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    (Mis)counting the cost?

    Accountability Complexity Decision Making Effectiveness Integrity Tough Questions
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    Like many people, I've been reading reports of the spread of COVID-19, and the impact it is clearly having on both the health and well-being of communities, and the economy. The number of confirmed cases is growing. Daily reports in New Zealand show confirmed and probable cases (April 3: 772 cases, 96 probable). Globally, the number of deaths attributed to COVID-19 also continues to climb, even though the vast majority of the deceased had comorbidities.
    Stepping beyond the human elements for a moment (anxiety, cabin-fever, ambivalence, physical distancing), aspects of the reportage have confused me (and others as well, I know), to the point I wonder about the underlying motivations of some of the reporters.
    ​Consider the case count: How many people have or have had COVID-19 in New Zealand? The following data lifted from the Ministry of Health website:
     
    Cases
    Probables
    Total
    April 2
    723
    74
    797
    April 3
    772
    96
    868
    The New Zealand media is reporting the total (797, 868) as the number of cases of COVID-19 in New Zealand. But, when the Ministry of Health's criteria is applied (definition of a probable case, here), the actual number of cases is the lower number (723, 772). The WHO, too, is reporting these same official numbers.
    The question that emerges from this analysis is straightforward: Why does the media persist in overstating the case count? Is it ineptitude, bias, or something more sinister?
    Fatalities: Official reports from around the world have been clear: many (most, but perhaps not all) of the patients who have died had comorbidities at the time of death. Was COVID-19 actually the cause of all the reported deaths (as the media has implied), or was it a contributory factor alongside other factors?
    In and of themselves, these misrepresentations by the media are probably of little consequence—until you consider that they may be indicative of a bigger problem that does merit attention.
    If New Zealand is to climb out of the hole it is now in, some bold decisions are needed. Decision-makers need to think strategically, not tactically. There is widespread agreement that the social and economic costs of the measures currently being taken in New Zealand in response to the COVID-19 outbreak are going to be very high. The effects of the community lockdown, widespread economic destabilisation and imposition of high levels of sovereign debt will probably linger for a long time. They may be generational.
    ​The decision to stop was easy; it has been made (although questions remain over whether the border is actually closed). The looming decisions concern when and how to restart. Ultimately, the quality of these decisions will be, to a large extent, dependent on the quality of evidence presented. If the government is to expedite the economic recovery, it needs to set ideology and worst-case models aside, and enlist seasoned, non-partisan critical thinkers to analyse the raw data, draw rational conclusions and present pragmatic recommendations. Without this, the real cost will continue to climb; a winter of discontent indeed.
  • Published on

    How does your board rate on the 'trust' scale?

    Accountability Governance Integrity Leadership Performance Societal Wellbeing
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    Trust is one of those social building blocks that is crucial for getting things done with others. Board work by no means exempt. When directors a faced with making strategically-important decisions, they must rely on information from and interaction with their board colleagues, the chief executive and any other advisors who may have been invited to contribute. Then, after consideration and having made a decision, the board needs to follow through, by ensuring the decision is implemented well. But, and sadly, the  levels of trust both between directors and with external stakeholder groups is often lower than what is needed for effective decision-making. The following comments, originally published in 2016 by EpsenFuller (subsequently acquired by ZRG Partners), make the point deftly:
    Board directors today face a variety of challenges. Whether it is a case of corruption or the increasing threat of cybercriminals, their performance in dealing with these issues is the subject of considerable attention, explained The Huffington Post (Jan. 25, Loeb). Investors, consumers and NGOs alike are looking to boards for accountability in terms of company performance. Yet, a recent study found that public trust in boards of directors is lower than that of CEOs. A mere 44 per cent of survey participants claimed to have trust in a company's board—five per cent less than trust in CEOs. Influential constituencies are demanding that boards perform at exceptional levels while maintaining distinct independence from company executives.
    That some directors do themselves no favours (through poor behaviour, malfeasance, hubris and  failing to complete actions, for example) is self-evident. But all is not lost. High levels of performance are possible—if all of the directors commit to working together (both as a board and with management) and reach agreement on the company's core purpose; the strategy to be pursued to achieve the agreed purpose; how performance will be measured; and the values that will underpin behaviour standards, decisions, and everything the company does and stands for.
    Perhaps if more boards embraced this mindset (working together), with the company's best interests to the fore, the trust problem that generates so much tension (not to mention column inches) would gradually become a thing of the past. Is this expectation worth striving for, or do you think it is too ambitious?
  • Published on

    On compensating directors...

    Governance Integrity Management Phd Research

    Should directors receive performance-based pay for their contributions?

    This is an interesting question. Performance-based pay has become commonplace amongst senior executives and sales staff in the last decade or so. The model is straightforward: perform well (by achieving agreed objectives) and get paid a commission, be awarded stock or receive recognition via some sort of bonus. Performance standards are generally set by a more senior manager. The system seems to work reasonably well. However, an increasing trends in recent years is the implementation of similar performance based reward systems in the boardroom. But is this smart? Do performance-based pay systems motivate the "right" behaviours amongst directors?

    Whereas management and staff are directly responsible for implementing strategy and achieving performance goals that are determined by a more senior party, the Board is not. In addition to their role being quite different (to determine strategy, monitor performance and manage risk), the link between what Boards do and company performance is tenuous, at best. Simply, we do not understand how Boards contribute to performance. Further, Boards are endogenous—they largely set their own agenda and determine the company's objectives. In establishing performance-based pay systems for themselves, Boards are immediately conflicted. One way of ensuring performance-based payments are made is to set artificially low targets (for example). I'm not sure this is a good way of maximising company performance, or motivating healthy behaviours, but it is a way of being paid(!)

    My preference is towards rewarding directors through fixed fee payments for their contribution. If they are contributing, they receive their fee. This would be the default. However, if they are not contributing effectively, this should become known through a formal Board review process. Shareholders should have access to review documentation, and only re-appoint directors that are contributing. 

    This sounds remarkably easy on paper, however the topic of today's muse is hotly contested amongst practitioners and academics alike. What's your view?

  • Published on

    Governance and professionalism: time to raise the bar

    Accountability Chairman Effectiveness Governance Integrity Management Societal Wellbeing

    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.

  • Published on

    Reading: Winning...an unhealthy obsession?

    Accountability Integrity Readings Societal Wellbeing Tough Questions

    Like hundreds of millions of viewers around the world, I have been watching the Olympics on television over the last week or so. Cycling, weightlifting and athletics are the sports that capture my imagination. The technical skill and mental capabilities of the athletes astounds me. How do they move so fast, throw so far, lift so high? In most cases, years and years of preparation go before a single moment, an opportunity to excel, to win.

    Winning is important to competitors, and to nations. You just have to look at the response of those athletes that expected to win but didn't. At what point does winning become an unhealthy obsession? Winning needs to be held in context. Is the ultimate goal to vanquish others, to prove a point, or to fully realise one's one potential?

  • Published on

    The humble apostrophe and pluralism

    Integrity Language Phd Research Societal Wellbeing

    I am no English scholar, but I am a bit of a stickler when it comes to grammar and punctuation. Take for instance the humble apostrophe. How often have you seen an apostrophe inserted in the word "it's" to imply ownership when "its" is correct? Another rather common mistake in business writing is the incorrect usage of the plural "are" following a company name. When a company (singular) takes an action, the company "is" acting.

    The incorrect usage of words, punctuation and grammatical constructs is a sign of sloppiness. It also creates an opportunity for miscommunication to occur. In today's technologically-equipped world, real-time grammar checkers should have all but eradicated poor grammar. Yet the evidence seems to show the opposite. The widespread influence of instant communication via email, text messaging and Twitter seems to have elevated speed (of response) over precision (of message).

    Think about the messages you have received in the last seven days. How many contained ambiguities or grammatical errors? Perhaps more importantly, how many messages did you misinterpret or misunderstand—to the extent that you needed to ask a question or double-back to check on a relationship? This might sound a little picky, but each poorly constructed message has the potential to reduce our productivity. And that brings me to the point. Isn't technology supposed to enhance our productivity? I'm sure it can, but only if we get the basics correct first.