May 17th–23rd: Familiar territory—living on the land of the long white cloud.

To see earlier pictures: May 1st–2nd, May 3rd–9th, May 10–16th.

May 17: Left, only.

May 18: Announcing one’s arrival.

May 19: Afternoon [de]light

May 20: An early-morning chauffeur-ride to client engagements, for the third day in a row.

May 21: Autumnal hues

May 22: Ah, those long white clouds…

May 23: What picture are you in: Life? Work? Play?

I have been based in Johannesburg this week, working with boards and directors in both South Africa and neighbouring countries. What has struck me is their entrepreneurial spirit: their ambition to realise the full potential of the companies they govern. That most are looking beyond compliance-based orthodoxy, for clues to help them get ahead, has been refreshing.

While conversations have been wide-ranging—from board structures and compositions, to enquiries about the Strategic Governance Framework, corporate governance codes, board pack designs and board meeting frequency—one topic has stood out: artificial intelligence.

On AI, everyone wants in it seems, but not necessarily to deploy AI tools and agents directly in the boardroom (although some are). Instead, having heard of my involvement with AI since 1984 (I studied the topic and built an ‘engine’ at university), they wanted to hear my perspective on several macro issues—especially how companies might gain, and possibly even sustain, competitive advantage.

My responses to directors have been fairly candid:

• Maintain an open mind.
• Technical advances are racing along. What was bleeding edge yesterday, may well be mainstream soon, or even passé.
• Don’t try to become an expert—learn to ask great questions of experts.
• Ensure projects that incorporate AI tools are tested against corporate strategy for alignment. A good question to ask is something like, “How will this project advance our strategic ambitions?”
• The business case to secure efficiencies and improve effectiveness within business operations, and in the preparation of board reports and administration of board materials, is fairly strong.
• Encourage staff to try stuff, but in your capacity as a director, be vigilant. Ensure the outputs produced by the AI tools (agents) being trialled are reliable and consistent before committing capital. If reliability is questionable, the likelihood of the board making high-quality decisions is low.
• Judgement, reasoning and intuition remain, exclusively, human capabilities.
• Any policies developed need to be policies, not procedures dressed as policy.
• Be cautious of inflated claims and overzealous consultants and sales people!

The appeal is great, but so is the hype, so keep Wittgenstein’s aphorism close:

These are my thoughts, this week. As I listen, read, and learn, I may change my mind. How do you see the so-called ‘AI-opportunity’ emerging?

I've been involved in several discussions about risk management recently, including one at a Business Leaders Forum hosted by Grant Thornton. Most of the discussions have centred on the struggles that Boards face in managing risk—and more specifically, ensuring they are adequately informed. In listening to people, I've discovered many Boards struggle in this area. 

• How do Boards know all relevant risks are being notified?
• How big (or small) should risks be before they are reported? What is relevant?

Let's tackle the second question first. In most organisations, management has the responsibility to implement strategy. Therefore, they also have the responsibility to identify and manage risk. In doing so, management should raise (with the Board) all risks that have the potential to compromise their implementation of strategy—together with mitigation plans. Anything with a strategic impact should be reported. If Boards are not receiving relevant risk information, they should go looking for it.

That leads nicely to the first question. In my [direct though anecdotal] experience, most risk information tends to arrive via management. Though the common pathway, it is not without its problems. Many Risk Managers report up though the CEO. Even external Auditors tend to be retained by the CFO and report via the CEO. And therein lies the problem. Who decides what gets reported to the Board? Why would a CEO notify a risk that exposes him/her to extra work and/or uncomfortable questions from the Board? Oh, the foibles of human nature... 

Whereas most Boards receive risk information via the CEO, several of the high performing Boards that I've worked with seek and debate risk information directly—from staff, customers, outside advisors. They also do so in the context of strategy. Boards that open several channels are more likely to be adequately informed and, consequently, be better positioned to assess strategy implementation and ensure risks are managed effectively.

Boards need to ensure that they are adequately informed, and the best way to do that is to work directly with a range of internal and external sources. While this approach sounds straightforward, it has the potential to cause angst amongst management if not handled well. The CEO should be kept fully informed of risk discussions, and, ideally, be present when external advisors make presentations to the Board.

One final point. If risk mitigations are not being implemented effectively, and the achievement of strategy is being compromised as a result, then the Board should replace the CEO.

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.

I agree with Baker and Mowbray. Governance is a socially dynamic phenomenon, with many variables and much complexity. Numerous researchers and practitioners have investigated structural and composition factors over many years. More recently, world-class governance researchers, including Leblanc, Huse and Nicholson, have investigated behavioural and process factors. To date, the research findings have been inconclusive, and causality with performance is yet to be established.

Despite flights of fancy from some commentators, slow progress by researchers, and much frustration all round, the search for a link between governance and company performance is of enormous practical importance. Therefore, efforts to understand the mechanisms within the governance phenomena, and any relationship with company performance, must continue. However, the research agenda much be changed. Attention must move away from consideration of individual characteristics—toward a holistic consideration of governance—if further insights are to be gained and any clear understanding is to be achieved.

My doctoral research efforts attempt to build on Leblanc and Nicholson's work. I plan to use a longitudinal multiple-case study approach (to understand the processes, behaviours and dynamic interactions within the governance system) to focus on the way Boards make decisions. Strategic decision-making has been postulated to be an important factor in the governance–performance relationship. If this is correct, a link between a strategic decisions and subsequent improved company performance should be apparent, after some longitudinal delay. The challenge will be to determine whether or not strategic decision-making can be attributed to the Board.

So where does this leave us? I certainly don't have any silver bullets, and progress is likely to be frustratingly slow. Boardroom diversity is important, however I suspect a focus on decision-making and related factors will reveal more about board performance than arguments about the number of women at the board table. Let's push on.