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    Paper accepted on Understanding Governance Workshop programme

    Conferences Governance Leadership Research
    I am thrilled to announce that I have been asked to attend and speak at the Understanding Governance Workshop, to be held in Barcelona, Spain, on 11–12 June, 2015. 
    The purpose of this workshop is to bring together leading thinkers to discuss contemporary directions in governance; to challenge the status quo, in terms of how boards work and how research is conducted; and, to give voice to innovative critical research. My paper, entitled "Executive-controlled boards, power and influence: A reality check", fits the second and third categories. Thank you to the Workshop organisers and paper reviewers for considering this contribution worthy to be included on the programme.
    With this invitation, my conference schedule for June is now confirmed, as follows:
    I will be in the UK and EU from 2 June through 20 June, and am available for other advisory, speaking or facilitation engagements between the conferences. I'd be happy to discuss corporate governance, board practice, strategy or related topics; including the results of my latest research. If you wish to take advantage of my proximity, please get in touch.
  • Published on

    ICAEW posts excellent discussion on capital market changes and impact on corporate governance

    Accountability Governance Leadership Performance
    The Institute of Chartered Accountants in England and Wales (ICAEW) has recently published an informative series of documents to help directors and executives respond to changes in capital markets and how they affect the foundations of existing corporate governance frameworks. The material is great. Here's a series of links to the source documents:
    While the intended audience is the ICAEW membership, the commentaries are useful for company leaders in other jurisdictions—if not directly then certainly as discussion starters around board and executive tables. If you are based in England or Wales and have any technical questions, please contact the ICAEW. If your business is based outside the UK and you would like to organise a facilitated discussion to explore how to take advantage of the suggestions, I'd be happy to help.
  • Published on

    The uncooperative Co-operative Group

    Accountability Governance Performance
    A couple of days ago, I posted this tweet, a thinly-veiled criticism of some unseemly behaviours in the Co-operative Group boardroom. The hashtag #hubris was subsequently associated with the tweet, perhaps suggesting that others had similar concerns over what is going on. Leveraging the recent safe deposit box raid in Hatton Garden, Peter Hunt suggested that the "great Co-op Group heist" was a "mighty stitch-up". Strong words indeed. Now Jill Treanor has urged chairman Allan Leighton to reverse the board's plan to put forward three (of it's own) candidates for three vacant positions. This has all become quite messy—it smells of nepotism, egos and power games.
    That the incumbent board (or factions within the board, at least) is clinging to power by putting forward three of its own nominations for the three vacancies is hardly good practice. However, that shareholders let the board get away with it is tantamount to dereliction of the shareholder's 'duty'. 
    Normally, shareholders would be expected to contribute nominations, and then to select directors through some agreed election process. In this case, the tail (certain directors) seems to be wanting to wag the dog (the shareholders). If the shareholders are interested in the performance of the business and in certain outcomes being achieved, they need to assert some control over the nomination process. However, if the shareholders remain passive, the board is free to act as it sees fit—within the bounds of the law and the Co-operative Group's constitution, of course.
    One final point. If the shareholders do wish to act, and any of the incumbent directors resist such moves, the shareholders could consider taking the somewhat bolder step, of replacing the uncooperative directors. The good of the company is at stake after all—and let's not forget who the company actually belongs to.
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    We talk about value creation, a lot, but what is it?

    Accountability Governance Leadership Performance Strategy
    Much has been written about the notion of value creation in recent times. The phrase is used in commerce, especially by directors, managers, consultants, researchers and facilitators, amongst others. If you listen into board meetings, discussions between managers, sales meetings, product development workshops and planning sessions, questions like "Does XYZ add value?', "How is value created?" and "What is our value proposition?" are likely to be asked. These pop up often, which suggests that value creation is recognised as being something important to be striven for. However (and alarmingly), different people have rather different ideas of what value creation is or might be. Worse still, their ideas are often based on incorrect assumptions!
    We talk about value creation as we would an old friend, yet in many cases we lack a common understanding of what 'it' is! Here's one suggestion, from the Reference for Business:
    Value creation is the primary aim of any business entity. Creating value for customers helps sell products and services, while creating value for shareholders, in the form of increases in stock price, insures the future availability of investment capital to fund operations. From a financial perspective, value is said to be created when a business earns revenue (or a return on capital) that exceeds expenses (or the cost of capital). But some analysts insist on a broader definition of "value creation" that can be considered separate from traditional financial measures. "Traditional methods of assessing organizational performance are no longer adequate in today's economy," according to ValueBasedManagement.net. "Stock price is less and less determined by earnings or asset base. Value creation in today's companies is increasingly represented in the intangible drivers like innovation, people, ideas, and brand."
    This paragraph exposes the nub of the problem. We assume we know what it is. Several simple but incredibly powerful questions need to be asked and answered before business leaders can hope to allocate people and resources effectively in pursuit of business goals:
    • Who is the recipient of the intended value?
    • What is valuable to them?
    • How can this value be created?
    • How will it be measured?
    Rather than make assumptions (think how often have you heard sales people use "unique value proposition"), boards and managers need to seek clear answers to these questions from the beneficiaries of the value that is to be created (because value is determined by the recipient not the creator). Expect to hear several answers to these questions, because 'value' means different things to different people.
    Starting at the 'top' of a company, boards should sit with shareholders and ask (or propose, if the shareholder is unclear) what 'value' looks like to them. Responses might include increased share price, a long-term market position or business model, increased market share or something completely different. This is the 'core purpose' question. Similarly, managers and staff need to sit with customers (or prospective customers) and ask the same question. Staff also need to be asked: their motivations are likely to be different from those of shareholders and customers. 'Great solutions' that 'add value' to customers / staff / shareholders are highly unlikely to do either if customers / staff / shareholders do not recognise, or are not interested in, the value that is supposedly being offered. As with strategy, boards need to take the high ground, by ensuring that value created for one recipient does not erode value elsewhere. Boards need to become crystal clear about value in a holistic sense: what it is, who the recipient is, and how it is created. 
    Once the value matrix (what and to whom) is understood and agreed, the answers need to be communicated in a clear and concise manner, so that effort and expectations can be aligned accordingly. Finally, the board has an ongoing role: to ask probing questions at board meetings, to ensure the required alignment (between purpose, strategy, strategy implementation and value) is actually in place and that the expected value is actually being created and delivered to the intended recipients.
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    Short-termism: cultural issues need cultural answers not more rules

    As westerners, we live in a world of instant gratification. It's an integral part of our culture, particularly in the USA. We are introduced to it as babes, and we become more adept as we grow into adulthood. Whether it be toys, mobile devices, motor cars, houses, share portfolios or some other expression, we want it all and we want it now. The rock band Queen sung a song about it. Photographers have given it a name: Gear Acquisition Syndrome ("Do you have GAS?").
    Instant gratification pervades business as well, although some writers have lamented the consequences of short-termism in business: sustainability is the oft-cited casualty. While many of their arguments have substance, most of those who write about the problems of short-termism in business are simply shouting into the wind. Lawrence Fink makes the point deftly.
    If the short-termism is a problem that needs to be fixed (because its effects are no longer tenable), two options stand out: more rules or different culture. The current practice, of creating more rules every time a major breach occurs, simply serves to impose more cost. Also, people find ways to get around rules. We need to get off that carousel: it's going nowhere. The better answer is probably to tackle the culture. Any volunteers?
  • Published on

    Boards: ask different questions, and delight in the possible

    Accountability Governance Leadership Management Performance Strategy
    We live in a paradoxical world. Rates of change are increasing, yet we want certainty. Times to market are reducing, yet we still want instant gratification. Zafer Achi and Jennifer Garvey Berger explored these paradoxes recently. They acknowledged that searches for certainty are "only natural", and that managers spend much of their time "managing the probable". However, the world is a social place. People make choices and things change, often unexpectedly. Consequently, the best laid plans can fail completely, leaving managers exposed and potentially out of a job. Achi and Berger suggest that the frame of reference used by most managers, of managing the probable, is a big part of the problem. Rather than managing the probable, they suggest that managers need to "lead the possible". They offered three recommendations to help managers make the change (see article for details):
    • Ask different questions
    • Take multiple perspectives
    • See systems
    These recommendations have the potential to change the way managers think, make decisions and lead. While reading the article, I couldn't help but think that the recommendations also have application in the boardroom. However, the adoption of 'possibility' thinking would up-end board practices in many cases. Boards that spend most of their time monitoring past performance and controlling the activities of the chief executive would probably be quite uncomfortable, even though the recommendations are neither earth-shattering nor inconsistent with the role and responsibility of the board (to maximise performance in accordance with the wishes of shareholders). Maybe its time for directors to take stock.