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    On corporate governance: The importance of a common understanding

    Accountability Ethics Family Business Governance Performance
    Corporate governance—the concept and the practice—has been the subject of much debate over the past two or three decades, especially as researchers, shareholders and the public have sought to make sense of the extent and meaning of the term and the appropriate role of the board.
    A cacophony of ideas and understandings have now pervaded our academies and directors' institutes (including that the scope of corporate governance extends well beyond the boardroom to include the whole of the organisation). As a concequence, the appropriate role of the board is not clear. Is it one of oversight and control, or is the pursuit of performance more important? The answer to this question is dependent on one other: What exactly is corporate governance? Many directors have become confused about these questions and, as a result, the appropriate role and contribution of the board.
    Thankfully, a straightforward answer is at hand.
    The term 'corporate governance' was coined just 56 years ago by Richard Eells, an academic. He used the term to describe "the structure and functioning of the corporate polity" (the board of directors). Sir Adrian Cadbury added that corporate governance is "the means by which companies are directed and controlled". In other words, corporate governance is an overarching term to encapsulate what boards (should) do as corporate goals are pursued. Corporate governance frameworks (such as those proposed by Tricker and Garratt) provide the underlying detail: they describe how the board should steer and guide the company it is responsible for governing. 
    Directors expecting to make effective contributions in 2017 and beyond would be well-advised to consider this what–how distinction very carefully: a common (and agreed) understanding is crucial if the board is to work harmoniously and decision-making is to be effective.
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    Benefits and costs of virtual AGMs

    Accountability Governance
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    The annual general meeting (of shareholders) is an important forum in company life; shareholders can engage with the company directly, and the board of directors is duty-bound to provide an account. Typically, such engagement includes hearing reports about the company's performance (typically the outgoing financial year) and outlook; asking questions; and, importantly, making important decisions including, inter alia, the election of directors who will be charged with overseeing the company (making decisions and ensuring performance) until the next annual meeting.
    Despite the importance of the annual meeting, attendances have been declining in recent years. For example, Tony Featherstone, a commentator with the Australian Institute of Company Directors, recently observed that attendances have declined by 25 per cent over the decade to 2015. Others have noticed similar declines. Reasons for declining attendances are many and varied. While the lack of time and the tyranny of distance are commonly cited, a perceived inability to influence the decision-making process is a big turn-off for many shareholders, especially those who perceive that voting has been stitched up before the meeting.
    Some commentators have suggested that new approaches are needed if shareholders are to be re-engaged. One alternative that has garnered widespread interest is the 'virtual annual meeting' to replace the in-person meeting. Tony Featherston and Anthony Hilton have both argued the case recently. 
    ​Superficially, the concept of a virtual annual meeting sounds great. Shareholders who cannot attend the annual meeting in person can particpate via an electronic channel. They can listen to presentations, ask questions and vote—and they can do so without incurring the time and cost of travelling to attend in person. But does remote attendance constitute acceptable engagement? Shareholders attending virtual meetings often cannot 'see' or interact directly with other remote participants. Consequently, the balance of power can (and does) shift from its rightful place (the shareholders) to the head table (the board of directors). The casuality is debate.
    The challenge for shareholders is to resolve whether the benefits of the virtual annual meeting outweigh the more traditional in-person meeting. Both formats have their strengths and weaknesses. Does the virtual meeting (a group of people sitting at remote locations with computers or tablets and collaboration software) enhance genuine participation (cf. attendance) as is claimed, or is the construct a thinly-veiled attempt by the board or management to assert control and constrain healthy debates at annual meetings?  And what of accountability? Where does that lie and, importantly, where should it lie? The answer is analogous to the quantity vs. quality debate.
    The annual meeting is the sole opportunity for shareholders to hear from the board and to hold it accountable. Accountability rightly includes answering questions and responding to challenges from those to whom the account is being provided. Boards should not be exempt from such scrutiny. Caveat emptor.
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    Crafting an organisation with purpose

    Accountability Decision Making Governance Performance Strategy
    Earlier this year (September), I had the privilege of attending the Organisations with Purpose conference, an event that sought to address questions about why organisations exist—their reason for being. The two-day event, which was jointly organised by London Business School and Blueprint for Better Business, was well-attended by some leading academic thinkers and, significantly, a few influential business leaders as well. 
    An overriding theme pervaded the conference: Companies with a single, clearly defined and communicated purpose tend to perform better than those that do not. To hear others summarising evidence-based research and case studies on a topic that I've been interested in for some years was great. It filled in several gaps in my understanding. A summary of the conference proceedings is now available. I commend them to you.
    The high point of the conference was the Blueprint for Better Business framework, a model to guide decision-making in purpose-driven businesses. It was compelling, to the extent that I've registered to attend a two-day immersion workshop, ahead of introducing the framework to companies in Australasia from early 2017. 
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    GIA conference and more: Serving boards in Sydney

    Accountability Conferences Governance Performance Speaking Engagements
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    The Governance Institute of Australia's national conference starts on Sunday 27 November at the Hilton Hotel in the Sydney CBD. I'll be at the conference on 28–29 Nov(*) to listen to what looks like a great lineup of speakers, and to serve as a panelist on Tue 29. The panel topic is "The pursuit of productivity".
    ​If you're going to be at the GIA conference and want to say hello, please feel free to phone me or send an SMS. My number is here.
    Following the conference, I will remain in Sydney for two more days (Wed 30 Nov and Thu 1 Dec) for private meetings. If you would like to take advantage of my proximity to chat about corporate governance; board  effectiveness; corporate strategy; emerging trends and the findings from my recent research; or, any related matter of interest, I'd be delighted to make a time to meet. Please get in touch to set up a meeting. Currently, there are several gaps in my diary including dinner on Wed 30 Now and breakfast on Thu 1 Dec.
    (*) Session summaries will be posted here throughout the conference. Please check back if you are interested.
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    On corporate governance, boardroom ethics and Brexit

    Accountability Decision Making Governance Performance Tough Questions
    One of the joys of working internationally is the opportunities it presents to discuss topics in a range of different contexts. While most of these discussions are either private (with clients) or rather impersonal (conference presentations), some are recorded for the benefit of a wider audience—including this recent conversation with Lavaniya Das of Azeus Convene. We talked about corporate governance, boardroom ethics and how the C-suite is dealing with Brexit:
    If you want to explore any of the points discussed in this interview, or challenge them, please feel free to either reply below or get in touch via email.
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    How can boards exert influence from the boardroom?

    Accountability Decision Making Family Business Governance Research
    A burning question for many directors is encapsulated in the title of this muse. In recent years, the business media has published many stories about boards; questionable board practices; assertive CEOs that 'take over': and, missteps and failures that seem to emanate from the boardroom. Some of these stories are justified, whereas others lack substance. Alongside, the academic community has investigated the question, although typically from the perspective of a desk-based researcher using public data or, at best, interview comments. Reliable knowledge about the board's role in influencing business performance has remained elusive. Sadly, unsubstantiated claims have filled the void.
    I have spent several years investigating the question of board influence beyond the boardroom as well, to discover whether boards are simply disempowered groups that meet to rubber stamp decisions, or whether influence (especially over firm performance) is possible. The quest has included longitudinal observations of board meetings; interviews with chairmen, directors and chief executives; and, the analysis of very large piles (mountains, seemingly!) of board papers, minutes, reports and observation notes. Useful insights have been gleaned from informal discussions with directors have provided useful insights as well.
    While no definitive answers to the burning question have emerged (in any predictable sense anyway), a pattern is clearly apparent:
    • Influence is possible. The board's active and sustained involvement in an agreed set of strategic management tasks (especially strategy formulation, strategic decision-making and verifying strategic outcomes are being achieved) is crucial if the board's interventions are to have any effect on the achievement of desired business performance goals. Director capability, board activity and boardroom behaviours matter. Specifically, the harmonious expression of five underlying behaviours are necessary if the board is to have any impact.
    • However, outcomes are not guaranteed. The board does not operate the company directly (that task is normally assigned to the chief executive), and many other factors both within and outside the company (most of which are outside the board's direct control) can affect actual performance. 
    Findings have been written up in my doctoral thesis. These findings are summarised in two published papers, with similar sounding titles.
    • How boards influence business performance: Developing an explanation. This paper was published in Leadership and Organization Development Journal (Volume 37, Issue 8), an academic journal.
    • Board influence from and beyond the boardroom: A provisional explanation. This paper was warmly received (it received the best paper award) at the European Institute of Advanced Management Studies' 13th Annual Workshop on Corporate Governance in Milan in late October 2016.
    Copies of the papers are available here. If you want to know more, please get in touch. I'd be glad to discuss the findings (especially the implications and guidance for practice) with any board or group intent on realising and sustaining high levels of company performance.