Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.

Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.

During the wide-ranging discussion, several participants suggested that governance should be professionalised, like medicine, accountancy, law and several other professions. I support these calls—strongly. Why? Well, stories like this get under my skin. While the majority of directors fulfil their legal and ethical responsibilities well, sadly there are a few bad eggs that discredit governance in the public's eyes.

The mechanism would be relatively straightforward, involving perhaps:

• entrance tests (competency, references and interviews)
• maintenance of professional standards (on-going education)
• periodic re-registration (two- or three-yearly)
• tiering (a general registration, and a higher level for directors of large, widely-held or publicly-listed companies)
• a disciplinary tribunal (with teeth and a propensity to act)

The Institute's optional accreditation scheme provides a useful starting point, but it falls short because participation is optional. In my opinion, governance must be professionalised, with a robust body and process not dissimilar to medicine (Colleges of Practice, Medical Council of New Zealand, Disciplinary Tribunal). Perhaps then the concerns expressed in the article—that directors can dodge bans—will become a thing of the past. Here's hoping.

How well do you understand the competitive environment your business operates in? Most strategic planners and executives know that matching their strategies to their environment is crucial. Further, most claim to have a good understanding of their environment. However, recent research conducted by BCG and published in HBR indicates that the majority of firms misread their environment. Consequently, they run the very real risk of adopting an inappropriate strategic style and/or developing flawed strategies.

Helpfully, there are many good tools available (a quick Google search will get you started) to help planners and executives read their environment more accurately. It is my experience that firms that use these tools, and engage a skilled facilitator to challenge assumptions, tend to create strategies that are more well suited to their environments. And that's got to be good for business in these tough economic times, don't you think?

An outstanding Editorial appeared in our local newspaper, the DominionPost, today. The editorial highlights the significant conflict of interest that exists when local government politicians are appointed to the boards of Council Controlled Organisations (CCOs). The appointment of local councillors—many of whom lack sound governance expertise, and all of whom are conflicted as the editorial argues—must stop. 

Councils and local communities would be far better off if independent directors were appointed to the boards of CCOs (and held accountable through normal shareholder and fiduciary processes). Independent, commercially astute directors would focus entirely on their role of acting in the best interests of, and maximising the performance of, the company. In so doing, the returns to shareholders would more than likely improve over what would otherwise be possible with a highly conflicted Board.

PS: I disagree with one sentence towards the end of the Editorial "...over time, superior systems will produce superior results." No. Governance is a complex and socially dynamic phenomenon. Over time, superior systems should produce superior results. 

As a reasonably pragmatic type, my starting point when writing is function. Every sentence should have a purpose—it is more important to communicate the message fluently and eloquently than to dress the message in what some describe as "flowery language". Unlike many fiction writers, my default setting is to prioritise function over form.

Yet when I read this article, I found myself thinking about my as yet unwritten thesis. Doctoral theses are limited to 100,000 words (about 270–300 pages), with an expectation that a robust argument will probably require 75,000–85,000 words. Gosh that seems like a lot. Why so long? Bulk for bulk's sake is never going to make the grade. Clearly a balance needs to be struck between function and form though, to ensure the expectations of the academic community are satisfied and that the essence of one's thesis is clearly communicated. But where does one draw the line between function and form?

Against a backdrop of greed, examples of New Zealand companies taking a strong ethical stand and "doing the right thing" are starting to emerge. This week, Keith Turner, Chair of publicly-listed company Fisher & Paykel Appliances was reported as saying that his approach was to resist trading (in FPA shares) while the Board was debating and commercially analysing ideas that could have material value implications. This strong ethical stance—based on what is best for the company—bodes well for the somewhat sullied reputation that governance boards have suffered recently.

Well done FPA Board, your ethical stance is an example that others should follow.

One of the things I need to tackle in my PhD is to ground my research in theory. Simply, it isn't acceptable to conjure up some grand scheme without showing the theoretical basis from which your ideas emerge. As none of the three main theories of governance (agency, stewardship and resource dependency) account for all situations, I have been looking at decision theory as the theoretical basis for my research. Further, research method also needs a theoretical basis. I am planning to use an iterative inductive-deductive-inductive method, based on grounded theory. 

Do you know of someone in New Zealand or Australia who is an expert in decision theory or grounded theory? If so, can you please contact me because I'd like to speak with them to build my knowledge. Equally, if you can point me to some good books or academic articles, I'd appreciate that as well. As these theories are new territory for me,  I'd welcome any and all suggestions—thanks in advance!