 I like exploring: old towns and villages, and the countryside; enjoying the landscape, clambering along trails and even into river beds to look more closely at flora and fauna. The pictures that form in my mind’s eye provide important context to understand the scene, and what may have gone before. Take the above image for example, a photograph I took a few weeks ago, having stepped off the path while walking towards a disused railway. This seemingly innocuous scene is of a fast flowing river, in a gorge. But more than that, it is just along from an abandoned gold mining settlement and an extraction plant (who knew?), and it has a name: the Ohinemuri River, this section is in the Karangahake Gorge. If the picture is studied more closely, details not apparent at first glance can be seen: plants in bloom, logs dumped from an earlier flood event, and an adjacent highway. Some details seem inconsequential, like the red blooming plant, others are far more significant (the river obviously floods from time to time, the gorge ‘hosts’ a major highway). Clearly, the act of looking ‘into’ the picture, not simply at it, reveals much. And so it is with board work: to look beyond what is written in board papers, to consider what is not written, the wider context within which the company operates, and still-weak signals that may portend trends and potential disrupters is crucial, if the board is to secure a more complete understanding and, ultimately, make more informed decisions. While some boards behave as if such things do not matter, effective boards know better. They are alert to both macro trends and issues (this recent report, from INSEAD, offers helpful insight), and more immediate matters such as sales figures, staff engagement and customer satisfaction trends. When was the last time you scanned the horizon to understand the wider context within which the company you serve operates, and how long has it been since the board thought deeply about the future, and the various risks and opportunities that might effect the company and its prospects?
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 One of the most satisfying aspects of my work involves sharing insights gained from 'live' experiences, in the hope they might be of some value to others. Whether it be facilitating a boardroom discussion, advising a chair, delivering a keynote, leading a capability building workshop, or chatting with a colleague, the call to share my knowledge and experience is strong. So, when Mark Banicevich, Founder of Governance Bites, contacted me for a chat, I was agreeable, more so as we had previously explored various aspects of board work (the recordings are available: here, here and here). The topics Mark wanted to explore included boards in crisis situations; ethical dilemmas in governance; and, governance in developing nations. A date was agreed, and the 'record' button was pressed. Now, all three of the fireside chats have been published. You can watch them here ⬇️. If you have any questions having watched them, or want to check something out, please feel free to contact me directly. Boards in crisis situations: Ethical dilemmas in governance: Governance in developing nations:  That life is complex and unpredictable is a truism. And, though the frequency and impact may vary, change is a constant, it seems. If one is to thrive (succeed, realise goals) in such an environment, adaption is critical having detected something has changed. To ignore or pay lip-service to change is folly, and to guess how to respond is about as reliable as gambling. The same principle applies in organisational and boardroom settings. As in life, some of what is seen, heard or read is reliable, but much is not—to the extent that descriptors such as misinformation and disinformation have become commonplace, even hackneyed. Consequently, those charged with providing effective steerage and guidance need to be alert, to ensure decisions about how to proceed are underpinned by accurate data from reliable sources, and insights from conversations and analysis. Two techniques I have found useful when considering decisions with strategic implications:
If boards are to make sound decisions, directors need to breathe—to create space and time to consider options well. Boards should also agree on the decision criteria, process and timing at the outset; guard against being drawn into irrelevancies along the way; and, employ a strategic mindset throughout. How does your board measure up in this regard?
 I have a thing about bridges. They are, in my mind at least, points of connection: not only between physical locations separated by water or chasm, but also between people, and between seemingly discordant ideas. This week I have been in the United States and Canada: in Chicago, to deliver a keynote at the Private Directors Association national conference, lead two masterclasses and fulfil other engagements; in Toronto, to speak at a Governance Professionals of Canada event and attend other meetings; and, in Knoxville, to catch up with a dear friend of some 45 years and take in some local history. In my downtime, I have done as I usually do: sate my curiosity—taking in the local sights, sounds and smells, and getting a sense of the history. From lakes (Michigan and Ontario), rivers (Tennessee) and vistas, to monuments, plaques and people, the social fabric that makes a place, well, a place is plain to see and feel. And, as I walked, I stopped periodically, to ponder those who went before, what they might have thought, and their intentions and actions as they went about their lives.  Then, last night, as I enjoyed hospitality in Knoxville, my mind was drawn to a comment my father shared many years ago, “Bridges are made for crossing, not burning.” Now, five decades on, I would add, “Bridges should be built and then crossed.”  To cross a bridge as it is being built is folly. Not only is this a poor use of resources, the likelihood of arriving at the intended destination is low. But this is what many executive teams and boards seem to do—they work it out as they go, or they assume that someone else has the matter in hand. Sometimes, they are so busy operating that they do not look past the here and now. But that is hardly a sound way to create value or a thriving business that endures over the longer term. The role of the board of directors is to govern, meaning to provide effective steerage and guidance. And, one of the four principles of corporate governance is ‘set direction’, meaning, to determine corporate purpose and strategy. And therein lies an awkward bridging question: If a company’s board has not set direction, what hope should the executive have of leading well; or the staff being productive; or, ultimately, of the potential of the company being realised? The strategic governance framework is one option boards may wish to consider, as they strive to see around corners and govern with impact. PS: For curious readers: The bridges pictured are the Gay Street Bridge in Knoxville, and the Michigan Avenue Bridge in Chicago.
 I was fascinated last evening, at a variety of behaviours on display following news that UA787, a flight from Houston to Chicago-O’Hare was delayed due to a technical problem. The captain provided updates, initially announcing the delay and reason. A little later, he came on the PA again, to apologise. Then he added, “that the engineers were working on it, and were confident of resolving the issue soon.” Some, likely the elderly gentleman I was seated beside, were a little anxious. He was being met by a family member and did not want to put the family member out at all. His response was to ask the flight attendant for an ETA, so he could make a telephone call to the party meeting him. Others, such as the business woman seated across the aisle, became agitated, as if the delay was the flight attendants’ fault; the impression being that she was busy and important and, therefore, the problem needed to be fixed “now”. Her response was direct: as soon as she had the opportunity, she collected her things and hurried off the flight. Others got off too, without fanfare. Yet others, sat quietly and waited, knowing there was little they could do. The situation provided an impromptu study of human behaviour and, in particular, how some people seem to have lost (or rejected) the art of waiting. I wanted to get to Chicago as much as any other passenger, especially having already flown in the care of Air New Zealand from home to Houston. And, a younger me may well have become frustrated at the situation, as the woman who left abruptly. But, I have learned to leave those things we cannot control to others. As I reflect on the experience, my mind is drawn to board work. The role of director is one of service. Have I allocated sufficient time to not only read papers, but consider them and read further? How patient am I when arrangements do not flow as planned, especially logistical arrangements? Is my schedule crammed, or does it provide space, not only as contingency but also for critical thinking? The very best directors arrive at meetings prepared, calm, and ready to go, having allocated space before the meeting, to read, think, and prepare questions. The rest, who tend to look harried and unprepared, need to reflect on their situation. Why are they not ready to contribute well? Are they poorly organised? Are they overboarded? Ultimately, are they fit to serve as directors, given the duties they owe? PS: UA787 departed 57 minutes late, and arrived approximately 24 minutes behind schedule. The Captain apologised once more. Flight attendants were polite. Passengers were looked after. The world didn’t end.
 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?”  I have been watching the leaves on a potted plant go a little yellow in recent days. Something is not right; the plant has been suffering, clearly—but why? Had I been over- or under-watering it? Or have I applied the wrong amount of fertiliser? After checking with sources more knowledgeable than me (a book in my library, but also Google), the penny dropped. The plant had become root-bound, a victim of its own success. Simply, the pot had become a constraint. The resolution? A bigger pot, to provide space for the plant to thrive once more. Now, we wait. Boards and companies are analogous to the pot and plant in this illustration. The pot holds the plant and provides space for it to thrive and grow. Sometimes, a new pot is the change needed if the plant is to thrive. And so it is with companies: sometimes changes are needed at the board table to reinvigorate decision-making, steerage and guidance. Whereas plants tend to droop, go yellow or otherwise signal poor health, tell-tale signals that it might to be time to make adjustments in a boardroom tend to be visible too. Examples include:
While this list is far from exhaustive, it is indicative. Notice many of the signals (that a director is out of their depth or no longer fit to serve) tend to be behavioural. But how might any shareholder or supernumerary know the real situation given boards tend to meet and operate behind closed doors? Something might seem to be amiss, but what, and who? A governance assessment (note, not a board evaluation) can be a useful tool to assess the effectiveness of the board and the governance 'system', and to diagnose any underlying problems. These should be conducted annually, by a credible independent assessor. Recommendations emerging from such an assessment need to be taken seriously. Boards that dismiss evidence-based recommendations out of hand, or make cursory adjustments only (the "sweep it under the carpet and hope for the best" tactic), should take a good look in the mirror. The response is itself a clue—defensiveness tends to confirm that all is not well. When something doesn't quite seem right, check it out. Directors serve at the pleasure of shareholders, and replacement is always an option. Often, it is a very good option; sometimes, it is the best option. Normally, a simple majority is all that is required to both appoint and remove a director. To give the director the benefit of the doubt is rarely the best option. Finally, if a decision is taken to remove a director, act on the evidence quickly, but do so quietly.
 Questions of where we came from, why various things happened or evolved as they did, and what we can learn from them to guide us as we live our lives fascinate many people—me included. From neo-lithic henges and stone circles, to the development of more recent industrial-scale enablers (notably, the wheel, the printing press, manufactories, the motor car and the Internet), man has long been fascinated with history, innovation and possibility. When we ponder historical developments and innovations such as the examples noted here—and other foundational things like language, writing, mathematics, ethics and civics—we gain insight to apply in our daily lives or use as a springboard to try to make new discoveries. This maxim applies personally, in family and social groups, and more broadly in society—and if we ignore it, it may be to our peril. The idea of learning from those who have gone before us is applicable in organisations too. How else would individuals and teams know what to do? This is what learning and development departments organise, and why professional development programmes exist. In the realm of boards and boardwork, relevant questions include three I have been asked most often over the past two decades: What is corporate governance; what is the role of the board; and, how should governance be practiced? That these questions are asked so often suggests directors (at a population level) lack the knowledge needed to be effective. Helping directors and boards govern with impact is a calling for me, so when Mark Banicevich invited me to explore the history of corporate governance—well, make a fleeting visit across a few high points in the Western context—I jumped at the chance. Hopefully, the commentary is helpful. Do let me know whether you agree or disagree with the various perspectives, and why, because I’m no Yoda (use the comment section below, or contact me directly). Life is a learning journey for me as well!  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:
As is typical in board and shareholder matters, options are many and resolutions are far from clear cut. What options might a capable independent director consider in such circumstances?
These are questions of commitment and duty. Directors need to not only recognise this, but consider options amidst ambiguity, and work within the constraints of the law and what is ethically acceptable. Essentially, these questions ask how far a director is prepared to travel, how hard they are prepared to work, how long they might prepared to wait before enough is enough. Are they prepared to make decisions that may be unpopular or even unpalatable, because such decisions are in the best interests of the company? Will they go to the ends of the earth, so to speak? Or does the preservation of reputation rank more highly than acting in the best interests of the company—essentially, will they bail when the possibility of reputational damage arises (as several directors of Wynyard Group reportedly did just before the company failed several years ago)? Directors would be well-advised to have asked themselves these questions before they accept an appointment. They should also be prepared to act (step away) if the thresholds they set themselves are surpassed, or if they no longer have the expertise or courage to act. 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. Hopefully, our discussion is helpful and enlightening. Regardless, I welcome questions and comments, either here or send me an email. This is my second conversation with Mark (the third will be published in May). If you missed the first, you can access it here: Governance around the world. |
SearchMusingsThoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention. 
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Dr. Peter Crow, CMInstD
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