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    Qualities of directors and boardroom behaviours that actually make a difference

    Accountability Governance Leadership Performance Research
    Have shareholders worked out that the appointment of women to corporate boards per se is not a ticket to improved business performance? The challenge of lifting representation has been embraced by many groups across the Western World, including the 25 Percent Group. Yet the numbers are not stacking up in the way many had hoped. While some countries have implemented quota systems, conclusive evidence is yet to emerge to show that, by adding one or more women to a corporate board, business performance will increase.
    Diversity amongst directors makes sense, because a mix of backgrounds and experiences tends to produce a wider range of options for consideration. If the debate is healthy and vigorous, higher quality decisions can follow. However, women should not be appointed for political or social reasons. The conversation needs to move on, beyond simple numbers and the presence of absence of XX and XY chromosome pairs, or any other specialist technical skill for that matter. Physical attributes and technical skills are inputs (only), their presence does not produce results.
    Researchers and professional directors need to dug deeper, to discover the qualities and behaviours of directors that are likely to contribute to better outcomes. In other words, what directors do and how they think in boardrooms. If we can discover these qualities and the social interactions that flow from them(*), and nurture their expression in boardrooms, then increased business performance might not only be possible, but perhaps sustainable. The likelihood of a mix of male and female directors is pretty high as well, I would have thought.
    (*) This is the essence of my doctoral research. Details will emerge during 2015. Contact me if you want to be notified when papers and articles are available.
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    International Conference on Management, Leadership and Governance

    Conferences Governance Leadership Management Research
    Are you interested in the latest developments in management, leadership and corporate governance? If so, you might like to check out the 3rd International Conference on Management, Leadership and Governance being held in Auckland, New Zealand on Thu 12 Feb and Fri 13 Feb. Details are available here.
    The keynote speakers are:
    The two previous editions, in Bangkok and Boston, were great forums. Auckland will be no different: ideas will be shared, emergent research findings presented and new ways of improving business performance debated. In addition to the main conference topics, the following themes will be discussed during mini track sessions:
    • Pluralistic approaches to effective corporate governance research
    • The role of leadership in effective corporate governance
    • Research into cultural and gender leadership
    • Effective corporate governance
    • Effective leadership at different stages of organisational growth
    • The role of women in sustainability management
    As usual, summaries of each session will be posted here throughout the conference. Please let me know if a particular paper or conference track interests you and I will do my best to attend and report on it.
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    When publicly-listed companies miss revenue forecasts

    Accountability Governance Performance Research
    When publicly-listed companies miss their revenue forecasts, as Wynyard Group and Orion Health both did recently, the stock market generally responds by discounting the share price. That's because the 'value' attached to the business is a mathematical calculation involving both current inherent value (generally represented by customers, intellectual property and other assets) and future value (expected revenue). 
    Knowing this, some companies announce somewhat optimistic forecasts, both to challenge sales and delivery teams, and to send signals to the market. When forecasts are achieved, everyone is happy. However, if forecasts are not met, the natural reaction of the market is to back out the value. Sometimes the market reacts quite strongly, especially if the share price has climbed significantly on the back of optimistic forecasts, press release statements and marketplace hyperbole. This raises some interesting ethical questions:
    • Are share price movements simply the natural forces of the market at work in response to stimuli including forecast information?
    • Is any further action required to protect various parties from the vagaries of optimist forecasts?
    • What sort of guidance should publicly-listed companies provide to the market, or should companies remain silent on future revenue and profit expectations? 
    • What constitutes 'realistic guidance'?
    I don't have any strong views on these questions at present, other than to suggest they seem to be important to the smooth functioning of the market. Therefore, they probably deserve some air time. Depending on the responses to these questions, I may initiate some further research and develop some recommendations. 
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    On corporate boards and retirement homes...

    Accountability Governance Performance Research
    What's the difference between the average corporate board and a retirement home? If age is the measuring stick, then not a lot apparently. Both tend to be populated by people of advancing years. While it's easy to jump on any number of bandwagons (employment, ageism, relevance, promotion of younger people), there is probably more value to be gained by digging a little deeper to try to understand what impact 'advanced average age' might have on business performance.
    Older directors can be beneficial in a boardroom environment, because age brings experience and wisdom, both of which are thought to be necessary for the making of good decisions. However, this view assumes that directors are actively engaged in the work of the board—an assumption that is far from universal in practice. In contrast, boards comprised primarily of older directors can be a hinderance to decision-making and business performance if the directors lack energy and focus; if their cognitive skills are weak; or, if they are not appropriately engaged in the work of the board.
    The relationship between diversity and financial performance has not been convincingly established. However, I suspect that if shareholders actively seek to appoint a mix of younger and older directors to their boards they will experience better returns in the long run—but only if directors are competent and engaged. A diverse set of competent directors who are actively engaged in the work of the board is more likely to identify a broader range of strategic options and debate issues more vigorously than a passive, homogenous board. While decisions may occur more slowly (while options are considered and the debate occurs), they should be of a higher quality. And if high quality decisions are implemented well, then improved business performance is a likely and realistic outcome.
    Age is probably just an indicator, another one of those blunt sticks that I mentioned recently. A better question for shareholders to consider is whether their directors are engaged, competent and committed to the cause.
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    Research update: turbulence at the pointy end of the process

    Governance Phd Research Research Update
    I've spent the last six weeks working hard (seven days a week), towards my goal of completing the doctoral research thesis, in readiness for a final check by my supervisors before it is submitted for examination. That process has involved long hours of focussed concentration and a fair dose of pedantry. Those of you who have completed doctoral research will know exactly what I mean, no doubt.
    Progress has been steady, but the pointy end of the process is taking longer than expected; more so following the arrival yesterday of some feedback from one of my supervisors. The feedback received over the past few weeks has been positive and encouraging. However, the latest feedback has introduced some unexpected obstacles to be dealt with. It's frustrating to say the least.
    While it would have been nice for my supervisor to have signalled the issues to be dealt with earlier than this, the bigger picture—of providing an explanation of how boards can influence business performance—remains my guiding motivation. If the unsolicited feedback received from people around the world is any indication, many boards and business leaders are eagerly waiting to read and understand the recommendations. That's a huge responsibility. Consequently, I choose to remain focussed, even though the goal is now a little further away than previously thought. I'll keep you informed.
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    Board quotas: a failed experiment?

    Governance Performance Research
    I posted a comment last week that challenged the "blunt stick" thesis that increased business performance is one consequence of appointing more women to corporate board positions. After pressing the "post" button, I steeled myself to receive a barrage of hate mail, from people that fervently believe that the appointment of women onto boards is causative to increased business performance. However, none arrived, although several people provided positive feedback (thank you).
    The response made me wonder whether people are starting to move on. If this article, entitled Norway, France and Finland tried to help women by using quotas on corporate boards. It hasn’t worked is indicative, then maybe they are. The title says it all really. Given this, are we now prepared to admit that quotas are probably not the answer? Perhaps we really should bite the bullet, and start looking elsewhere for possible causes and explanations of how boards can or should influence business performance.
    As always, I welcome your feedback—because I'm in learning mode as much as anyone else!