Tags

  • Published on

    A journey, in thought and deed

    Accountability Corporate Governance Language Performance Research Rules Value Creation
    Picture
    When I was a boy, milk was free (I was raised on a dairy farm), but you could buy it in a glass bottle with a silver foil top (pasteurised but not homogenised) for four cents a pint at the general store. Television (once we got one, in 1969, to see the Apollo 11 moonshot) was a grainy, black-and-white experience, with a single channel available. You got to watch whatever the broadcaster chose to deliver across the airwaves.
    Now, milk costs several dollars a litre, but it comes in many different styles (blue, light blue, skim, lo-fat, full-cream, calcium fortified, lo-lactose and UHT—as well as products called milk that contain no milk at all, such as oat milk and almond milk, in a wide variety of packaging options). Television has changed too: from a take it or leave linear broadcast experience via rabbit-ear antennae, to a plethora of video-on-demand (streaming) options via the internet. 
    These are but two of thousands of examples that illustrate the onwards match of technology. Oh how life has changed, even in my lifetime.
    The onward march has also affected the way we communicate, not only personally with family and friends, but also with clients, suppliers and the general public as well. The notion of using a fountain pen to handwrite a letter, or making a toll call, seems quaint now—but some of us still value these moments. The emergence of social media has extended our reach in ways not thought possible twenty years ago. Sharing business cards, once commonplace, is now rare. If people want to contact me or learn about me, they tend check my LinkedIn profile (notice the assumption, that I have one), even before mentioning Google or asking about a website or blog. 
    And that brings me to the point of this muse, which is to share one aspect of a conversation with an esteemed company director, in the hope it might encourage others committed to serving the director community. Yesterday, I was asked about the role of social media in my business life, what channels I use and how long had I been using these. The first two questions were readily answered; the third took a little longer—because I needed to find the menu option!
    • Social media: LinkedIn is the only social platform I use. It complements my website and blog, as a forum to comment on topical issues, share articles written by other people and, candidly, reach boards and directors who make use of Linkedin as a trusted source of information. Previously, I used Twitter, but that did not last long for the platform was, I thought, little more than a soapbox for people to shout at each other. When I checked my LinkedIn profile, I was surprised to see I had first used the platform in July 2003, over twenty years ago and just three months after the platform was officially launched by Reid Hoffman!
    • Website: petercrow.com was first launched in November 2001, the month after I left paid employment and founded QuarryGroup, the global board advisory practice. Musings, the blog, came later, in March 2012. The websites were (and remain) online brochures, whereas the blog was created as a place to share my thoughts and test ideas while working on my doctorate. Since 2016, Musings has become a forum for a wider range of board and governance topics. Today, approaching 750 entries later, Musings is read widely, by a global audience.
    Thank you for permitting me to share my experience. I hope anyone considering using social media or a blog as a channel might be encouraged—not only to do so, but to stick at it over the longer term. My journey to date has been fulfilling; I have met thousands of people from many walks of life and, I hope, they have valued the interaction as much as I have.
  • Published on

    Do you have a question about governing with impact, or driving organisational performance?

    Accountability Corporate Governance Decision Making Director Development Effectiveness Governance Leadership Performance Tough Questions
    Picture
    One of the great joys of being an independent advisor is the opportunity to spend time with people from a wide range of backgrounds; business and social experiences; walks of life; and, in my case, countries and cultures. The depth and breadth of humanity never ceases to amaze me. Paradoxically, a common thread runs amongst the diversity: people intent on improving organisational effectiveness and making a difference spend lots of time asking questions, lots of questions.
    When a question is asked from the floor after a keynote talk, during an advisory engagement or professional development workshop, or as part of a confidential discussion or informal chat, something mysterious happens: Both parties learn! This should come as no surprise, for no one has all the answers—although some people behave as if they do.
    Recently, I posed several questions board directors may wish to consider. ​The response to that musing has been overwhelming, so I thought an open invitation might be in order.
    ​If you have a question about any aspect of corporate governance, strategic management, board craft or the challenge of governing with impact—either personally or on behalf of a board you serve on—please ask and I will gladly respond. Use the comment link here or, if you prefer, send an email. Let's learn together!
  • Published on

    Our own worst enemy?

    Accountability Corporate Governance Decision Making Director Development Effectiveness Governance Performance Tough Questions
    Picture
    I have spent four days in Australia this week, meeting with directors, advisors and a couple of institutional leaders in two state capitals. While the weather has been great, a few storm clouds [metaphorically, on the governance horizon] were apparent. Whether these are serious problems, or just differences of opinion, they strike me as being worthy of discussion. I’d be delighted if you would ponder the following situations, and share your thoughts to help me understand why boards, more often than not, erode value.
    • Confusion over what governance is:​ A meeting with a sixty-something director, with over two decades of experience, set me on my backside. He explained that “most of my colleagues understand that corporate governance and compliance are, essentially, interchangeable words”. He went on to say that board directors don’t spend enough time thinking about the future (agreed), and that the solution is to give governance a radical overhaul. When I asked, he said that governance needs to be redefined, “because the expectation is unrealistic.” He suggested advisory boards have a significant role to play, for directors cannot hope to keep up with the pace of change, and someone needs to advise the CEO anyway. I opined that everything he suggested was, in fact, within the remit of governance (to steer, to guide, to pilot), but he wasn’t having a bar of it. Governance, in his mind, is compliance; and the board’s job is to keep the CEO “safe”.
    • Regulating one’s way to performance: A meeting in Sydney, with three people familiar with regulatory frameworks—all of whom are professionally trained as lawyers—caught me on the hop. All three agreed that the imposition of codes and regulatory frameworks was necessary, because “statutes don’t go far enough.” The implication was that rules drive compliance, and that compliance with rules equates to performance. In other words, follow the rules and the organisation will thrive. I was shocked. Rules are, I think, boundaries—nothing more. How can one possibly thrive if the extent of their contribution is merely to ensure they live within the rules?
    These examples demonstrate, to me anyway, that questions of what corporate governance is, the role of the board and how governance might be practiced are far from resolved. Directors and their advisors seem to be their own worst enemies. Flawed understandings of what governance is (the provision of steerage and guidance, to achieve an agreed strategic aim), and how it might be practiced, remain serious barriers to boards fulfilling their mandate, which is to ensure the enduring performance of the company. Why do some directors’ institutes, advisory and consulting firms, regulators, academics, and media commentators continue to discuss “best practice” and promote various matters that have little if any direct impact on achieving sustainably high levels of organisational performance? Surely attention needs to be on helping directors and boards do their job well, n’cest ce-pas? I have a few ideas to crack this problem, but I’m keen to hear what you think.
  • Published on

    Chairmanship: a mechanical process, or a deft art?

    Accountability Corporate Governance Decision Making Leadership Performance
    Picture
    Board are funny things. They are comprised of selected individuals (directors, board members) charged with meeting together to consider various matters for the purpose of making decisions. While it is true to say directors meet, decisions are made by the collective whole—the board—not individual directors. Therefore, every decision is unanimous. Complicating matters, boards only 'exist' when directors meet, and board work is, largely, endogenous; so, they need to be coordinated—someone needs to 'drive' the board. ​​​
    The term 'chairman' (also, 'board chair, 'chair' or sometimes, 'chairperson') is the term used to identify the board member who carries such responsibilities—these being to convene the board’s meetings, ensure duties are discharged, and that steerage and guidance (that is, governance) is effective. But, as all directors are equal in law, the chair's role is exercised through influence, not command in any controlling sense. Given this, how should a board chair, well, chair the board? ​
    While there is no one 'best' way of chairing, the following characteristics are conducive to better outcomes:
    • Build relationships: Effective chairs nurture trust and respect within the board; with management (especially the chief executive); and, with shareholders and legitimate stakeholders. 
    • Understand the business and the wider landscape: This includes corporate strategy and operations, organisational culture, competitive landscape, and emerging trends and disruptions.
    • Lead on purpose and values: The board needs to set the direction and the basis for decision-making and conduct. Sometimes, tough (even unpopular) decisions are needed, to ensure alignment and to secure in the long-term interests of the company.
    • Boardroom culture: Exercise tact and sensitivity, and maintain decorum. Respect confidences and maintain utmost confidentiality when required. Emotional intelligence, situational awareness, maturity, wisdom, and the ability to draw out the best in others are critical to effective chairmanship.
    • Show decisive leadership: Empathy and understanding is important, but only to a point—for these attributes do not drive decisiveness. Sometimes, assertiveness from the chair is required.
    • Learning and development: Effective chairs know they don't know everything—far from it—and things change anyway. Consequently, they tend to have a continuous learning mindset.
    • Nurture a broader skill set: Technical skills are necessary, but they are far from sufficient. The best chairs read widely and they encourage other directors to do so as well.
    • Embrace multiple perspectives: Eliciting different points of view during ideation and when debating topics is crucial if the board is to guard against groupthink. Cognitive diversity is important too; it has been shown to be an antecedent of higher quality decisions.
    • Listen: Chairs should speak last, having drawn and heard from others. When the time comes to speak, do so clearly and succinctly, and encourage colleagues to do likewise.
    • Manage time:​ Start on time, ensure the board moves steadily through the agenda and where practicable finish on or near time.
    • Ensure continuity: Consider succession, especially for the chief executive role but also for the chair.
    Governance is tough because, inter alia, things change, sometimes unexpectedly; boards often need to make decisions without all the information they want; linkages between decisions and outcomes are contingent; and, directors' duties are unbounded. 
    If boards are to govern with impact, chairs need to be alert: to ensure directors are actively engaged, and that they identify and consider relevant information, think critically and, together, make smart decisions in the best interests of the company. The chairs' priority is to convene the board and its work, and keep directors on track and the organisation safe. For this, a deft hand is needed.
  • Published on

    Governance and ESG: what’s driving what?

    Accountability Corporate Governance Decision Making Effectiveness Governance Performance Sustainability
    Picture
    I’ve been holidaying in Scotland this week, the first of two in the Highlands after whistle-stop visits to Edinburgh and Glasgow. I prefer the countryside over cities, the wide-open spaces and the scenery. The vistas in Scotland are especially magnificent, especially if the weather is fine, which it has been this week. Today, I saw the Jacobite Steam Train in action as it crossed the famous Glenfinnian Viaduct—well almost in action, for the chance of a wayward spark starting a fire in the adjacent bracken has limited this famous tourist experience to a push-me pull-you configuration with a heritage diesel locomotive bringing up the rear. The question, in my mind and the minds of others witnessing the viaduct crossing, was, “Which locomotive is actually doing all the work?” Or, more plainly, what is driving what? From the picture, the answer is not immediately obvious. However, the very presence of the diesel locomotive provides an important clue. And so it was. Today, the Jacobite Steam Train excursion was, in fact, the Jacobite Steam Train experience, powered by diesel.
    The visual imagery provides a powerful analogy for something else I saw today; a press release issued by the Institute of Directors entitled, “ESG must not neglect governance!”
    The headline implies that governance (from the Greek, meaning to steer, to guide, to pilot) is little more than a component of ESG (a means of measuring corporate performance). This, despite governance being the term that describes the work of the board of directors (the means by which companies are directed and controlled). But, reading on, the situation is not quite as it first seemed. Dr. Roger Barker, head of the policy unit, acknowledged the importance of boards taking non-financial (so-called, ESG) factors into account when making decisions. But he also noted the emergence of an “ESG industry” that has started to control various agendas, with little interest in the enduring performance of the company. And, with it, boards are being subordinated to a lesser role. Barker issued a strong call: to subsume governance within ESG may well result in the important work of the board in driving business performance becoming neglected.
    Bravo, Dr. Barker! This is exactly what institutions need to be telling their members and others interested in corporate performance: ESG is a measurement and reporting mechanism, no more and no less. The board of directors is duty-bound to ensure the performance of the company, now and into the future, a high calling. If it is to discharge its duties well, the board needs to remain in control, driving the agenda. In doing so, the board should consider various externalities including social and environmental factors), of course, but it should not be beholden to them or to those applying the pressure.
  • Published on

    Picking an adjective...

    Accountability Capitalism Corporate Governance Effectiveness Governance Performance Value Creation
    Picture
    When aiming to achieve something in business, is it better to be good, or effective, or both? ​Should boards for example pursue good governance, or prioritise effectiveness? And, are these qualifiers mutually exclusive, or can a board claim both? These 'challenge' questions have beset contemporary boards of directors, more so as various stakeholders have sought to impose their expectations and ideological preferences onto corporate values, purpose, strategy and decision making.
    If these questions are to be considered and answered well, agreement on the meaning of the adjectives is necessary. To wit:
    • 'Goodness' speaks to benevolence and decency—of doing the right thing. It conjures an ethical or moral motivation, of acting in the best interests of someone else. 
    • 'Effectiveness' is about producing an effect or achieving a goal, result or outcome.
    Instinctively, good governance sounds attractive. It satisfies a human condition; of doing the right thing and acting in the best interests of someone else (a particular stakeholder interest, for example). But what if doing the right thing has the effect of compromising the competitive position of the company; the achievement of agreed performance objectives; or, potentially, the viability of the company? And, what might be considered good by one person or group may not be upheld elsewhere. Turning to effectiveness, the threshold is more objective—either the goal is achieved or it is not. But, what if the pursuit of an agreed objective results in environmental or social harm, or some other negative consequence?  That is not acceptable either.
    Given the extremes, some sort of balance is needed, in the same way that every board must ensure conformance requirements are satisfied (compliance, value protection) and performance objectives are achieved (value creation). If this is reasonable, should a different adjective be used, to more adequately describe the value of the board's work?
    My recommendation: drop goodness and effectiveness, for one (at least) is highly subjective and has become emotively charged (think, what ESG has become), and the other focuses more on the goal without necessarily considering unintended consequences. Ultimately, in extremis, neither is sustainable without the other. Instead, boards should pursue enduring impact.
    Boards that strive to be effective in role without incurring social or environmental harms are more likely to exert a positive and enduring influence beyond the boardroom (that is, have impact). As a result, they should be well-regarded by shareholders and legitimate stakeholders as well. The Strategic Governance Framework offers insights to boards intent on realising the full potential of the companies they govern.