Since time immemorial, man has sought to explore: natural curiosity has led to many discoveries, of previously unknown lands, flora and fauna, and more besides. Innovations and inventions too; discoveries enabling further exploration, and on it goes. Through the arc of history, exploration and discovery has been based upon empirical techniques—going and having a look.

About six decades ago, Jane Goodall put this approach to work as part of her research to learn more about chimpanzees. Her assessment was, straightforwardly, that if reliable understandings of how chimpanzees socialise were to be achieved, they needed to be watched, directly, over an extended period, as difficult as that might be. The extended period is necessary because behaviours change when a new actor arrives. Thus, Goodall’s study could not begin in earnest until the chimps became more familiar with her and reverted to behavioural patterns thought natural. When behaviours reverted, as Goodall thought they might, several new discoveries not previously known were made.

The approach Goodall used, and her discoveries, demonstrated the high value of longitudinal ethnographic techniques when studying social groups and their behaviours. And yet, while this has been understood for decades, centuries even, its application to my field—boards—is rare. Instead, since the dawn of board research, the dominant paradigm has been to collect data about directors, the composition of the board and other data, from outside the boardroom, typically from public databases, interviews and surveys. Such approaches have been deemed acceptable because researchers have found it very difficult to enter the boardroom. Given the only place the board and its work actually exists is in the boardroom, and that the board is a social group, surely the gold standard must be to conduct long-term studies of boards in session (through direct and non-participatory observation), as Goodall studied chimpanzees?

This issue, of using appropriate techniques that explore the subject of interest, not a proxy, was made plain by an ex-military colleague recently; his pertinent remark was, simply, “The map is not the terrain.” What seems to be the case (on the map) may not be the case (in reality). The underlying message was confronting: if you want to really understand, go there, gain first-hand knowledge. And so it is with board research. If we really want to understand how boards work, and how boards actually make decisions and influence performance, not how directors say they do when they are interviewed, watch them over an extended period. Then, possibly, you might be able discern what happens; how directors act and interact; and, even, spot associations between a strategic decision and some subsequent change in organisational performance. The findings will be contingent, of course, because the group is social, the situation complex, and external influences are many and varied.

To date, fewer than a dozen longitudinal observation studies, of boards going about their work, have been published. And, somewhat awkwardly, the reported findings present a different perspective from that commonly asserted by others informed by research conducted away from the boardroom: The capability of directors (what they bring), the activity of the board (what it does), and behaviour (how directors act and interact), appears to be far more important than the structure or composition of the board.

Now, as I wait to board a flight, for yet another international trip to work with boards, my colleague’s comment is ringing in my ear. And with it, a question, “What guidance will you rely on, given the importance of governing with impact?”

In recent times, diversity, equity and inclusion (often, DEI) has become topical in many spheres of business, social, organisational and political life, and boardrooms are no exception. The moot is that increased in-group diversity directly enhances organisational (project, team) performance. While this remains unproven, expectations are running high, and there are no signs they are abating.

When working across cultures, seek first to understand. Breathe. Invest time and effort to learn how others think; what drives them; how they feel; how their mind works; how decisions are made; and whatever else seems relevant. And, what is more:

The group leader (board chair) has an incredibly important role in this, to draw everyone into the conversation; acknowledge difference, but harness it for the common good.

Finally, a note: The techniques listed here are simply suggestions. But, in my experience, they can be incredibly powerful catalysts upon which relationships can develop and trust can be built. Ultimately, if boards are to have any hope of governing with impact, a sound understanding of 'who' is in the room, and 'how' they think, act and contribute is necessary. Invest time and effort, it'll pay off.​

Several times in the past year, I have been asked for advice, even to intervene, in situations where relationships between board members have become strained, or shareholders have fallen out—with each other or with board members—over differing expectations around returns and/or succession. Each situation has been both complex and demanding, for they involve people and human emotion.

The following vignettes are illustrative of the types of things that can go wrong and the ensuing behaviours of various actors:

Of the directors you know, how many possess the wisdom and maturity to act diligently, in the best interests of the company?

Boards, and an oft-mentioned but mysterious concept—governance—are topical. Daily, it seems, these terms feature in our newspapers and on social media, usually because something has gone wrong. And when it does, ​the chattering class is not slow to react. Typically, the targets of their comments are the board and management of the organisation.  That seemingly strong organisations suffer significant missteps—or even, fail outright—on a fairly regular basis is worrisome; the societal and economic consequences are not insignificant. What can be done?

Recently, the inimitable Mark Banicevich invited me to discuss boardroom success and failure, and to offer guidance that boards wanting to lift their game may wish to consider. 

The end of 2023 is nigh; consequently, minds have turned to end-of-year celebrations, various secular and religious festivals, and, inevitably, reflections.

As I sit back, in these final hours of the 'business' year, I have found myself pondering 'reach'. This, a response to a question from a friend who, knowing of my recent trip to Kenya, wanted to know how many countries I had visited in 2023. When I checked back, this is what I discovered:

Superficially, this sounds like a busy year. And it has been. But, I hasten to add these data are neither targets nor badges of honour. They are, simply, footprints: evidence of my travels as I have sought to help boards govern with impact over the past year.

I have just arrived back in New Zealand, from ten days in the UK and Europe. My meetings with directors, advisors, academics, students and directors’ institutions had two primary objectives: to listen and to share. The listening aspect was to gain firsthand knowledge of issues and opportunities; the sharing aspect to provide updates on the craft of board work and my experiences as a practicing director.

 Learnings (a few immediate observations, in no particular order):

Amongst it all, there were some gems:

Several followup visits are now being planned, to advise, assess, educate and speak on topical board and organisational performance matters. If you want to discuss a matter of interest, or check my availability to assist, contact me for a confidential, obligation-free discussion.

And with little more than a blink, January 2023 is, nearly, done. January is, for me, a time to relax, reflect on the year past, spend time with family and friends, read and get ready for what lies ahead. 

After a good break, I not only feel ready for what lies ahead, but excited at the opportunity to help boards and directors, academics and regulators grapple with some complex issues. The first three trips for the year are scheduled, as below—and planning is already underway for several more in the months to come.

While events and engagements are being loaded into the diary daily, some gaps remain, mainly in Singapore and England. So, if you want to take advantage of me being in your neighbourhood, best to get in touch soon! If you want to talk or meet, but the timing doesn't suit, let me know anyway—there will be opportunities later in the year.

Today marks the beginning of a lull following a busy programme of international and domestic commitments since early February. Over a 110-day period, I have spent time in Australia (four times), England (twice), the US (twice), Germany (twice), Ireland, Sweden and Lithuania—and at home in New Zealand; interacting with over 520 directors, chairs and chief executives from 19 countries. Formal and informal discussions at conferences, seminars, masterclass sessions, education workshops, dinners, advisory engagements and board meetings were instructive to understanding what's currently top-of-mind for boards around the world. The following notes are a brief summation of my observations. I hope you find them useful.

Diversity and inclusion: These topics continue to dominate governance discussions in many countries. But, and noticeably, the discourse has matured somewhat over the last six months. The frequency with which the rather blunt (and often politically-motivated) instruments of gender and quota is mentioned is starting to subside, as directors and nomination committees start to realise the importance of diverse perspectives and options to inform strategic thinking and strategising. Long may this continue, as board effectiveness is dependent on what boards do, not what they look like.

Big data and AI: What a hot topic! Globally, boards are being encouraged by, inter alia, futurists, academics and consultants to get on board (if you'll excuse the pun) with the promise that developments in this area will change the face of decision-making and improve corporate governance. Some assert that these developments will obviate the need for board of directors in just a few years. The directors I spoke with agree that these tools can help managers make sense of complex data to produce information, even knowledge. But these same directors have significant reservations when it comes to strategic decision-making. Automated systems are poor substitutes for humans when it comes to making sense of (even recognising) contextual nuances, non-verbal cues and other subtleties. Unless and until this changes, the likelihood that boards will continue to be comprised of real people engaged in meaningful discussion remains high.

Corporate governance codes: The number of corporate governance codes introduced in markets has been steadily rising over the last decade. Most western nations, and a growing number of Asian and developing nations, have implemented codes to supplement statutory arrangements. Many directors and institutions around the world continue to look to proclamations that the UK is the vanguard when it comes to corporate governance thinking and related guidance: the recently-updated UK corporate governance and stewardship codes are held up as evidence of good practice. While the quality of board work in the UK has improved over the last decade, a strong compliance focus continues the pervade director thinking—across the business community in the UK and beyond. The reason is stark: codes are little more than rulebooks. Further, rules don't drive performance, they define boundaries. The more time boards spend either complying with the rules or finding ways to get around them, the less time is left for what actually matters, company performance. In many discussions over the past few months, I've pointed people to the ground-breaking work of contributors such as Bob Tricker, Sir Adrian Cadbury and Bob Garratt. These doyens provided much-needed impetus to help boards understand their responsibility for company performance. The emergent opportunity for regulators and directors' institutions is to consider alternative responses to ineptitude and malfeasance: instead of creating more rules all the time, why not hold boards to account to the existing statutes, most of which seem to be eminently suitable?

Best practice: Many individual directors (and boards collectively) are starting to move beyond 'best practice' as an aspirational goal. Further, directors and boards are demanding to hear educators and thinkers who are also practicing directors, not trainers delivering off-the-shelf courses. Context is everything. The evidence? When a director asks to explore the difference between theory and practice you know something in his prior experience has missed the mark. Practising directors know that the board is a complex and socially-dynamic entity, and that the operational environment is far from static. Directors' institutes, consulting firms and trainers need to stake stock and move beyond definitive 'best practice' claims, lest they be left behind and become monuments to irrelevance. Enough said.

Governance remains a fashionable topic: ​If I had a dollar every time I've heard 'governance' promoted as a career in recent months, or the term used in discussions (including, sadly, often inappropriately), I would be really well off. But the act of invoking a term during a discussion is no panacea to whatever situation is being discussed. More capable directors are needed to contribute to the effective governance of enterprises, of that I am sure. But the established pattern of selecting directors from a pool of seemingly successful executives—as if a reward—is folly. The findings from a growing number of failure studies from around the world attest to this. The role of a director is quite different from that of a manager or executive. Managers and executives have hierarchical authority and decisions are made by individuals. In contrast, directors lead by influence and decisions are always collective. The challenge for those aspiring to receive a board appointment is to set their managerial mindset aside, to enable a more strategic mindset and commitment to the tenet of collective responsibility to emerge. 

Standing back from these interactions, the board landscape seems troubled. But I remain hopeful. Progress is being made (albeit more slowly than many would wish) and a pattern is slowly emerging. Increasing numbers of directors are acknowledging that the board's primary role is to ensure performance goals are achieved, and that the appropriate motivation for effective boardroom contributions is service, not self. 

Ten days ago, I was in Vienna to attend the Global Peter Drucker Forum, as an observer and participant. However, at the last minute—actually, three days before the Forum—the organisers asked me to 'jump in' to cover for a panelist who was a withdrawal. The session, which was recorded, was entitled "Managing like you have skin in the game". I was asked to provide a boardroom perspective. My comments start at 41m 35s:

The limited liability company is a great construct; an efficient vehicle for commerce, through which to pursue an overall aim (purpose) and to distribute wealth (however defined) over an extended period. What's more, mixed levels of ownership are possible; greater economies of scale are attainable (beyond what a sole trader or entrepreneur could typically achieve); and, importantly for absentee shareholders, liability is limited to the extent of the capital invested. 

Though they offer many benefits, the limited liability company is not without flaws—it is a social construction after all, and a complex dynamic one at that. The motivations, priorities and interests of various interested parties (shareholders, directors, managers and staff, amongst others) are often different. Contexts change, and egos can get in the way as well. Left unbridled, differences can fester, morale can suffer and, in more extreme cases, the company can be torn apart. Wynyard Group and Carillion are two recent example but there are many others. Family firms are not immune to such challenges. In fact, when the wildcard of family dynamics is added to the mix, family firms are actually more, not less, susceptible. Though not always visible, the spectre of undue influence often lurks as a contributing factor, as the following discussion reveals:

Failure to differentiate the roles of 'shareholder' and 'director': Let's start with some definitions. A shareholder is a person or entity that owns shares in a company. Ownership of shares affords certain rights, such as, selecting directors, receiving dividends and participating in major decisions. But those rights do not extend to running the business. That is the responsibility of managers, a delegation via the directors. In family firms, the roles of shareholder, director and manager can become blurred, especially when an influential family member holds multiple roles.​

The most common expression of undue influence that I've seen over the years relates to decision-making at the board table: a director with a significant shareholding 'expects' to influence significant decisions in their favour because they own a large parcel of shares. The important distinction that is lost (sometimes it is 'conveniently' neglected) in such situations is that the board meeting is not a proxy for a shareholder meeting. Shareholders and directors vote differently. Shareholder voting is conducted on a 'one vote per share' basis, whereas each director has a single vote at the board table. Regardless of whether directors hold shares or not, every director has an equal say.

If situations like this arise, they need to be nipped in the bud. If they are not, board meetings become a farce; the other directors puppets. This is far from acceptable, especially when the duty of acting in the best interests of the company (not any particular shareholder) is factored in. In most cases that I have observed, attempts to exert such [undue] influence tends to stem from ignorance and a desire to do what they think is fair, not malice. Usually, a quiet discussion with the director concerned is often all that is needed to resolve the matter. Another family member or an outsider (an independent director if there is one, or some other trusted advisor) are useful candidates for this task.

Treating the company as little more than a personal bank account:​ If I had a dollar for each time I've seen this in family firms... Recently, while observing a board meeting as part of an advisory engagement, a director asked, "Why are we always so short of cash when we are supposedly highly profitable?". The discussion that followed was both enlightening and disturbing—and, sadly, it was not the first time that I'd heard it play out. One director with banking access had been buying personal items with company funds and, from time to time, had been taking 'petty cash' for personal use. He saw nothing wrong with this because "it's my firm anyway".

If a director or shareholder uses company funds to acquire personal items, or uses the company bank account as if it were their own, they are acting in their own interests (whatever those may be). Their actions may put the viability of the company at risk as well. Neither of these motivations is permissible in law. Any shareholder wanting money from the company needs to ask the company, not just take it (that's theft!). Valid payment options include shareholder salaries (payment for effort/services rendered), dividends (a share of the profits), donations (but these may be taxable) and director's fees. ​The company may also agree to lend money to the shareholder. Regardless of the motivation or the payment option, a written policy which outlines the rules and conditions pertaining to payments to shareholders can help mitigate misunderstandings.

Employment of family members and related matters: ​Another expression of undue influence is the situation in which a family member 'pulls rank' to secure employment for themselves or another family member. While any family member may nominate anyone else (including other family members), to foist a particular person onto a manager is completely unreasonable. If managers are to be held accountable for performance, they  need to be free to make reasonable employment decisions themselves, in accordance with employment policy. In family firms, it is a good idea to add a section entitled 'Employment of family members' in the policy, to set out the rules the be applied whenever a family member is being considered for a role. 

While none of these examples of undue influence is unique to family firms, they are usually more visible (and often more destructive) in family firms. Once discovered, they need to be resolved. If not, family relationships can become strained, even to the point of breaking down. Actions that families might consider taking to prevent or at least mitigate the types of problems summarised here include:

Boards wanting to explore matters mentioned here should get in touch directly to arrange a private briefing.