In 2018, before mankind was tipped upside down by a global pandemic, the chattering class had been very active, responding vociferously as news of various corporate failures and missteps came to light. Carillion plc and the Institute of Directors (both UK), Steinhoff (South Africa), AMP (Australia), and Fletcher Building (New Zealand) were topical examples. The consternation and angst was palpable.
That seemingly strong and enduring organisations were failing (or suffering significant missteps) on a fairly regular basis concerned many; for the societal and economic consequences significant. Many commentators (primarily, but by no means exclusively, the media) responded by berating company leaders (specifically, the board and management), placing ‘blame’ squarely at their feet. This is a reasonable: ultimate responsibility for firm performance lies with the board after all.
Fast forward to 2026, what has changed? Well, if post-Covid failures are any indication, not much. The Post Office scandal in the UK, accounting firm PwC, and Port of Auckland (New Zealand), have been in the news for all the wrong reasons. Wilko (UK), GDK Group (Australia) and Du Val Group (New Zealand) are three amongst many that have collapsed under large debt burdens. Fletcher Building has suffered again too, which suggests it may not have learned from its earlier experiences.
Amidst it all, calls for tighter regulation and stiffer codes abound. This, despite the geographical spread of corporate failures implying that local statutes and codes are probably not a significant contributory factor. Examples of compliance-driven responses include the King V code (South Africa), ISO 37000 standard (global), and Better Boards Act proposal (UK).
The responses of boards I have been invited to sit with in recent months have been telling: some have circled the wagons, to defend against accusations that they may have been negligent; some have diverted blame elsewhere, such as, management or regulatory burden; and, some board directors have simply walked away, the burden too great. Others have decided that focussing attention on what matters (engaging strongly, in pursuit of sustainable performance), is what matters most.
Given the chatter in business and social circles, and in the media, it would be easy to join in; to berate all and sundry. But let’s not go there. Instead, it is probably more productive to identify activities and behaviours that may have contributed to the situations, in search of learnings:
- The role of the auditor: Most if not all of the firms mentioned above were attested by their respective auditors to have been reported accurately and operating satisfactorily. Yet, clearly, some were not. Whether the auditors were in cahoots with management, or the board; failing to discharge their duty to provide an accurate and impartial assessment; or, even, inept, is a matter of speculation in most cases. Regardless, something in the audit world is amiss. To date, few commentators have called out the audit profession as being an accessory.
- Business knowledge: Remarkably few of the directors of the companies identified here seem to have understood the business of the business they were governing at the time. Often, directors are recruited for their technical skills (notably, legal and accounting expertise) or extant relationships. Relatively few had significant experience in the sector the business operated in. This is consistent with global research by McKinsey, which revealed one director in six possess relevant knowledge. How any board can make an informed decision when most of its directors do not understand the wider operating context well is perplexing.
- Director engagement and behaviour: Most of the directors of the companies noted here had a classical conception of board work and engagement: They read their papers and attended board meetings, but did little else. The relationship with management was distant and aloof; directors rarely engaged with each other or the company between meetings; and they saw their most important contribution as being the hiring or firing of the chief executive—all characteristics of a board focussed on control, not governance.
- Board involvement in strategy: The boards of all of the firms identified here relied heavily on management to prepare strategy. Directors backed themselves to ask questions and respond to proposals when they were presented. Some delegated strategy approval to management. While most directors appear to have been well-intentioned, the resultant outcomes tell the story. A heavy reliance on management is, clearly, unwise. What of “trust, but verify?” If the board is not involved in the development of strategy in some way, as researchers and commentators increasingly recommend, the likelihood of the board understanding what it is being asked to approve and subsequently providing adequate steerage and guidance is low.
If boards are to learn from the failure cases noted here (amongst others), the first and, frankly, most pressing priority is to mitigate apparent weaknesses and focus on what matters. My research suggests that sustainably high levels of firm performance are possible, but they are contingent on several factors, including:
- Ownership: The board is the apex decision-making authority in every company, meaning it is responsible making the very biggest decisions. Consequently, if the board is to have any influence over performance at all it needs to take responsibility, directly, for the big calls.
- Purpose: If performance is to be achieved and sustained over time, all contributors need to understand their role and why it is important. Sadly, many directors bypass the ‘why’: they do not understand (and, therefore, cannot describe) why the company exists (activity trumps reason, it seems). Even if they can, directors often do not hold one view. Agreement on why the company exists—its purpose—is crucial: it provides the touchstone against which strategy is formed, all other decisions can be made, and performance assessed.
- Strategy: Purpose alone is insufficient. Strategy is the course of action required to achieve the agreed purpose. While no one model (of strategy development) fits all situations, the board should roll its sleeves up and get involved in the formulation of strategy, together with management.
- Effective boardcraft: This is the biggie. My article, Towards more effective corporate governance, paints the picture.
Some commentators have suggested that the success of the board is entirely a matter of luck. I disagree. While outcomes are not guaranteed, my doctoral research and experience supporting boards across five continents suggests boards can exert influence beyond the boardroom, including on firm performance. However, this is contingent: they need to focus on ‘the right things’.
Unless and until boards start taking their responsibility for the performance for the company seriously, the hope of much changing remains, sadly, dim. What is your experience?
