Tags

  • Published on

    Good things take time, sometimes a very long time

    Accountability Corporate Governance Effectiveness Governance Leadership Performance
    Picture
    We live in a fast-paced world, where the only constant seems to be change itself. Nine months ago, messages promoting the latest and greatest scheme (or product or idea) bombarded our senses daily, imploring us to embrace something better. Hope prevailed. Now, with the outbreak and impact of coronavirus, the situation is quite different.
    Despite the ebbing and flowing of seasons and circumstances, even the onset of crises, some things remain remarkably constant; stable despite great turbulence and the best intentions of enthusiastic advocates to move things along. The corporate boardroom is one such example.
    Earlier this year, during the early days of the coronavirus, I re-read Making it Happen, Sir John Harvey-Jones' reflections on leadership. Harvey-Jones, a successful businessman and industrialist, was perhaps best known for leadership of British firm ICI, culminating in his chairmanship from 1982 to 1987. His insights are timeless; arguably still relevant today, 32 years after they were first written. To illustrate the point, here is a selection of salient comments Harvey-Jones made about boards in 1988:
    • Many boards are unclear as to whether they are merely a coordinating committee, or whether their primary responsibility is to intentionally make decisions to take the company into the future.
    • Board members are often chosen from amongst the most successful executives. But governance is different from management.
    • Many incumbent board members assume that new appointees will 'pick it up as they go along'.
    • Boards do not easily set for themselves the sort of criteria of success that they unhesitatingly apply to every other part of the business. Unless a board continuously reviews and criticises the way it is working, it is extraordinarily difficult for it to improve its performance.
    • It is important not to go in to a meeting without some clarity as to what you are expecting to achieve. If you attend because the meeting has been called, with little personal aim, you should ask yourself why you are going at all (to the extent of asking why you should continue as a board member).
    • It is perfectly possible for boards of directors to meet regularly and never discuss any creative business at all—a "severe abnegation" of both personal and collective responsibility according to Harvey-Jones.
    Do any of these points sound familiar? They probably do, because, sadly, many of Harvey-Jones' observations are still prevalent today. Given the duties of directors, why are some boards still reluctant to embrace change when circumstances change, or a crisis strikes?
    Is it time your board took stock, not only of the company's strategy and business model, but of itself?
  • Published on

    Company Director: a profession in waiting?

    Accountability Corporate Governance Governance Performance
    Picture
    The professionalisation (sorry, a horrible word) of governance has been a topic of discussion for many years. Some directors, when describing what they do, prepend the adjective form of the word, to indicate their full-time paid work is a [company] director, and to indicate their commitment to 'professional' standards (the implication being that some are not). Others abhor such usage.
    Many directors are diligent and highly engaged in their work. So why the felt need to professionalise? Studies of company and board failures reveal a consistent pattern of contributory factors, including hubris and overconfidence among directors; low levels of board-management transparency; lack of a critical attitude, genuine independence, appropriate expertise and relevant knowledge in the boardroom; and, tellingly, low levels of commitment by directors. Consequently, public confidence is mixed.
    If the practice of governance is to become highly regarded, standards need to be lifted and applied. But can or should governance (that is, the practice of directing) be elevated to the status of 'profession', as medicine, law and accountancy are? And what, exactly, is a professional director? How is one different from an 'ordinary' director (or any other type of director)? What difference might professionalism make? Are better outcomes any more likely? In considering these questions, let's first define some terms:
    • A profession is a paid occupation, especially one that involves prolonged training and a formal qualification. Members possess special knowledge and adhere to ethical standards.
    • Professionalisation is the action or process of giving an occupation, activity or group professional qualities, typically by increasing training or raising required qualifications.
    • A professional is a member of a profession. Typically, they are required to profess commitment to a code of ethics, and apply their knowledge in the service of others. 
    Individuals wanting to become a medical doctor, for example, must first successfully complete several years of university-level training, after which they become a trainee intern, are provisionally registered and start to practice. A commitment to the Hippocratic oath is necessary. Doctors are also required to formally register with an approved institution, pass professional member- and fellow-level exams and complete approved professional development (on-going). Usually, a formal disciplinary process is available if an individual is found to have flouted professional standards. Law is similar, and accountancy too. On this measure, it's clear that doctors (and lawyers and accountants) are professionals; stakeholders (patients, clients) can have confidence in their work.
    But what of directors and governance? Two observations are relevant. First, almost anyone can become a director, and do so with no training! In most jurisdictions, any person over a specified age (18 years old in New Zealand), who is not an undischarged bankrupt nor is before the courts, may become a director. That's it! There is no mandatory training requirement, nor is membership of a professional body or ongoing professional development necessary. Second, many directors' institutions around the world have, over the past few decades, sought to promote governance as a profession. Their good work has resulted in charters being established, and members being invited to commit to ongoing professional development and to operate in accordance with a code of ethics. But these well-intended efforts have been met with mixed success to date. Optionality seems to be part of the problem. Variable quality training programmes, and ambiguity around the primary purpose of the institution appear to have been contributing factors too.
    If governance is to become recognised as a profession, as many have argued is needed, minimum standards need to be instituted, and optionality withdrawn. Prospective directors should be required to complete approved (formal) training and pass exams; serve as an intern; gain (and maintain) formal membership of an approved institution; and commit to continuing professional development. Flawed understandings of the role of the director and what corporate governance is and how it should be practiced need to be corrected too, and the power games, hubris and ineptitude apparent in some boardrooms rectified.
    But, in the end, the question of professionalising governance remains contentious. Some experienced directors don't see the need, believing they are competent. Others don't want to be scrutinised. And some directors and observers continue to argue fervently in favour, because they think the likelihood of better outcomes should be much higher.
    What do you think?