and process not dissimilar to medicine (Colleges of Practice, Medical Council of New Zealand, Disciplinary Tribunal). Perhaps then the concerns expressed in the article—that directors can dodge bans—will become a thing of the past. Here's hoping.

How well do you understand the competitive environment your business operates in? Most strategic planners and executives know that matching their strategies to their environment is crucial. Further, most claim to have a good understanding of their environment. However, recent research conducted by BCG and published in HBR indicates that the majority of firms misread their environment. Consequently, they run the very real risk of adopting an inappropriate strategic style and/or developing flawed strategies.

Helpfully, there are many good tools available (a quick Google search will get you started) to help planners and executives read their environment more accurately. It is my experience that firms that use these tools, and engage a skilled facilitator to challenge assumptions, tend to create strategies that are more well suited to their environments. And that's got to be good for business in these tough economic times, don't you think?

An outstanding Editorial appeared in our local newspaper, the DominionPost, today. The editorial highlights the significant conflict of interest that exists when local government politicians are appointed to the boards of Council Controlled Organisations (CCOs). The appointment of local councillors—many of whom lack sound governance expertise, and all of whom are conflicted as the editorial argues—must stop. 

Councils and local communities would be far better off if independent directors were appointed to the boards of CCOs (and held accountable through normal shareholder and fiduciary processes). Independent, commercially astute directors would focus entirely on their role of acting in the best interests of, and maximising the performance of, the company. In so doing, the returns to shareholders would more than likely improve over what would otherwise be possible with a highly conflicted Board.

PS: I disagree with one sentence towards the end of the Editorial "...over time, superior systems will produce superior results." No. Governance is a complex and socially dynamic phenomenon. Over time, superior systems should produce superior results. 

As a reasonably pragmatic type, my starting point when writing is function. Every sentence should have a purpose—it is more important to communicate the message fluently and eloquently than to dress the message in what some describe as "flowery language". Unlike many fiction writers, my default setting is to prioritise function over form.

Yet when I read this article, I found myself thinking about my as yet unwritten thesis. Doctoral theses are limited to 100,000 words (about 270–300 pages), with an expectation that a robust argument will probably require 75,000–85,000 words. Gosh that seems like a lot. Why so long? Bulk for bulk's sake is never going to make the grade. Clearly a balance needs to be struck between function and form though, to ensure the expectations of the academic community are satisfied and that the essence of one's thesis is clearly communicated. But where does one draw the line between function and form?