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    The craft of board work; 21 years on

    Corporate Governance Governance Management Performance
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    Twenty-one years ago this week, I embarked on a journey to pursue a dream: to help directors and boards become value creators, realising the potential of the companies they govern. At the time—four weeks after the terror attack on the World Trade Centre—governance was hardly known as a word, and most boards had a strong compliance orientation. I had no idea whether the dream was realistic, much less attainable. But, at 39 years old, the calling was strong—compelling even. So, I took a deep breath and walked away from a great company and international role, armed solely with a strong belief that I might be able to add some value. I was told that stepping away from financial security and the makings of a stellar international career was crazy. But the decision had been made.
    I found that people would happily talk about their situation and what they wanted to achieve if they thought you were genuinely interested in them. That insight has provided the foundation for everything that followed—including working with thousands of directors in 45 countries across five continents, serving on boards, delivering hundreds of talks and leading many education sessions. The 2012–2016 period dedicated to complete doctoral research, to try to answer that most difficult question of how boards influence company performance provided a breakthrough that I hope, one day, will be taken up widely: the Strategic Governance Framework. To have met and spent time with doyens of corporate governance, strategy and leadership along the way—including Bob Garratt, Bob Tricker, Charles Handy, James Lockhart, Jenny Darroch, Roger L. Martin, Rita Gunther McGrath, Silke Machold, Stuart Farquhar, Andrew Kakabadse and many more besides—has been inspirational. I am indebted to everyone who has spared a few minutes to answer questions and share insights.
    Other highlights include sitting with directors in India, Eastern Europe and other places well off the beaten track, to listen; experience their thirst for insight; and receive their gratitude for what little I had to offer. 
    Without exception, everyone I've met and worked with has wanted to find ways to guide and steer the businesses they govern with greater effect. To have been asked to contribute has been a honour. ​
    Thank you to every established director, board trustee, and board chair; every aspiring director; every chief executive and leadership team; every MBA student, researcher and associate; everyone who has heard me speak or read my articles (note: all my articles and blog posts remain available today); every regulator and government who sought confidential assistance; and, untold others I've never met. Thank you for considering my submissions and arguments, for believing in me, for encouraging me and for engaging me.
    Today, 21 years on from stepping out of the boat, the calling remains strong. I remain available to serve for as long as boards and directors call for assistance, and my ability to contribute allows. To that end, and with the passing of the pandemic, I am available once more to travel to meet in person to understand and speak into situations. So, if you have a question or want to discuss a problem, please get in touch. I stand ready to serve.
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    The craft of board work: Northern tour

    Accountability Corporate Governance Decision Making Governance Leadership Performance Speaking Engagements
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    The passing of the Covid pandemic has been a great relief for many; boards of directors are no exception. Several weeks ago, I visited Sydney, Australia to meet with directors, boards and leaders of membership bodies. The feedback was clear: if companies (and through them, economies and societies) are to prosper, boards need to start thinking strategically again. Last week, more grist to the mill. During a successful visit to Bengaluru, India to lead a Board Immersion Programme for a globally-known FMCG company, the question of how boards can add value was front-of-mind throughout.
    Today, I'm delighted to announce my first post-Covid visit to the United Kingdom and Europe, to continue the advisory work there.
    From November 16th through 25th, I will visit the UK, several EU countries, and elsewhere as required, to respond to requests to speak, and to help boards respond well as they pursue sustainable business performance. This includes:
    • Advisory sessions (individual board and executive team)
    • Keynote talk on sustainability issues
    • Half-day immersion workshop to consider modern governance practices
    • Confidential briefings on emerging issues
    • Guest lecture to post-graduate students
    Do you want to meet in November? Regardless of whether you have a specific request or a general question, please get in touch. I'll respond promptly with some suggestions for your consideration.
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    Thinking about difficult problems, deeply.

    Accountability Corporate Governance Decision Making Effectiveness Governance Leadership Performance Tough Questions
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    I’ve spent quite a bit of time in recent weeks thinking about problem solving; my attention drawn, in particular, to problems that fall between simple (for which answers are self-evident) and wicked (easily defined, but for which an answer is elusive due to incomplete or contradictory information, or changing requirements). Difficult problems are those that can be solved, but answers are far from evident, even following careful enquiry. The BBC Series, The Bomb, explores a case in point. Nuclear fission was discovered to be theoretically possible (Leo Szilard), but considerable effort over the following decade was required to finally tackle the problem in practice.
    So-called ‘difficult problems’ require, clearly, intentional enquiry and, often, patience. As with gravity and magnetism, the underlying explanation (resolution) cannot be observed directly, only through its effects. So, deep and critical thinking is needed, if a resolution is to be discovered.
    Such problems are familiar territory for boards: if they were straightforward, management teams would resolve them. And therein lies the challenge for directors: the underlying cause of a problem raised to board level tends to be hidden under that which can be seen. And what is more, any linkage between the problem, the underlying cause, what can be observed, and any subsequent effects or impacts (note: plural) is tenuous and, almost certainly, contingent.
    If boards are to be effective in their work (governance: the means by which companies are directed and controlled), directors need to be alert, astute and actively engaged—more so because resolutions to difficult problems cannot be discerned directly. Thus, directors need to think beyond what is written in board reports, and what is apparent when reading other materials. Those who think they can get away with quickly reading board papers a few days before the upcoming meeting are kidding themselves.
    If directors are prepared to read widely across a range of topics, allocating 1–2 hours per day for six days every week, to consider ideas and think deeply, the likelihood of uncovering possibilities and solution options is greatly enhanced. Indeed, the correlation between, on one hand, time spent reading and thinking deeply, and on the other, high quality decisions is stark. Time and critical thinking matters, if directors are to add value.
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    Wither accountability?

    Accountability Corporate Governance Decision Making Ethics Governance Tough Questions
    During June, I spent most of my discretionary time reviewing articles about corporate scandals and failures, as reported in the mainstream media and academic press, and discussed on social media. They made fascinating reading, not only for the summaries, but also the amount of finger-pointing and defensiveness—an indication that accountability was missing in action in most cases.
    Consider the Carillion, Wirecard and Petrobas cases, all mentioned in a recent Financial Times feature article (paywall, sorry). The discussion concentrated on the accounting and audit professions; the questions being whether they should have detected the problems, and whether ethics should be a consideration. These are good questions, but they sound a little like positioning an ambulance at the bottom of the cliff. Disclosures, in the form of annual reports, audit statements, and various ESG-related reports, are necessary. But they are just that; disclosure reports. And the more complex the reporting and disclosure requirements, the more time management and the board needs to spend preparing and checking reports, to meet expectations. And with greater focus on reporting and compliance, the greater the likelihood that accountability will become discretionary.
    Accountability is one of four foundational elements of corporate governance. There are two aspects, namely, boards are charged with holding management to account, and they need to provide an account to legitimate stakeholders. (The others are the formulation and approval of corporate purpose and strategy; policymaking; and, monitoring and supervising management, to ensure the company is operated and strategy achieved within prevailing statutory and regulatory boundaries. Together, these four elements comprise the Learning Board Framework, a proposal described in The fish rots from the head, a book written by Bob Garratt, a doyen of corporate governance and board work, circa 1996. The LBF is the single-best approach to board activity that I have come across in my twenty-five years of board and governance practice and research, bar none.)
    As in life, enduring success in business (meaning, achieving and sustaining high levels of organisational performance) can be attributed to many things. These include, inter alia, a great idea, a clear and coherent strategy, excellent execution, capable and highly-motivated people, forces of nature, timing, effective leadership, luck (yes, luck), and more besides. Yes, success has many sources, even to the point of being idiosyncratic. 
    Failure is different. Even a cursory study of corporate failures reveals several common themes, most of which can be readily traced back to the boardroom:
    • hubris
    • ineptitude
    • malfeasance
    • incompetence
    • questionable ethics
    • corporate governance misunderstood
    • wrong expertise mix
    • weak engagement
    • lack of time
    Almost all of these themes emerge from poor behaviour and a leakage of accountability. Knowing what to do is one thing, knowing how to behave (and behaving) is quite another. Fortunately, help is at hand. Insights from research suggest five underlying behaviours are necessary if boards are to contribute well. These include strategic competence, a sense of purpose, active engagement, collective efficacy and constructive control. If any one of these is absent, the likelihood of the board exerting any meaningful influence or adding any value drops to nought. (If you want more information on this, please get in touch.)
    One final comment: The role of director is founded on trust—the fiduciary responsibility. And from this flows accountability—in role and in relationship. If boards place a low value on accountability, by not holding management to account for the achievement of operational and strategic goals; rubber-stamping advice from suppliers such as lawyers, accountants and auditors; or, not providing a candid account of performance to shareholders, regulators and other stakeholders, they deserve ​what comes their way.
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    Are TLCs important, or are they NMP?

    Accountability Corporate Governance Decision Making Governance Performance Strategy Tough Questions
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    The opportunity to embrace a transport technology that is cleaner, quieter and considerably cheaper to operate (than petrol or diesel alternatives) is attractive—once the initial purchase price hurdle leapt. The purported benefits seem to be significant, but does the reality match the rhetoric? As with any proposal to embrace system-level change, the costs of moving from one technology to another are far from trivial. If an assessment is to be complete, the total lifetime costs (TLCs) need to be considered; that is, the sum total of all costs incurred over a product/system’s lifetime (includes manufacture, operation, disposal).
    In the case of electric vehicles, what of the economic, environmental and social costs of extracting metals for battery ingredients; logistics and manufacturing; replacement of batteries when they are spent; battery disposal; and, of upgrading the power generation and distribution network to provide adequate electrical power to recharge batteries? Many of these are being quietly ignored, it seems. Not my problem, some argue, as if out of sight is out of mind. This short article argues that when the TLCs are factored in, the benefits associated with a seemingly compelling technology (in this case the adoption of electric powered vehicles and other devices with battery power packs) may not be as great as what has been claimed.
    And so to the purpose of this muse, which is not to argue the benefits or otherwise of adopting electrically powered vehicles. Rather, it is to table an issue often overlooked by board of directors considering so-called strategic projects: total lifetime costs.
    When faced with a strategically-significant proposal, boards first need to check for alignment, by testing whether the proposal is contributory to the corporate strategy (spoiler alert: often linkages are tenuous). Assuming it is, directors should satisfy themselves that total lifetime costs have been included. Only then can the question of whether the recommendation should be embraced or rejected be debated.
    Why might this be important? Directors are duty-bound to act in the best interests of the company. That means taking all relevant information into account. 
    If boards ignore externalities, or abuse the social, environmental and economic capitals consumed in the operation of the company, the governed company is unlikely to endure over the longer term. And in so doing, directors may be exposing themselves, unwittingly, to legal challenge as well.
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    Is ESG a harbinger of something big, or just a TLA?

    Accountability Corporate Governance Effectiveness Governance Societal Wellbeing
    The June solstice is almost upon us. Davos, the World Economic Forum's annual meeting of elite political, academic and business leaders (some would say, talkfest), is over for another year. Private jets have returned to base, and the thoughts of leaders (in the northern hemisphere, at least) are turning to summer holidays and, with it, relaxation, reading lists and an opportunity to cogitate. Meanwhile, leaders south of the equator press on, for the June solstice marks the onset of winter.
    Metaphorically, the June and December solstices are signposts: ​marker pegs that signal pending change.
    Over the past couple of years, I have been watching intently one signpost in particular, wondering whether it might portend a change in relation to board work, or whether it might be a mirage that can be ignored. ESG, a three-letter acronym for environmental, social and governance, was coined in 2005 by a group associated with the United Nations. The stated goal was to put pressure on companies to think beyond financial indicators as the primary indicator of business performance, and to report accordingly. 
    A veritable industry of so-called experts (many self-styled) has emerged in recent years, all claiming to help businesses respond well to ESG demands and expectations. Many business leaders, activists, politicians and directors’ institutions have latched on too, themselves motivated by various self-interests. That interest in operating sustainably and improving reporting is high is no bad thing. 
    However, to date, evidence to support the proposition that the embrace of ESG leads to better performance is yet to emerge. Indeed, cracks are starting to appear. Several critical thinkers have called out ESG as offering less than what has been claimed. Some have gone as far as asserting that ESG is a ‘solution’ looking for a problem (read: wasted effort). Whether it is or not remains to be seen. However, there is cause for concern: discussion has reached the point that advocates have deemed it necessary to make counter arguments, to defend ESG. That several different definitions of the term are circulating doesn't help. Boards also need to be very alert and ask probing questions, to ensure they continue to discharge their duties. In particular, boards need to assess whether ESG proposals are conducive to improved business performance, and if ESG is a harbinger of substantive change in the way businesses need to operate or yet one more TLA, a fad that will ultimately be consigned to the history books and, in time, forgotten. 
    That questions are being asked—openly—should be a catalyst for political, civic and business leaders to check that the aspiration (claim), intention (strategy), actions taken and resultant outcomes are aligned. On the evidence to hand, ESG is unlikely to be a panacea. Thus, a level of scepticism in relation to the purported benefits of ESG is warranted. ​​​