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    ICGN'15: A timely call to action

    Accountability Ethics Governance Management Performance Strategy
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    Robert AG (Bob) Monks is a experienced shareholder activist and pioneer in corporate governance. The tall octogenarian has spent a lifetime influencing boards and board performance, especially in corporate America. Monks was invited to deliver the keynote address the ICGN conference.
    Monks, a gifted orator, spoke from the heart, and he had the gathered delegates enthralled as he did so. Reviving memories of the wartime leader Winston Churchill, Monks reminded delegates that, while they had come far, they were not at the end (ie. 'arrived') nor were they at the beginning of the end. They were, he said, "at the end of the beginning". He went on to suggest:
    • Boards and shareholders (particularly institutional investors) had barely started on the journey of convincing management that an engaged shareholder more likely to be helpful than a hindrance. I suspect this was a wake-up call for many, particularly those that think they 'do' corporate governance well and that shareholders should be kept at arms' length.
    • Too many chief executives and executive teams had autocratic control of the levers of power. They were feathering their own nest and allocating resources in favour of short-term outcomes—and boards were allowing chief executives to get away with such behaviours. Thus, chief executive accountability is largely a myth.
    • Much of what actually happens in boardrooms is not corporate governance or even an approximation of corporate governance. Rather it is a shadow play, orchestrated to give he appearance of the board doing the things that it should be doing. The statement that corporate governance is a high-profile smokescreen was as telling as it was damning. 
    Monks continued by offering several recommendations to the audience (comprised largely of institutional investor representatives but also other participants in the corporate governance community including academics and advisors). He said that shareholders need to be genuinely engaged (by specifying what they want from their investment); that integrated reporting is crucial (to provide clarity around actual business performance); and, that all publicly-listed companies need to have real (identifiable) owners (to satisfy the engagement challenge.
    Monks received a standing ovation from some of the delegates, such was the power of his oratory and the high esteem in which he is held. One surprise: neither value creation or strategy was mentioned. I wonder what Monks thinks about these activities and the board's role therein. Rather than guess, I'm going to ask him. Congratulations to the conference organisers for securing Bob Monks' contribution to the debate.
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    ICGN'15: Inside the boardroom black box

    Accountability Conferences Governance Performance Research Strategy
    For many of us, the boardroom is an opaque structure, whereby those on the outside can only but guess what might (or might not) happen on the inside. And that's the way many directors like it: strong norms of privacy and claims of confidentiality are held up as defences against such things as professionalism and accountability. While many boards try to do their job well, some directors are victims of hubris, arrogance, laziness and, in some more extreme cases, a perception of being above or beyond the law (the slippery slope that often leads to fraudulent activity). It's little wonder that the level of distrust (of directors) is at an all-time high.
    The second plenary of the second day of the ICGN conference tackled the topic of what does (well, should) happen in boardrooms. The panel prized open the corner of the blackbox.Here's some of the takeouts from the discussion:
    • Directors, you need to think about who you represent (Clue: the constituency that put you there is not the correct answer).
    • Many boards focus on risk (at the expense of future performance, value creation and shareholder wishes) far too much.
    • All boards have a culture, but not all board cultures are aligned with corporate culture.
    • Groupthink is an ever-present problem for boards. Diversity can help.
    • The highest standards of integrity and probity are crucial, and especially so for the chairman. If either of these are compromised or perceived by others to be compromised, then the director concerned needs to leave the board, immediately.
    • High levels of trust between directors and with the chief executive are crucial, to provide a suitable foundation for vigorous debate to occur.
    • Boards need reliable / accurate / unfiltered information to make informed decisions. That which is received via the chief executive is, often, biassed in some way. The panel thought board–staff conversation was to be encouraged (within an agreed framework or protocol) as a means of eliciting a more complete picture.
    • "What happens in the boardroom stays in the boardroom".
    My experience, both as a serving director and as a silent observer is that the characteristics listed above are probably necessary to board effectiveness. However, they are by no means sufficient  nor do they necessarily guarantee business performance outcomes will be achieved.
    I was surprised that little attention was paid by the panel to time splits (compliance / monitoring / forming future strategy) or to the importance of strategy as a board agenda item. This would have been useful guidance for serving directors. However, it is probably a touchy subject. Most directors 'know' how much time they perhaps should spend on strategy (and they'll 25–40 per cent if asked), whereas most boards actually spend far less time on this activity (typically five per cent). Perhaps this discrepancy is a source of embarrassment to directors and, therefore, it does not get discussed. Notwithstanding this, this discussion as probably the most useful of the conference to date—because it was about boards and what boards [should] do (ie. corporate governance).
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    ICGN'15: Is it time for a holistic review of financial market regulation?

    Accountability Governance
    The topic of the first plenary of Day #2 of the ICGN conference was whether the time had arrived for an holistic review of the financial market regulatory framework. This question was timely because most of the standard 'hard law' responses (to failure) have done little more than to increase the compliance burden that companies needed to deal with. The panel was quick to acknowledge this. It suggested that an holistic review was needed, and warned that genuine change would only occur if several desirable behaviours (I'd call them 'social commitments') were embraced alongside the hard law responses. The following social commitments were discussed:
    • Trust (between all participants)
    • Ethics and integrity
    • A social compact (to behave well)
    • A positive culture
    This discussion was as interesting as it was disappointing. To the average man in the street, an holistic framework incorporating hard rules and social commitments makes good sense. The disappointment was that the discussion was even needed. Clearly, some boards remain reluctant to make (let alone embrace) the social commitments. Given this, it is little wonder that 'big business' has such a poor reputation amongst the general populace.
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    ICGN'15: On global governance reform

    Accountability Conferences Ethics Governance
    Sophie L'Helias, Senior Fellow, Governance at Governance Board chaired a very interesting panel discussion. The panel was asked to discuss whether corporate governance had progressed or regressed over the last twenty years (since ICGN was formed). The opening observation was that much had changed, yet much remained the same:
    • Investors hold more power now than they did twenty years ago. Shareholders—institutional investors in particular—now know they can exert influence and many are starting to take this role quite seriously.
    • While activism brings its own challenges (including battles during proxy season), the notion of trying to hold a company and its board accountable for company performance is something institutional investors and smaller shareholders are increasingly aware of.
    • Transparency, accountability, fairness and responsibility are four key principles that feature more often now than in the past. However, the application of such principles is by no means universal.
    • The conceptualisation of corporate governance remains, in the main, one of a policy framework within which shareholders seek to exert influence over performance and outcomes. [note: In this regard, the investor community seems to be some distance behind the research that suggests corporate governance is far more than a structure or a process or a policy framework.]
    • Calls for 'responsible investing' and responsible use of the three capitals—financial (money), human (people) and natural (environmental)—are much more prevalent than ever before.
    This first panel session of the conference provided an interesting opening play, upon which later discussants could build (or otherwise!). The main takeaway for me was that shareholders and boards need to 'grow up'. Looking over the fence at each other (and, in some cases, simply ignoring each other) is not a healthy context for either productive ownership or effective control. Boards were created to bridge between owners and managers, yet many boards seem to be far more interested in pursuing their own interests and priorities (than acting in the best interests of the company or the shareholders). While we appear to have come far, we still have much to learn.
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    ICGN'15: Official welcome

    Conferences Governance Performance
    Alderman Alan Yarrow, Right Honourable The Lord Mayor, City of London provided the official welcome address straight after the ICGN AGM. Yarrow's speech was short and sharp, and it was delivered with great enthusiasm. Looking back over the last twenty years, Yarrow observed that while much appeared to have changed in the corporate governance world, much more had not. He went on to suggest that, with the benefit of hindsight, many seemingly good decisions made in good faith actually had unintended consequences. For example, many of the reforms introduced in the 2008–2010 period in response to the GFC did not deliver the expected benefits. Rather than tidy up company operations and reporting regimes, they have decreased liquidity, increased the rate and extent of change; and, increased the volatility of markets. An enlightening observation.
    Baroness Neville-Rolfe spoke after The Lord Mayor. Neville-Rolfe is a recently re-elected Conservative MP in the British House of Commons. Her speaking engagement at ICGN was her first 'outing' (to use her word) since the election results were confirmed. She claimed to be in listening mode, to find out what was going on and to learn about emerging trends in the world of commerce. More specifically, the Baroness invited the corporate community to express its view and to make recommendations. However, the Baroness was not without opinions herself. Having issued the invitation, she went on to suggest that the following attributes are important for 'good governance'.
    • Help determine and contribute to the enterprise's success
    • Ensure fairness (reigns)
    • Promote transparency
    • Require CEO remuneration
    Together these two speeches were as wonderful as they were brief. They set the scene for the conference very well. I could have listened to these two speakers for longer, but sadly their time was at a premium.
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    ICGN'15: AGM summary

    Conferences Governance Performance
    If you are anything like me, Annual General Meetings do not normally feature as compelling events in your calendar. AGMs are often boring sequences of compliance-oriented voting, with little if any inspirational or aspirational commentary. Most of the time, I give AGMs a wide berth. However, as a new ICGN member, I decided to attend the AGM to hear the discussion, and I'm pleased for the experience. The chairman, Erik Breen ran a good meeting and every resolution was carried.
    On first contact, the ICGN feels like 'just another' corporate governance body. However, having listened through the AGM, I was pleasantly surprised to find:
    • ICGN is a genuinely international network of like-minded professionals, the usage of network (cf. organisation) being intentional
    • The multi-national context of ICGN provides opportunities to engage regionally- and nationally-based entities in discussions in ways that would not otherwise be possible
    • That ICGN has a  clearly defined (and annunciated) aim, which is to influence (policy), communicate (networking) and inform (provide guidance and education)
    While the ICGN was birthed out of the investor community (53% of the membership today is from this community) to support multi-national investment activity, a trend away from investor dominance is readily apparent. The organisation has a clearly stated goal of reducing the dominance of the investor membership increasing corporate and individual membership. 
    One minor disappointment was that there was little mention of individual directors during the AGM. Rather, the focus was on the investor/advisor community—indicative language being 'investors', 'advisors' and 'the company'. This led me to wonder about the ICGN's commitment to championing the task of directing and to holding directors accountable for doing their job properly.
    The outgoing deputy chairman and finance committee chairman, Frank Curtiss, was recognised for his significant contribution of many years. Anne Simpson received the ICGN Award having been nominated by Sir Adrian Cadbury and Nell Minnow amongst others. This very popular decision was well received by the assembled membership.