Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.
Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.
During the wide-ranging discussion, several participants suggested that governance should be professionalised, like medicine, accountancy, law and several other professions. I support these calls—strongly. Why? Well, stories like this get under my skin. While the majority of directors fulfil their legal and ethical responsibilities well, sadly there are a few bad eggs that discredit governance in the public's eyes.
The mechanism would be relatively straightforward, involving perhaps:
The Institute's optional accreditation scheme provides a useful starting point, but it falls short because participation is optional. In my opinion, governance must be professionalised, with a robust body and process not dissimilar to medicine (Colleges of Practice, Medical Council of New Zealand, Disciplinary Tribunal). Perhaps then the concerns expressed in the article—that directors can dodge bans—will become a thing of the past. Here's hoping.
An outstanding Editorial appeared in our local newspaper, the DominionPost, today. The editorial highlights the significant conflict of interest that exists when local government politicians are appointed to the boards of Council Controlled Organisations (CCOs). The appointment of local councillors—many of whom lack sound governance expertise, and all of whom are conflicted as the editorial argues—must stop.
Councils and local communities would be far better off if independent directors were appointed to the boards of CCOs (and held accountable through normal shareholder and fiduciary processes). Independent, commercially astute directors would focus entirely on their role of acting in the best interests of, and maximising the performance of, the company. In so doing, the returns to shareholders would more than likely improve over what would otherwise be possible with a highly conflicted Board.
PS: I disagree with one sentence towards the end of the Editorial "...over time, superior systems will produce superior results." No. Governance is a complex and socially dynamic phenomenon. Over time, superior systems should produce superior results.
Against a backdrop of greed, examples of New Zealand companies taking a strong ethical stand and "doing the right thing" are starting to emerge. This week, Keith Turner, Chair of publicly-listed company Fisher & Paykel Appliances was reported as saying that his approach was to resist trading (in FPA shares) while the Board was debating and commercially analysing ideas that could have material value implications. This strong ethical stance—based on what is best for the company—bodes well for the somewhat sullied reputation that governance boards have suffered recently.
Well done FPA Board, your ethical stance is an example that others should follow.
Earlier this year, my wife and I celebrated 25 years of marriage. When we announced this milestone to several friends and colleagues they were genuinely thrilled for us—because, sadly, many marriages don't last the test of time. Rather than working together over a lifetime, couples seem to reach for divorce proceedings when the going gets a bit tough. In our case, I could not have achieved what I have without my wife. I'd like to think I've reciprocated to help her realise her dreams.
I'm a firm believer that behind (actually, beside) every good man is a very capable woman. Together, more is possible. It's as simple as that.