Tags

  • Published on

    Board effectiveness is possible and sustainable

    Accountability Decision Making Governance Phd Research Strategy
    Several months ago, the editors of Ethical Boardroom contacted me to write another article for their magazine. Previously, I'd written articles on governance issues in New Zealand and Australia and accountability; and, provided a commentary piece on internships. Given a free reign (within the bounds of editorial deadlines), I agreed to share some observations about the boards of social enterprises and, in particular, explore board effectiveness—all based on recent experiences in boardrooms and with members of social enterprise boards. The article is now available here.
    The commentary, which has generated considerable interest and feedback—including amongst directors and boards of profit-seeking companies—suggests that the 'secret' of effective board contributions lies in board members looking ahead and working together towards an agreed goal.  My doctoral research bears this out: the board's ability to exert influence from and beyond the boardroom (including over firm performance) seems to be contingent on the board maintaining a close involvement in strategic management, and a few (I found five) characteristics of directors and social interactions being expressed as the board does so.
    If the large number of people that have already seen the article and asked questions is any indication, the topics of board effectiveness and sustainable business performance are of great interest. The feedback has been gratifying. Thank you. If you want to learn more about board effectiveness; the underlying 'performance' characteristics of boards; or, how to embrace a high performance board environment, please get in touch.
  • Published on

    Do you hear the people sing?

    Accountability Decision Making Governance Performance
    I'm in London this week, meeting business leaders and board advisors, listening to their stories and sharing a few of my own. Already, after just 24 hours, a strong theme is starting to emerge. A drum that I have been beating for several years now can be heard reverberating amongst the streets of the City and beyond.
    Though faint at first, expectations are starting to move. Increasingly, shareholders, commentators and even some directors are beginning to voice concerns about what boards actually do. Many boards have operated in a perfunctory manner for years—the oversight of management has been a convenient diversion. However, the amount of the red tape boards have to deal with is lifting the stakes. The expectations on boards are rising. Last week, in Brisbane, many of the 220 directors that I addressed said that boards should spend more time on firm performance. Today, in London, the suggestion that compliance-based regimes do nothing for value creation and that boards need to allocate much more time to strategy was voiced in every meeting I attended. Next week, in Paris, who knows?
    Are we on the cusp of a paradigm change? Is the stirring anthem of the république gaining momentum? Perhaps. That directors are now realising that more time must be invested doing what shareholders appointed them to do—setting strategy and steering companies towards agreed performance goals—should be music to one's ears. Might we even be witnessing a 'back to the future' moment, as directors and boards embrace Cadbury's plea: that corporate governance is the means by which companies are directed and controlled, with a performance objective in mind? I hope so.  
  • Published on

    Moving beyond 'USP' and 'point of difference'

    Decision Making Governance Leadership Performance Strategy
    A couple of weeks ago, I met with a recently appointed chief executive who wanted to test some ideas in his quest to identify the company's USP (unique sales proposition) and, therefore, its point of difference. Paul's concern was that the company was operating in a crowded and competitive marketplace without a coherent strategy, and that success was dependent on standing out. We had a fascinating conversation—the essence of which is repeated here because Paul's question seems to be topical (I have just come off a phone call with a chairman (different company) who posed a very similar question). ​
    I asked Paul to describe the company and summarise the present reality. He recounted the company's past successes, current capabilities, market position and strong product line. Then he said that market share had drifted downwards in recent years. After sipping my coffee, I asked Paul why the company existed. He looked blankly at me as if I had come down in the last rain shower. "To make a healthy profit, of course".
    "Of course", I said. "I expected to hear that. But doesn't every company have that goal? How does being different serve this goal, especially when barriers to entry are so low these days that difference is only temporary, at best?
    "Apart from serving our collective egos, that you have something different (or even unique) to offer is of little consequence to most busy people. It matters even less when a competitor offers something seemingly similar for a lower price. When this happens, it's a race to the bottom—and that's dumb. Shouldn't your motivation be to make a difference and help your clients achieve their goals? With this in mind, might a better objective be to identify your company's 'point of impact'? In my experience, people choose to embrace your ideas and buy your product because they believe in you and what you represent. Imagine the response if MLK had uttered "I have a plan"—that speech would have been a footnote, gathering dust in the annals of history. But he didn't."
    The conversation moved to other matters. Then, as we finished our coffees, Paul smiled knowing that he had some work to do. I wished him well and we parted ways.
    Do you know why your company exists? The next time your board and executive gathers to review strategy and set future goals, start by asking this question. I respectfully suggest that you don't move on until a lucid answer is both determined and agreed.
  • Published on

    Proposal for shareholders to approve management work. Why?

    Accountability Decision Making Ethics Governance Leadership Performance
    Image description
    News has emerged from Volkswagen this week that the board has proposed that shareholders formally approve the work of the company's top management team. Wow, I'm amazed. Isn't that the board's job?
    The board exists as a decision-making proxy for absent shareholders and, in so doing, the board should provide oversight of management including of its work. Regular board meetings and other board–management interactions provide the appropriate forum for this reporting, verification and monitoring to occur. In contrast, annual meetings provide a forum for the board and management to provide an account of the resultant company performance to the shareholders.
    That the Volkswagen board of directors is recommending that the work of management is approved by the shareholders creates the impression that the board is not doing its job of overseeing management adequately. While this could be an obfuscation (following the trouble the board and management found itself in over the emissions scandal), if the board is attempting to shift responsibility (for oversight of management away from the board) it needs to be called out. The shareholders then need to determine whether the current board is delivering value or simply defending a position—it's own.
  • Published on

    What is going on with New Zealand's largest company?

    Accountability Decision Making Ethics Governance Leadership Management Performance Strategy
    Picture
    After several years of paying high milk prices to its farmer-suppliers, Fonterra has hit hard times. International demand for milk products has slumped. On the supply side, prices paid to farmer-suppliers have tumbled. Some have said the problem is primarily related to changing demand especially in China, whereas others have suggested that Fonterra is complicit having stimulated supply to 'feed' its massive processing plants. To make matters worse, Fonterra has started losing farmer-suppliers to its competitors and it seems to be exercising "considerable discretion" with payment terms as well. 
    The latest commentary, an interview on Paul Henry's breakfast show today, lay out some of the challenges in plain English. Click here to watch the video clip. (disclosure:  James Lockhart is my doctoral supervisor, but had no prior knowledge of this interview.)
    The situation, which has been brewing for a several years, is messy to say the least. Other companies including Tatua and Open Country Dairy seem to coping much better. This begs several questions including whether the Fonterra board and management are actually in control; whether the corporate strategy is sound or not; and, whether the company has the financial and managerial resources to respond effectively. While I'm nowhere near close enough answer these questions, the old saying "where there's smoke there's fire" seems to apply.
  • Published on

    Would you like to learn more about #corpgov and board effectiveness?

    Conferences Decision Making Governance Leadership Performance Research Speaking Engagements Strategy
    Are you based in or near London or Paris? Do you want to learn more about board effectiveness, corporate governance and how boards can exert influence from and beyond the boardroom?​ ​If so, please read on.
    In a few weeks I will be visiting London (24–31 May) and Paris (1–4 June) to speak with directors and trust board members about board practices, board effectiveness and emerging trends in corporate governance; share the results of my latest research; attend meetings; and, to present a paper at the EURAM conference.
    ​If you have a question (perhaps along the lines of these ones below) or a request and would like to take advantage of my proximity, please get in touch. I'd be delighted to hear from you and to schedule a meeting. ​
    • Do you want to increase the effectiveness of your board?
    • Would you like to know about my latest research on boards and firm performance?
    • Do you have a question about boards, board practice, corporate governance or a related topic?
    • Do you want to explore how to apply some of the suggestions I've shared on Musings?
    • Are you looking for a speaker to address an event or conference sometime in the next 12 months?
    If you've answered 'yes' to any of these questions...you know what to do. I am at your service.