 Guest blog: Dr. Cletus Kadzirange (GBS Oxford University, United Kingdom) By now, almost everyone has heard that artificial intelligence is revolutionising the commercial world. In addition to creating customer insights and automating procedures, it offers advice on hiring, pricing, and medical diagnosis. Around board tables, the atmosphere is frequently positive—AI is quick, intelligent, and full of potential. While boards are positive about possibilities, are they prepared to govern AI? This is a governance question, not a technological one. The most progressive boards are starting to realise that monitoring AI requires far more than a digital strategy, because AI has the potential to affect reputation, social license, compliance, ethics, brand, and more besides. Questions boards should consider centre on accountability, transparency and long-term risk management:
AI is no longer a back-office technology. Already, it has emerged as an important enabler, influencing operational, strategic and reputational performance. Consequently, boards that ignore AI as someone else's problem may be blindsided. Boards need to ask questions to ensure AI literacy is adequate, risks have been well-assessed and that governance practices are fit-for-purpose. This is not a matter of dreading the unknown: it is about providing effective steerage and guidance. Has your board discussed AI governance in a genuine, systematic way yet? It not, it might be time to get started. About Dr. Cletus Kadzirange:
Cletus is a pracademic in corporate governance and company law who consults, trains and writes on various aspects of corporate law, directors' duties and governance. His specific expertise lies in implementing forward-thinking governance frameworks and sustainable practices that foster long-term value and ethical stewardship.
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 A few weeks ago, while facilitating a board masterclass at Naivasha, Kenya, I had the good fortune to see some local wildlife at close range. Some people consider walking in close proximity to wild animals to be dangerous, for it may portend harm or injury, but others embrace the activity with open arms. Thinking, that well-spring from which ideas and insights emerge, innovations are birthed, and humanity progresses and flourishes, is similarly polarising. One of the things I have been thinking about recently is quite selfish: What direction should I take my writing in 2024? Musings is nearly twelve years old (first entry was in March 2012, which coincided with my doctoral research efforts, and sharing of conference papers and articles). While the longevity makes it a rarity, my motivation has not changed. It has been to share thoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention. Apart from the introduction of 'boardcraft', a word I coined in 2020, this overarching goal has remained consistent since day one. From humble beginnings, when entries garnered just a few readers, the blog is now widely read. Over the years, many readers have been graciously engaged in a discussion about a topical matter, or asked for help to realise potential. And that has been wonderful, thank you. And, as you might expect, some entries have garnered high attention; others less so. Readers seem to prefer pragmatic guidance over provocations or calls to think more deeply about something. Recent examples of the former include writings on questions, chairmanship, and storytelling. Now, as we stand on the cusp of 2024, my hope is that Musings remains relevant and useful into the future. And with that, may I ask a favour? (Actually, provide an opportunity, to crowdsource Musings!) What topics and style would ensure Musings remains relevant and useful as it moves into its teenage years? Do respond in the comments block below, or send me an email. And, thank you in advance.
Guest blog: Dr James Lockhart (College of Business, Massey University, New Zealand) During the late 1990s and early 2000s the hot topic in corporate governance was independent directors. Independent directors, it was proposed at the time, were the very panacea for performance improvement. It didn't really matter what the problem was the solution was independent directors, preferably a majority of them—and fast! Much effort went into defining an independent director and veritable lists emerged of the much needed characteristics and attributes, especially concerning ownership (the lack thereof); earnings from ownership (the lack thereof); or, employment or former employment (the lack thereof). Sadly, in all that enthusiasm the single most important attribute—independence of thought—was seldom mentioned. Fast forward a decade: now its diversity’s turn. Diversity, it is now proposed, is the panacea for improvement. Just like independent directors in the past (where no systemic evidence emerged supporting the assumption that independent directors actually improve performance) business is besieged with the idea that diversity on boards will enhance performance. All of the board diversity research conducted to date has been from outside the boardroom. We know that because there have been only four longitudinal studies conducted within the boardroom—one in Norway by Morton Huse; one by a serving board member (no conflicts there); one by a British colleague (Silke Machold); and, one by Peter Crow. So what is being measured? Just like the independent director research, the diversity research has reduced the boardroom to a simple input-output model. Diversity then refers to the measurable appearance of directors, such as, skin colour, ethnicity, sex, age, qualifications, professional backgrounds, and so on with a focus on sex, colour and age. But does diversity of appearance produce a diversity of opinion? Does diversity of appearance produce different strategic decisions that would not have been considered or not approved in the absence of such diversity on boards? Given that we don't know how effective men are in the boardroom, it is implausible to argue that we know the effectiveness of women. That is not to suggest we don't need more women on boards—we do. But the focus of the discussion ought to be one of building better boards, boards that are focused on wealth creation, and boards that deliver the company’s aspirations. As with the independent director argument that preceded it, repetition seems to matter—if something is repeated often enough it will eventually be believed. The discussion is being fuelled by the post-modern/neo-Marxist views currently dominating the B-school landscape, one that will acknowledge diversity everywhere other than amongst Caucasians. And with that, the point is lost. The focus of corporate governance should be on performance, in organisations where the thinking folder is overflowing, not what people look like. About Dr James Lockhart:
James is a Senior Lecturer at Massey University’s Business School, and a credentialed and practising company director. He teaches and researches in strategic management and corporate governance, and is responsible for the delivery of the College’s business internship and professional practice (Management) courses. He currently holds two directorships; is on the Defence Employers Support Council; and, is a Chartered Member of the Institute of Directors in New Zealand. Guest blog: Lloyd Russell (TCB Solutions, Brisbane, Australia) Family-owned businesses constitute a special category of company—made different by the familial influence that often pervades decision-making and operations. Consequently, directing within this environment can be challenging, especially for external directors. The challenges associated with family influence can be mitigated somewhat if the family members know why they might want to recruit external directors, and the purpose of the family business is defined and agreed. Each director needs to understand the business of the business well if contributions are to be effective. This does not mean that directors need to be fonts of technical knowledge. Rather, they need to understand the business’ strategy, supply chain, business model, core competencies and operational mechanisms. The question of what family members want from the business and the board, and especially from external directors needs to be answered. In some cases, the family simply wants added expertise and independent contributions in pursuit of agreed performance goals. However, it is more common for expectations to ‘creep’ beyond this because of the inherent complexities of the three overlapping frames of family business: family, business and ownership. As a consequence, external directors can find themselves snared in all manner of (often unstated) expectations beyond the boardroom. Families considering adding one or more external directors need to become ‘board ready’. This is where sound rational discussion often meets emotional attachment and passion! As an accredited family business advisor I take significant time to understand the dynamics and prepare the family for this important step, which is often a massive leap of faith for many families. A good rule of thumb when writing director profiles is to think in terms of 40% IQ, 50% EQ and 10% SQ. Why? In addition to being technically competent, external directors need to be both aware of and sensitive to family and personal dynamics, and they need to understand the family legacy. Influential family members may or may not own shares; may or may not be directors; and, they may or may not work in the business on a day-to-day basis. These variations often lead to quite different expectations. Managing the family’s expectations is critical because directors have a legal obligation to the business first and foremost. The board’s main priority is to deliver on agreed strategic priorities. However, family members often expect more from external directors including (but not limited to):
As a result, the family and potential directors should conduct due diligence, to understand and clarify expectations in order to minimise the chance of unpleasant surprises at a later point. On the flip-side, the addition of external directors can be incredibly rewarding. While there is no ‘silver bullet’, the appointment of external directors can lead to a dynamic boardroom and, ultimately, a highly valuable family-owned business. About Lloyd Russell:
Lloyd is a fourth generation family business member and an accredited family business advisor. He is based in Brisbane while servicing clients throughout Australia and internationally. He is a specialist in family business strategy and governance with a particular focus on inter-generational transfer; has over 30 years’ experience in senior management; and, is an accredited neuroscience practitioner. Contact Lloyd by phone +61 413 549 748 or by email [email protected] Guest blog: Guy Le Péchon (Gouvernance & Structures, France) Board rejuvenation is often considered and discussed, but statistics on boards member ages show little progress. The general public thinks a board of directors is a set of relatively old people. Common sense and corporate governance approaches lead one to think that the introduction of new ideas from younger generations would surely be a company asset. Age diversity within a board is unquestionably desirable, but will one or two younger directors be enough? Probably not. In fact, except in exceptional cases (mainly in new technology fields), board members will probably be least 35 years old—hardly 'young' any more—by the time they have acquired the experience needed to be a skilled board director. Also, younger leaders often have full-time jobs, so will there be sufficient candidates available anyway? Recruitment of younger directors may be difficult and generally will not be enough to ensure that potential contribution from truly young people will be brought to the boards. How then to proceed ? One approach to solving this problem might to be create a Young People Board, under the leadership of the official board—a 'shadow cabinet' of sorts. With slightly different goals, some municipalities use this approach. A Young People Board could be composed of 18 to 25 year old volunteers—a similar number of members as the official board. Recruitment could be for three-year terms (with renewal of one third every year). The aim would be to achieve multi-faceted diversity. Periodically (say three times per year), the company board would invite the Young People Board to consider a topic discussed by the official board. The Young People Board would meet to debate the topic and develop proposals. Many ideas would emerge as young people naturally consider new technologies; social networks; data protection; ecology; ethics; and, international perspectives. Each year, a half-day meeting would be scheduled with the official board, to receive presentations and debate the topics studies by the Young People Board . The Young People Board formula would be light, without any significant expenses or time commitment from the official board members. However, the process would enable official board members to be positively confronted with new ideas coming from truly young people. They may even retain some ideas for implementation! Members of the Young People Board and, indirectly, their friends and relatives, would derive benefits including learning about the company activities, its executives and, importantly, the 'corporate governance' world. Through the process, the company may identify young talents for later hiring. The company could use this approach to improve its image, especially among young people. Many speeches and writings advocate innovation. As one dwells on this, the realisation that innovation applies not only within technology areas, but also in organizational processes and the social domain. The Young People Board is a concrete example of this type of innovation. Is this something your board can support? If so, please contact Guy Lé Pechon at Gouvernance & Structures. Guest blog: Guy Le Péchon (Gouvernance & Structures, France)
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