The emerging role of the board in business performance

Fifty leading board researchers, directors and company secretaries assembled in London this week to consider the topic Corporate governance for a changing world: capturing long-term value. The event was hosted by Tomorrow's Company and Frank Bold, at Cass Business School. I had the privilege of joining the discussion.

Dr Roger Barker, Deputy-Director at the Institute of Directors, provided the catalyst for a lively discussion amongst the attendees. He offered some rather provocative comments about boards, short-termism and business performance in the longer-term, as follows:

• The current [conformance oriented] corporate governance model does not appear to be particularly conducive to longer-term thinking nor value creation.
  
• Despite challenges and concerns raised amongst a broad constituency, many people who work in The City (of London) think that the current system of corporate governance is 'good'—they do not recognise short-termism as a problem.
• Executive pay is essentially an issue of balancing short-term financial engineering against longer-term value creation.
• Despite efforts by legislators, regulators and stock exchanges (not to mention the OECD itself), the notion of a one-size-fits-all model of company law and corporate governance is not well suited to all types and sizes of companies.

Several interesting thoughts emerged from the group and plenary discussions that ensued:

• That the predilection with short-termism is 'probably' the antithesis of sustained business performance over time.
• That the conformance–performance pendulum has probably swung too far towards conformance. A renewed focus on company performance and longer-term value creation is needed.
• Despite the best intentions of the authors, codes and associated regulations have not delivered any meaningful business value.
• The shareholders and boards need to return to basics by focussing on (and agreeing) the purpose of the company and the strategy by which or through which the purpose will be pursued. [This point was music to my ears, for it is consistent with my research findings.]

I came away from the meeting in good spirits. That a group of influential academics, researchers, directors and company secretaries are both in agreement that the current model of corporate governance is problematic (flawed, even?) and that a new model perhaps via purpose and strategy might offer hope if boards are to make meaningful contributions in pursuit of longer-term value creation and a sustainable future.

The informal discussion and private comments over drinks after the roundtable session served to reinforce these points; especially that well-intentioned leaders are committed to realising the potential of the businesses they lead or govern and that there is a hunger for 'answers'. My hope is that these messages are both transmitted and heard amongst a wide constituency, and that people get on board. I am committed to playing my part. If you have questions or would like to know more, please get in touch.