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    Selling a major company asset to a director, and doing so properly

    Accountability Ethics Governance Leadership
    Is it ever OK to sell a major company asset to one of the company's directors? One must be careful, very careful. The safe answer is probably 'no', because the proximity of conflict is ever-present and the question of whether the transaction satisfies the director's duties provisions (to act in the best interests of the company) sets a very high bar to clear.
    However, a recent case in New Zealand suggests that such transactions can be completed, and well, if certain provisions are satisfied. In this case, Dorchester Property Trust (DPT) wanted to sell one of its properties the Goldridge Resort Queenstown (GRQ). A DPT director wanted to acquire the asset. The DPT board acted cautiously. The director took no part in determining whether the asset should be offered for sale, and was excluded from the process of assessing acquisition offers. As such the board's handling of the matter satisfied the related party transaction requirements.
    While some investors were a bit scratchy over some some matters (see the article), few if any concerns over the GRQ transaction have been raised. This suggests that the board handled the matter well, in both a legal and a moral–ethical sense. Well done to the DPT board.
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    Do you have a 'heads-up' habit?

    Leadership Management Performance
    One habit that has served me well for many years is the 'heads-up' habit. It's really simple. Every week, I pause and look ahead, as follows:
    • Every Saturday morning—before breakfast—I look ahead at least four weeks. The motivation is to identify big tasks (typically international trips and major events) loaded into my diary: the objective being to make sure sufficient preparation time is allocated to think, write speeches, build slide decks or prepare well. It gets me thinking—early—about the main points of scheduled talks or important meetings. It has the added benefit of highlighting gaps in trip schedules and, therefore, opportunities to request additional meetings or activities well in advance. I also check trip logistics, especially travel time, accommodation and transport. There's nothing worse than realising at the last minute that an important connection or hotel booking has not been made! This part of the heads-up habit helps me avoid last minute rushes.
    • Every Sunday evening—after dinner—I look ahead seven days. I do this with my wife. We walk through our respective calendars to see what activities we need to plan for, and whether either of us will be home late from a commitment or away overnight (a seemingly simple but incredibly important thing, especially when it comes to planning the evening meal!). This part of the habit helps me manage important relationships.
    In the past, I sometimes lost sight of important upcoming activities (and ended up suffering late into the night trying to make up—the results of which were never that great). However, last-minute rushes have become a rarity since I embraced the heads-up habit. If you don't have a habit to stay of top of your commitments, you might like to try this one. It made my life easier and I seem to be more productive. Also, my wife says that I'm easier to live with!
    Most people I know live fairly busy lives. Western culture and the 'always on' society we live in has done that to us. However, some—by my assessment anyway—have become a bit too busy for their own good. Societal norms seem to reward busyness and excellence, yet cracks start to appear when we get very busy for long periods. We get tired and make mistakes. Our commitment to do things with excellence suffers. How do you cope in such situations? Do you plan well ahead; or, do you manage your commitments on a daily basis; or, do you simply back yourself to keep up with what work and life serves up? 
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    ICAEW posts excellent discussion on capital market changes and impact on corporate governance

    Accountability Governance Leadership Performance
    The Institute of Chartered Accountants in England and Wales (ICAEW) has recently published an informative series of documents to help directors and executives respond to changes in capital markets and how they affect the foundations of existing corporate governance frameworks. The material is great. Here's a series of links to the source documents:
    While the intended audience is the ICAEW membership, the commentaries are useful for company leaders in other jurisdictions—if not directly then certainly as discussion starters around board and executive tables. If you are based in England or Wales and have any technical questions, please contact the ICAEW. If your business is based outside the UK and you would like to organise a facilitated discussion to explore how to take advantage of the suggestions, I'd be happy to help.
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    Paper accepted on Understanding Governance Workshop programme

    Conferences Governance Leadership Research
    I am thrilled to announce that I have been asked to attend and speak at the Understanding Governance Workshop, to be held in Barcelona, Spain, on 11–12 June, 2015. 
    The purpose of this workshop is to bring together leading thinkers to discuss contemporary directions in governance; to challenge the status quo, in terms of how boards work and how research is conducted; and, to give voice to innovative critical research. My paper, entitled "Executive-controlled boards, power and influence: A reality check", fits the second and third categories. Thank you to the Workshop organisers and paper reviewers for considering this contribution worthy to be included on the programme.
    With this invitation, my conference schedule for June is now confirmed, as follows:
    I will be in the UK and EU from 2 June through 20 June, and am available for other advisory, speaking or facilitation engagements between the conferences. I'd be happy to discuss corporate governance, board practice, strategy or related topics; including the results of my latest research. If you wish to take advantage of my proximity, please get in touch.
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    We talk about value creation, a lot, but what is it?

    Accountability Governance Leadership Performance Strategy
    Much has been written about the notion of value creation in recent times. The phrase is used in commerce, especially by directors, managers, consultants, researchers and facilitators, amongst others. If you listen into board meetings, discussions between managers, sales meetings, product development workshops and planning sessions, questions like "Does XYZ add value?', "How is value created?" and "What is our value proposition?" are likely to be asked. These pop up often, which suggests that value creation is recognised as being something important to be striven for. However (and alarmingly), different people have rather different ideas of what value creation is or might be. Worse still, their ideas are often based on incorrect assumptions!
    We talk about value creation as we would an old friend, yet in many cases we lack a common understanding of what 'it' is! Here's one suggestion, from the Reference for Business:
    Value creation is the primary aim of any business entity. Creating value for customers helps sell products and services, while creating value for shareholders, in the form of increases in stock price, insures the future availability of investment capital to fund operations. From a financial perspective, value is said to be created when a business earns revenue (or a return on capital) that exceeds expenses (or the cost of capital). But some analysts insist on a broader definition of "value creation" that can be considered separate from traditional financial measures. "Traditional methods of assessing organizational performance are no longer adequate in today's economy," according to ValueBasedManagement.net. "Stock price is less and less determined by earnings or asset base. Value creation in today's companies is increasingly represented in the intangible drivers like innovation, people, ideas, and brand."
    This paragraph exposes the nub of the problem. We assume we know what it is. Several simple but incredibly powerful questions need to be asked and answered before business leaders can hope to allocate people and resources effectively in pursuit of business goals:
    • Who is the recipient of the intended value?
    • What is valuable to them?
    • How can this value be created?
    • How will it be measured?
    Rather than make assumptions (think how often have you heard sales people use "unique value proposition"), boards and managers need to seek clear answers to these questions from the beneficiaries of the value that is to be created (because value is determined by the recipient not the creator). Expect to hear several answers to these questions, because 'value' means different things to different people.
    Starting at the 'top' of a company, boards should sit with shareholders and ask (or propose, if the shareholder is unclear) what 'value' looks like to them. Responses might include increased share price, a long-term market position or business model, increased market share or something completely different. This is the 'core purpose' question. Similarly, managers and staff need to sit with customers (or prospective customers) and ask the same question. Staff also need to be asked: their motivations are likely to be different from those of shareholders and customers. 'Great solutions' that 'add value' to customers / staff / shareholders are highly unlikely to do either if customers / staff / shareholders do not recognise, or are not interested in, the value that is supposedly being offered. As with strategy, boards need to take the high ground, by ensuring that value created for one recipient does not erode value elsewhere. Boards need to become crystal clear about value in a holistic sense: what it is, who the recipient is, and how it is created. 
    Once the value matrix (what and to whom) is understood and agreed, the answers need to be communicated in a clear and concise manner, so that effort and expectations can be aligned accordingly. Finally, the board has an ongoing role: to ask probing questions at board meetings, to ensure the required alignment (between purpose, strategy, strategy implementation and value) is actually in place and that the expected value is actually being created and delivered to the intended recipients.
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    Boards: ask different questions, and delight in the possible

    Accountability Governance Leadership Management Performance Strategy
    We live in a paradoxical world. Rates of change are increasing, yet we want certainty. Times to market are reducing, yet we still want instant gratification. Zafer Achi and Jennifer Garvey Berger explored these paradoxes recently. They acknowledged that searches for certainty are "only natural", and that managers spend much of their time "managing the probable". However, the world is a social place. People make choices and things change, often unexpectedly. Consequently, the best laid plans can fail completely, leaving managers exposed and potentially out of a job. Achi and Berger suggest that the frame of reference used by most managers, of managing the probable, is a big part of the problem. Rather than managing the probable, they suggest that managers need to "lead the possible". They offered three recommendations to help managers make the change (see article for details):
    • Ask different questions
    • Take multiple perspectives
    • See systems
    These recommendations have the potential to change the way managers think, make decisions and lead. While reading the article, I couldn't help but think that the recommendations also have application in the boardroom. However, the adoption of 'possibility' thinking would up-end board practices in many cases. Boards that spend most of their time monitoring past performance and controlling the activities of the chief executive would probably be quite uncomfortable, even though the recommendations are neither earth-shattering nor inconsistent with the role and responsibility of the board (to maximise performance in accordance with the wishes of shareholders). Maybe its time for directors to take stock.