In recent months, news of another round of corporate scandals (Mintzberg thinks 'syndrome' is a better descriptor) have dominated our newspapers and Internet news feeds. All seem to be failures of corporate governance: HSBC, FIFA, Toshiba and, most recently, Volkswagen. While failure is nothing new, why have these failures occurred and why now? What's happening (or, more probably, not happening) in our corporate boardrooms at the moment?
While each case is to some extent unique, an interesting pattern starts to emerge if we stand back a little and take a holistic view of several failures together: a well-regarded business, with both a strong trading record over an extended period and great brand equity commensurate with its public reputation, hits turbulence leading to failure or scandal. Questions are asked, investigations follow, significant irregularities are exposed and fingers are pointed. Eventually the spotlight is turned onto the board. All roads lead to Rome, after all.
The seemingly steady flow of failures has seen a great malaise descend over the business and investor community during the northern summer. Measures developed to reduce the incidence of failure (including the OECD corporate governance principles and various in-country codes) have not had the intended effect. Indeed, they have rung hollow. To the casual observer, the situation seems to be bad, possibly hopeless. However, glimmers of hope are starting to appear.
In the past six weeks, I have asked all of the director groups that I have spent time with for their opinion—as a litmus test of sorts. A strong majority of the 350+ directors across several countries (England, Eire, USA, New Zealand and Australia) say things need to change. Most think that current conceptions of board practice and corporate governance are not helpful if the goal of business is value creation; and that strategy needs to feature more prominently on the board's agenda. While most of the commentary is anecdotal, it is consistent with emerging research.
Could this small sample of emerging and established directors of mid-size businesses be the vanguard of change? I've begun exploring ideas with several boards—on the assumption that the answer is yes. However, this is a case of the more the merrier so please get in touch if you want to 'join the party'.
Thoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention.