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    Actions have consequences ... always

    Governance Performance
    If you ever needed proof that what goes around comes around, you need look no further than the Parole Board's decision to deny Rob Roest, former director of failed finance company Bridgecorp, parole. Roest received a six year sentence in 2012, after being found guilty on several charges relating to the failure of Bridgecorp. Despite being described as a model prisoner, Roest's "rather intransigent attitude to his offending" seems to have swayed the Board towards its decision to keep Roest behind bars.
    In addition to giving Messrs Roest and Petricevic (who was also denied parole last year) more time to think about their actions and their attitudes, the decision provides a salutary reminder to all directors—that duties owed by directors to the company and to shareholders cannot be taken lightly. Directors who are unclear of their duties and responsibilities would be well-advised to read and apply the relevant sections of the statute, and to enrol for a professional development course with their local director's institute.
  • Published on

    Women on boards: more rhetoric

    Governance Leadership Performance Research
    The board and business performance discourse has been maturing over the twelve months or so: beyond various "blunt stick" theses that link certain structural and composition attributes of boards with improved business performance (women, board size, independent directors, CEO duality, et al), towards more general (and more subtle and far more complex) notions of diversity, behaviour and interactions in the boardroom. The maturing that has started to occur is welcome. Most of the time, when we don't understand something, we start by investigating the obvious (what we can see). Then, if answers are not forthcoming, we dig deeper. The maturing that I referred to in the opening sentence is the start of the digging deeper phase.
    The discourse has evolved in recent months, as people have begun to realise that answers to social problems rarely involve inanimate constructs like percentages. However, the conversation took an unexpected turn this week, with the publication of this well-written article in the Washington Post. It picked up one of the blunt sticks that I thought had been put down. The rhetoric is laudable, and it may well sell newspapers, but the argument is somewhat misguided.
    McGregor and Schulte's article starts by commenting on the percentage of US board seats occupied by women: 19.2 percent. So far so good. It's only when you read the article for a second or third time that the underlying (and unstated) thesis—that more women on corporate boards is good—becomes apparent. It may be, but I doubt that the presence of women in boardrooms per se is the answer to the question of how boards can or should influence business performance. Rather, women are far more likely to be a proxy for another underlying quality or social mechanism that cannot be spontaneously observed. A diversity of opinion and life experience, to enhance boardroom debates, is one likely possibility. However, we don't know that yet.
    More research is needed, including longitudinal studies of what actually occurs in boardrooms (silent observation), to identify the underlying qualities of directors, social mechanisms and tasks completed by boards that, importantly, actually make a difference to business performance in certain circumstances. Then, and probably only then, will the rhetoric start to gain substance amongst directors and the wider community. In the meantime, articles like those written by McGregor and Schulte need to be consigned to the cutting room floor, so that there is plenty of space available for articles that dig deeper.
  • Published on

    Speaking and advisory tour: UK & Europe in March 2015

    Governance Performance Research
    A few weeks ago, I signalled my intention to return to the UK and Europe in March 2015, to fulfil speaking and advisory engagements. The trip is now confirmed: I arrive in London on Sunday 8 March, and will be available for meetings anywhere within the UK and Europe, as follows:
    Mon 9 March
    Tue 10 March
    Wed 11 March
    Thu 12 March
    Fri 13 March
    Mon 16 March
    Tue 17 March
    Wed 18 March
    Thu 19 March
    Fri 20 March
    available
    speaking Leeds
    available
    speaking in Winchester
    available
    meetings in London
    available
    major European city (subject to confirmation)
    available
    depart for New Zealand
    If you would like me address a public audience; work with a board or executive team; attend a symposium; facilitate a workshop; discuss the findings of my doctoral research; or, explore collaborative research opportunities, please contact me. I'm happy to explore any aspect of board practice, corporate governance, strategy, business performance and related topics that might interest you. I look forward to hearing from you, to understand how I can help.
  • Published on

    When is the board not "all in it together"?

    Governance Performance
    The recent sentencing of former South Canterbury Finance director, Ed Sullivan, has raised an interesting issue for directors. Most professional development providers, the Institute of Directors included, teach that the board is a collective of directors and, therefore, the collective responsibility applies. However, the Sullivan case suggests otherwise. Sullivan was found guilty of making false statements (including failure to disclose a related party transaction) and deception. Another director and the CEO were acquitted. The collective responsibility—that the decisions of the board are the decisions of the whole board—has been trumped in this case. Or has it? Whereas other cases against directors have resulted in guilty verdicts across the board (albeit with variations in sentencing), fault is apportioned to one director only in this case. An approachable summary of the verdicts and basis for each judgement, has been published here. 
    Mr Sullivan appears to have overstepped the mark on several occasions, by making false statements or by withholding information. Justice Heath determined that Mr Sullivan acted alone, and that decisions to make statements or withhold the information were his decisions. It seems that they were not decisions of the board, and therein lies the important distinction. All directors are culpable for decisions made (or not made) by the board—whether every director was present when the decision was made or not—whereas individual responsibility applies when individuals act outside the board. This is because the board is a collective of directors and, therefore, binding decisions of the board can only be made by the board (ie. during meetings of the board).
  • Published on

    Museum CEO exposed as ineffective. But what of the board?

    Governance Management Performance
    Te Papa, the Museum of New Zealand, is front-page news today. This time, the museum has "lifted the lid on Michael Houlihan's disastrous tenure as its chief executive"—a strong opening statement by the newspaper. Houlihan has presided over several years of poor business and financial performance since his arrival in 2010. However, two big loss-making exhibitions and the Chief Executive not coming "anywhere near meeting any of the targets we gave" led the board to its decision to agree to Houlihan's departure.
    Thankfully, the Te Papa board has now acted. A new Chief Executive has been appointed, and the museum is looking to the future. The Minister of Culture and Heritage seems to have had her confidence restored as well, now "[new] Chief Executive Rick Ellis and Chair Evan Williams are now steering the ship in the right direction".
    The newspaper suggests that the problem lay with the Chief Executive, by implying that he was ineffective. Indeed he may have been, but is that where the enquiry should stop? The Chief Executive is accountable to the board, so the board should not be beyond scrutiny. The board's job is to govern (to steer and to pilot). This is (or should be) an active role. Why did it take two years to act? Was it asleep at the wheel? Some further enquiry is likely to be beneficial—not as a witch hunt, but to reveal insights and provide guidance for other boards.
  • Published on

    That composition will be the #corpgov story of 2015: Really?

    Governance Leadership Performance Research
    Sorry folks, but I have just seen red. Rich Fields, a correspondent at Tapestry Networks, has just proclaimed that board composition will be the big corporate governance story in 2015. I'm surprised, really surprised. 
    For well over a decade now, the academic and practitioner communities have been exploring a wide range of board structure and composition options, in search of a causal link with business performance. Many attributes of boards and directors have been investigated including gender; CEO duality; independent director; board size; and, diversity, amongst others. Positive, neutral and negative associations have been reported in the research. Earlier this week, I wrote a thought piece on independent directors, and offered the following conclusion:
    A variety of conclusions are apparent in the research. Cause has not been established. It's a bit like saying that female directors cause companies to perform better. Increasingly, people are realising that board performance is more likely to be contingent on what directors do in certain situations than on who they are or any specific board structure or composition. Like gender, the independence attribute is likely to be a proxy for something else. We need to discover what that might be, so it can be used to qualify the suitability of director candidates and inform board performance assessments.
    Respectfully, I suggest Mr Fields needs to think a little harder about what is known already and what is yet to be discovered. Aspects of composition may be topical, but to suggest that board composition will be the hot topic is rather myopic. We need to move on, and turn over some other rocks, elsewhere.