Hitting the nail, squarely, on the head

Bob Tricker just did it again.

Long the doyen of corporate governance (Sir Adrian Cadbury used the term "father of corporate governance"), Tricker has just posted this article, a stinging critique of several emergent ideas that, through repetitive use, have permeated thinking and are becoming accepted as conventional wisdom. Risk, culture and diversity are singled out as populist memes. Yet robust evidence to support the notion that any of these memes are directly contributory to effective governance—let alone company performance—in any predictable manner is yet to emerge. Tricker's timing is, once again, exemplary.

Thankfully, Tricker offers far more than a straightforward critique. He reminds readers that the purpose of the board of directors is to govern:  

The governance of a company includes overseeing the formulation of its strategy and policy making, supervision of executive performance, and ensuring corporate accountability.

The purpose of a profit-oriented company is also made clear (a point famously made by Friedman):

To create wealth, by providing employment, offering opportunities to suppliers, satisfying customers , and meeting shareholders' expectations.

In calling out this matter, Tricker has hit the nail on the head—the effect of which is to place those motivated by the promulgation of unfounded memes in a rather awkward position. I am with Tricker; our understanding of corporate governance needs to be reset. Rather than pursue new memes (a perfectly adequate definition was established over fifty years ago), boards need to discover how to practice corporate governance effectively. Tricker (Corporate governance: Principles, policies and practices), Garratt (The fish rots from the head) and a few others provide excellent guidance as to how this might be achieved.

 (Disclosure: The two books named in this article are the ones that I refer to most often when working with boards. I commend them to you.)