For over forty years now, researchers have been investigating boards to try to understand their contribution to business performance. The dominant logic has been to count things, perform statistical analyses and apply hypothetico-deductive science—to identify this elusive thing called "best practice". The latest group to pursue the "best practice" argument are the proxy advisory firms. Details their modus operandi are summarised in this blog, posted on the Harvard Law School site.
A best practice approach—whereby if one does 'x' then 'y' occurs—sounds great. However, the reality is not as straightforward. As most directors know, every situation that a board deals with is, to some extent, unique. Boards are made up of people. The context within which boards exist, the company, is also a construction of people. Board structures and board activities that work in one context may fail in another.
The blog on the HLS site is helpful because recognises that one size does not fit all. It also exposes some of the practices promoted by proxy advisory firms for what they are: detrimental to performance. Notwithstanding this, boards can influence performance. While the blog on the HLS site has particular relevance to boards and shareholders of public companies, many of the suggestions are useful for boards of private companies as well. I commend it to you.
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.