Tags

  • Published on

    Is 'good' governance to be desired?

    Accountability Corporate Governance Decision Making Governance Language Performance Research
    Picture
    I'm in London for the weekend, an interlude between inter alia commitments hosted by the Institute of Public Administration (a masterclass for board chairs, in Dublin); Lagercrantz Associates (a workshop, in Stockholm); and the Baltic Institute of Corporate Governance (a masterclass and the BICG conference keynote, in Vilnius). 
    To work with people across cultures, countries and contexts is a great privilege. Discussions reveal differences in perspective and approach. Yet, some things are consistent, transcending borders and cultures. One example is 'good governance'. Directors everywhere want to know how to achieve good governance.
    This is a tough request. The problem is that 'good' is a moral qualifier, implying someone or something is morally excellent, virtuous or even righteous. But that is not all it means. A quick check in any dictionary reveals at least 39 other definitions! Which one does a person have in mind they ask for help to achieve 'good governance' or 'good corporate governance'? And what about other directors around the table. Do they have the same understanding or not?
    It's little wonder that directors have become confused about the role and purpose of the board.
    Pragmatically, corporate governance is the means by which companies are directed and controlled (Cadbury, 1992), that is, it describes the work of the board. The objective is to produce an agreed level of performance (however measured). 'Effectiveness' is a more appropriate qualifier than goodness. If something is effective it is adequate to accomplish a purpose; producing an intended result. 
    Returning to the question of how to achieve good governance. After reminding the enquirer that so-called best practices offer little guarantee of success (which one is best anyway), I usually steer the discussion away from goodness towards effectiveness (performance), and suggest that Bob Garratt's Learning Board matrix, and the Strategic Governance Framework are useful starting points for a lively discussion at the board table.
    Once directors acknowledge that high company performance is the appropriate goal, and that success is a function of effectiveness more so than goodness, they start to ask more relevant questions, such as, "What actually matters?" and, "How do I as a director and we as a board become more effective?"
  • Published on

    Governance: An act of leadership or service, or both?

    Accountability Conferences Corporate Governance Director Development Performance
    Picture
    I have just returned home from a busy but most invigorating week on the East Coast of the United States. The purpose of the trip was two-fold. First, to invest in myself by attending a course; and second, to participate in a series of meetings and discussions to explore matters relating to boards, board effectiveness and how high performance might be achieved.
    The following paragraphs summarise some of my learnings. If you want to know more, please get in touch.
    • The Boards that lead programme at Wharton Business School attracted 49 serving and aspirational directors from ten countries. Professors Michael Useem and Ram Charan and their colleague Dennis Carey led the course incredibly well; a highly interactive exploration of when boards should lead, when they should follow and when, simply, they should get out of the way. The insights and commentaries from both the course leaders and several highly-esteemed company chairs, activists and academics during 'fireside chats' provided great assurance that it is possible to make a difference. A notable theme was that directors cannot afford to be aloof in their role. If [strategic] decisions are to be informed and value is to be created, directors need to ensure they understand the business of the business well—and that takes time. 
    • Many boards in the United States are still caught in the 'compliance' trap—the protection of personal and professional reputation continues to be a more pressing priority for many directors (than the achievement of performance goals). As a consequence, boards are not paying sufficient attention to the strategic future of the companies they govern. While compliance matters are by no means discretionary, boards need to get more courageous with their time allocation, and also demand better reporting, to ensure compliance matters do not dominate the agenda. 
    • Several directors lamented—some at length—that the promotion of ESG in recent years has been counter-productive. Rather than focussing boards on performance dimensions beyond money (the intention), boards have in practice become more concerned about adherence to prescribed 'best practice' frameworks. The directors I spoke with said that 'G' (governance) element in particular is problematic—adding little in terms of focussing boards on the creation of value over the longer-term. The alternative that sits more comfortably with directors I spoke with is SEE (social, environmental, economic).
    • The value of purpose reared its head in several discussions—director awareness of the need for clarity in relation to why the companies they govern exist is increasing. However, more needs to be done, to ensure a collective understanding is achieved. Time spent explicitly sharing thoughts and assumptions, with the intention of reaching agreement on a single, stated purpose is crucial: A North Star for decision-making.
    • The diversity discourse continues to evolve. Thankfully, a growing cohort of directors are realising that physical attributes of boards (number of directors, ethnic or racial heritage, or gender diversity, for example) provide little assurance of board performance let alone company performance. A more sophisticated understanding is crucial. My colleague, James Lockhart, has been vocal on this point for some time.
    • I was asked on several occasions to explain the Strategic Governance Framework, a key finding to emerge from my doctoral research completed in 2016. Both individual directors and boards were fascinated to learn that a framework for better board effectiveness (one informed by actual board observations) is now available for consideration and deployment. This was most gratifying. Boards interested in exploring this framework further should contact me directly for a private discussion.
    • Capping off the week, I spent 36 hours in Washington DC, taking in the sights and sounds of the National Mall, and visiting a couple of two of the Smithsonian Institution's fine museums. Returning to the hotel, the last eighteen words of Lincoln's address at Gettysburg rang in my ears. If companies are to prosper in the future, boards need to embrace a strong sense of purpose and service—to the company and legitimate stakeholders. Anything less is not only selfish, it is unsustainable.
    • Finally, and more personally: to the many unnamed folk I met through the week, thank you for your generosity. If the high level of interest throughout the week is any indication, the likelihood of me spending more time in the United States, to wrestle with both the opportunities and challenges of rethinking board effectiveness, and concentrate on company performance more so than compliance tasks (although such tasks cannot be neglected), is high.
    If you would like to discuss any aspect of this summary, challenge my observations, or explore implications for your board, please get in touch, I'd be delighted to hear from you..
  • Published on

    Will board effectiveness improve in 2019?

    Accountability Corporate Governance Decision Making Effectiveness Governance Leadership Performance Value Creation
    Picture
    With 2018 consigned to history and holiday season break all but over, most business leaders and boards of directors are turning their attention to what the year ahead (and beyond) holds. Even a cursory glance reveals a plethora of issues that may have an impact on business continuity and, potentially, continuance. 
    Consider these indicators:
    • ​Rampant economies that have powered much of the global growth over the last decade may be running out of steam. Many Asian 'tiger' economies are growing less rapidly than before, Apple and other tech giants have issued warnings, indicating that a correction may be just around the corner.
    • Populism and nationalism are no longer words heard only in political and academic hallways.
    • The climate is changing.
    • Medical and social developments are impacting the lives of untold millions around the world.
    • Disruptive technologies and business models are fundamentally changing commerce.
    • Weaponising of biological 'forces' to reshape nations, economies and mindsets.
    • March 29, 2019 is shaping as a watershed date for Britons and Europeans in particular, but also others.
    • The US-China trade war and disquiet in the Middle East have the potential to disrupt international trade.
    • The emergence and potential impact of identity politics and various lobby movements (#MeToo and #GilletsJaune are two examples amongst many).
    • In several countries, general and/or local government elections are occupying the minds of many.
    And that's just the start.
    As is usual at this time of the year, business and governance commentators have stuck their collective necks out, promulgating a variety of predictions given the indicators (as real or imagined as each indicator may be); each behaving as if they possess levels of predictive insight beyond what a reasonably educated person might be able determine by tossing a coin. But do they? They cannot all be correct—in fact, none may be. 
    The challenge for boards, of course, is working out how to respond well. 
    What is becoming increasingly clear is that boards have become confused by what's going on around them. Increasing numbers have grown quite tired of 'conventional wisdoms' and so-called 'best practices' (plurals intentional). Some have responded by taking defensive positions, and others are boldly trying things without first understanding the contextual relevance.
    My response to enquiries from boards is straightforward: open your eyes to the possibilities, think and act strategically, but don't be impetuous. Check the current context, because things change, often in unexpected ways. Helping boards respond well typically involves sharing insights from research and practice; facilitating discussions; and providing contextually-relevant and evidence-based guidance. If you want to discuss options to respond well to a changing world around you, or lift the effectiveness of your board, please get in touch. 
  • Published on

    Skin in the game: A boardroom perspective

    Accountability Conferences Corporate Governance Decision Making Family Business Performance
    Ten days ago, I was in Vienna to attend the Global Peter Drucker Forum, as an observer and participant. However, at the last minute—actually, three days before the Forum—the organisers asked me to 'jump in' to cover for a panelist who was a withdrawal. The session, which was recorded, was entitled "Managing like you have skin in the game". I was asked to provide a boardroom perspective. My comments start at 41m 35s:
  • Published on

    Upcoming European speaking and advisory tour

    Conferences Corporate Governance Decision Making Governance Performance Research Research Update Speaking Engagements
    Picture
    In a couple of weeks, I'll be in England and Europe, for the third and final time this year. The schedule includes attendance at two conferences, delivery of two keynotes and a bevy of meetings, as follows:
    Sun 25 Nov
    ​
    Mon 26 Nov
    Tue 27 Nov
    Wed 28 Nov
    Thu 29 Nov
    Fri 30 Nov
    Sat 1 Dec
    Sun 2 Dec
    Mon 3 Dec
    Tue 4 Dec
    Wed 5 Dec
    ​
    ​Thu 6 Dec
    Stockholm: Deliver keynote at event organised by Digoshen (Topic: Outlook on international corporate governance and board practices).
    ​Stockholm & London: advisory meetings.
    Transfer to Vienna.
    Vienna: Global Peter Drucker Forum, pre-conference workshops.
    Vienna: Global Peter Drucker Forum, main conference (day 1).
    Vienna: Global Peter Drucker Forum, main conference (day 2).
    Vienna: post-GPDF review; transfer to London.
    Free day in London.
    London: advisory meetings.
    London: ICGN Global Stewardship Forum. 
    Henley: ​Share research insights with faculty & doctoral students (Henley Business School Governance Seminar); explore future research opportunities.
    London: ​advisory meetings.
    While the schedule is fairly full, some gaps remain for additional meetings (in London).
    If you would like to meet, please get in touch. I'd be glad to discuss any aspect of boards, corporate governance or effective board practice; explore a research idea; or respond to (future) speaking or advisory enquiries.
  • Published on

    Re-conceiving 'control', as a constructive mechanism

    Accountability Corporate Governance Decision Making Governance Performance Tough Questions
    Picture
    In business, as in life, the task of exerting control is commonly perceived as being one of exercising limits; of saying 'no' and imposing constraints. Such perceptions are well-founded. Check these verb usages of 'control', lifted straight from the dictionary:
    • to exercise restraint or direction over; dominate; command
    • to hold in check; curb
    • to test or verify (scientific experiment)
    • to eliminate or prevent the flourishing or spread of
    If you have spent much time in boardrooms, you'll know that director behaviour tends to be consistent with these definitions, more so if the chief executive is ambitious or entrepreneurially-minded (the two attributes are not necessarily the same). When asked, board justification for exercising caution is straightforward: to keep the chief executive honest and to keep things 'on track'.
    Such an understanding—holding management to account—seems admirable. Monitoring and supervising management is one key task (of four) of corporate governance after all. But does a strong hand actually lead to better outcomes? More pointedly, how might the exercise of restraint and limits advance the purposes of the company (noting the board is responsible for ensuring performance goals are achieved)? Such conduct is analogous to applying the brake when the intention is to drive on. A growing body of academic and empirical evidence suggests that a strong hand, like increased compliance, may actually counter-productive.
    Rather than persist with what is demonstrably a problematic approach, it might be more fruitful for boards to consider another perspective. ​What if control is re-conceived in positive terms (namely, constructive control), whereby the board's mindset is to provide guidance (think: shepherd or coach) by ensuring the safety of the company and steering management to stay focused on agreed purpose and strategy? Might this deliver a better outcome? 
    Emerging research (here, but contact me to learn more) suggests the answer is 'yes'. Strongly-engaged and strategically competent boards that display high levels of situational awareness as they debate issues from multiple perspectives and make informed decisions in the context of the long-term purpose of the company can make a difference. Constructive control is one of five important behavioural characteristics of effective boards identified in this research.