Prof. Silke Machold delivered the second keynote talk at the International Governance Workshop in Barcelona. Machold, who has been researching boards for many years, is a researcher that I admire—for she has been able to gain access to boardrooms to observe boards in action. Here's a summary of her rather wide-ranging commentary on companies and corporate governance:
  • If we look back through history, a steady progression from city states, through church states to nation states is apparent. The latest development is large corporations, some of which are as large as nations (Apple is as big—in revenue/GDP terms—as Austria, for example). While size often begets influence, scale does not necessarily mean that corporations are 'good' or beneficial to society.
  • Myths: That the shareholder maximisation value is always 'good', and that shareholders are owners (I commented on this recently). If shareholders were owners, then they could enter the place the company operates from and they could take possession of the company's assets. Just imagine doing that if you were a Walmart or Tesco owner—you'd be arrested for theft or shop-lifting!
  • The strong focus on earnings, and board and managerial propensity towards short-termism is, in essence, 'fishing with dynamite'. While it is this dangerous, what's worse is that it is a self-fulfilling prophecy.
  • They way we tend to look at boards—as decorations (Mace, 1970) or as engaged actors (Huse, 2007)—is somewhat simplistic. Machold has observed boards that are or have been both active and passive at different times.
  • In respect of conflict in the boardroom, Machold called out two different types of conflict, one of which is healthy and the other which is not. Cognitive conflict (thinking about and debating problems is good) whereas affective conflict (debating personalities and emotions is destructive). Boards and management teams need to discover how to pursue CC.
  • Machold walked into the diversity discussion by suggesting some types of diversity are good and others are probably not as good. Personality diversity is probably unhelpful, because the tendency is to focus on personality differences rather than debate problems. Machold suggested that boards and recruitment committees should include personality profiling within their recruitment process because better cognitive debate is more likely to occur amongst directors with similar personalities (than directors with a considerable personality diversity).
Machold summarised her talk by suggesting that much has been said and claimed over the years, and that much of it had led to people getting quite excited about factors and attributes that, quite frankly probably are immaterial—thus the title of her talk: Much ado about nothing.