ECMLG'13: Moving boards from agency to performance

James Lockhart (Massey University, New Zealand) presented a paper which challenged the underlying foundation that has supported the majority of the governance research and practice over the last four decades. Lockhart opened by contending that the focus that many boards have on compliance has produced a generation of defensive, reputation-protecting boards, as opposed to boards that focus on business performance. Lockhart asserted that governance attention needs to change, away from compliance and towards factors that effect performance:

• Division of labour: A clear division of labour, between boards and managers (cf. the often ambiguous roles of governance and management) is crucial to deciding who does what (efficiency and effectiveness)
• Power: Hubris in the boardroom tends to determine what gets discussed, and therefore, what gets implemented. In contrast, humility and a commitment to cooperation should be conducive to refocussing attention on collegial efforts to discover, agree and work together towards the corporate objective.
• The role of the owner: In many governance situations, the role of the owner has been forgotten or ignored. This should not be a surprise, because the governance legislation in many countries requires the board to act in the best interest of the company (cf. the owner). If the role of the owner is reasserted, boards' attention should move to the making of decisions that affect the goals and strategies of the owners/shareholders.

These points provide a useful basis for future governance research, and for practice. However, they assume that directors and boards have the competence and inclination to change their behaviours and embrace them—an assumption which, unfortunately, cannot be taken for granted.