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    What is "corporate governance culture", and how is it relevant?

    Governance Leadership Performance Strategy
    Ah, culture, an oft misunderstood and sometimes misrepresented word. In the last few decades, a lot has been said about culture in business. Drucker's comment, that culture eats strategy for breakfast, is widely quoted. Given the importance of strategy to the achievement of objectives, culture must be really important! 

    Many of us know about culture, but what is it? You might like to read what others think culture is before you read on, because I have just come across a rather troubling variation: corporate governance culture. Yes, that's right. Corporate governance culture. It's mentioned here. Craft makes some good points in his article, but this term seems to imply that boards have their own culture, which leaves open the possibility that the rest of the company has a different one. That doesn't sound right.

    Craft suggests that the vital relationship between culture, strategy and performance is at the heart of good governance. We nearly agree. I suggest that the vital relationship between culture, strategy and boards is at the heart of effective performance. Same elements—different arrangement. But then Craft moves on, and in so doing he loses me:
    The only way in which a company is able to ensure that it is delivering the right type of business growth is through performance analysis and appraisal.
    Really? Performance analysis and appraisal are both rearward facing activities. How does looking backward only ("the only way...") help if you want to go forward? Bob Garratt's book, The Fish Rots from the Head, tells us most of what we need to know. Culture starts at the top, in the boardroom, and it pervades outwards from there. If boards expect to influence the achievement of company performance outcomes, they need to engender a company-wide culture and wrestle directly with strategy (which is "the art of command" after all). So, let's leave cute terms like "corporate governance culture" where they belong—on the cutting room floor.
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    Boards: talking with shareholders is not optional

    Governance Leadership Management Performance Readings
    I've been on vacation this week, in Perth, Western Australia, with my wife. One of the things that we enjoy while away is to read newspapers that we wouldn't normally see at home, especially the local newspaper. This routine gives us a different perspective on what's going on in the world at large, which serves to broaden our horizons. I try to get my hands on a print copy of the The Australian when in Australia, and often read online versions of the New York Times and The Times as well. 

    The commentary pieces and investigative articles published in major newspapers are often quite thought-provoking—particularly when one is relaxing over a coffee and a muesli breakfast. For example, this article, published in the New York Times today, caught my eye. It highlights the difficulties that investors are having in talking with the boards of the companies they own (or, more correctly, part-own). I was stunned. Why would any director who is serious about their contribution not talk to the people to whom they are responsible and accountable? It smacks of hubris. More importantly, what can be done to remedy this problem?
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    Boards and performance: Just how far have we come in 15 years?

    Governance Leadership Performance
    I was fascinated to read this post on CorpGov.net today. James McRitchie looks back at corporate governance, boards and company performance outcomes over the last 15 years. His summary provides some great insights into how far we have travelled as directors, researchers and consultants. Unsurprisingly, some contemporary topics were not discussed to any great extent in the past: diversity, technology and strategy, for example. Sadly, many of the issues that pressed in on boards in the past are still alive and well today. These include fraud, compliance, reputation, shareholder issues, and a propensity to look backwards, amongst others.

    So, how far have we actually come in 15 years? We have travelled some distance for sure, but not as far as many of us would like to think, I suspect. The compliance requirements today are greater than in the past. Directors seem to have a greater awareness of their responsibilities and commitment to their work now. However, many directors and boards are still grasping at straws—protecting their reputations, focussing on compliance, keeping management honest—rather than looking forward, to the things that actually make a difference to performance and wealth creation. Clearly, corporate governance remains a work in progress.

    What will boards and corporate governance look like in 15 years time? Who knows. However, if we can work out how boards influence performance and if we can work out how to motivate directors to concentrate on the things that matter, then there's a chance that value-creating boards might even become commonplace. Is that worth striving for?
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    If the CEO sets the vision, what value does the board add?

    Governance Leadership Performance Strategy
    Over the last three years, I have been banging a drum: that boards of directors need to lift their game. They need to get serious about their contribution to company success. Boards hold the delegated responsibility for the overall performance of the company, in accordance with the wishes of the shareholders. Therefore, important tasks of the board would appear to include setting vision (having understood the shareholders' wishes); determining strategy; and, oversight of management to ensure that the strategy is implemented effectively. Increasingly, directors are starting to think along these lines. For example, most of the delegates on each Institute of Directors Company Directors Course that I facilitate say that the board needs to set the vision and be involved in the setting of company strategy. However, when I watch boards in action, those that spend quality time on vision and strategy seem to be in the minority.

    A case in point is Microsoft. I was interested to read that Satya Nadella, the recently appointed CEO, has shared his first vision—an outline of Microsoft's direction under his leadership. His comments provide some early signals of where Microsoft wishes to head. Such guidance is helpful for staff, customers and investors. However, the article ascribes ownership of the vision to Nadella. There is no reference to the board, which is odd because the research suggests that there is a link between boards that set vision and get involved in the strategy development process, and improved company performance outcomes. This begs a rather obvious question: If Nadella and his managers are setting vision and strategy, what role is the Microsoft board performing (apart from adding cost)? Microsoft has a long and proud history of innovation, yet the very group charged with realising the wishes of the shareholders—the board—appears to be silent and adding no value. Could this be the case? I hope my assessment is wrong.
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    Mixed-sex boards are better. Yes, but why?

    Governance Leadership Performance Research
    Another research report on the topic of women on boards has just been published. This one was completed by Prof. Judith Zaichkowsky of Simon Fraser University in Canada. You can read the full report in the June 2014 issue of International Journal of Business Governance and Ethics (*), or read the headline findings here. Amongst other findings, Zaichkowsky found the boards with even one woman rated more highly than those with no female directors. This confirms a trend that was first noticed a decade or so ago.

    The most interesting part of the report for me was the means by which it was conducted and the scope of the findings. The study was based on the statistical analysis of a number of variables of interest. I don't doubt the validity of the results. However, the thing to keep in mind with statistical analyses is that they can only show, at best, correlations—which is exactly what Zaichkowsky achieved.

    Knowing that mixed-sex boards can and often do have higher corporate governance ratings is helpful. However, there is an elephant in the room. The killer question is to understand why mixed-sex boards rate more highly, so that other boards can learn and apply the knowledge to their own situation. I doubt the answer has much to do with gender per se. Women do something different in the boardroom or they bring something different to the discussion, I suspect. That different thing appears to be valuable, so I would love to know what it is!

    My suggestion to researchers thinking about tackling the "why" question is to get inside some boardrooms and observe what actually happens. That's what I did for my research (to explain how boards can influence performance outcomes). If you'd like to discuss how to achieve this, please contact me, I'd be very happy to exchange ideas, and to outline about how I went about the challenge of gaining access.

    (*) The original article is available from the IJBGE website, for a fee. 
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    Adapt or die: a recipe for change

    Governance Leadership Management Performance Readings Strategy
    One of the big challenges for boards, managers and business leaders in the modern business world concerns change. Many leaders seem to be able to formulate strategy reasonably well. However, far fewer are effective when it comes to making organisational change happen. I was discussing this topic with a colleague this week—the context being the board's role in overseeing change—when they referred me to this short article published on the London Business School – Business Strategy Review website. The article took me about five minutes to read. However, as I pondered the ideas that author Therese Kinal mentions, the significance of her recipe started to dawn on me so I thought I'd share it with you. Kinal suggests that successful organisational change requires six ingredients:
    • A real, pressing and complex business problem
    • A diverse team with the right mix of skills and influence
    • Learning through action
    • Going through a battle
    • Synergistic co-operation
    • The coach

    Kinal offers some wonderful and highly pragmatic insights, based on a model she calls Unleashing. I won't repeat the detail of the article here, other than to say the recipe is people-centric (surprise, surprise), that none of the ingredients are optional and there are no shortcuts. If you are a company director, or an executive manager, I recommend you click on the link and read the article. I doubt you'll be disappointed.