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    Is the rush to place women onto boards driving the best behaviours?

    Accountability Governance Performance
    The rising tide, expressed as an increasing number of women receiving appointments onto boards of directors, is now well-established. Some countries (Norway, Germany, for example) have driven change via quotas, whereas others (Australia) have utilised peer pressure by requiring companies to report the gender mix of their boards in annual reports. Others are just getting on with it.
    The latest drive, in India, has seen some interesting behaviours emerge. The Indian Companies Act now requires every board of every publicly listed company to have at least one female director, with a compliance deadline of 31 March 2015. The Bloomberg reporter used "scramble" to describe recent behaviours, as if to imply that the motivation to appoint female directors is driven by compliance rather than performance. While the scramble may satisfy the statute, and some inspired appointments will be made, there is a very real risk that some boards will be encumbered with a 'token' female who does not have sufficient skill and expertise to contribute effectively.
    If companies and societies are serious about achieving high business performance, then at least three things probably need to happen:
    • The strong norms of privacy and self-serving interests that pervade some director groups and shareholding interests needs to be challenged. The best interests of the company, and of all shareholders, needs to prevail over those of any individual director or shareholder.
    • Researchers need get inside boardrooms to find out how boards can have an impact on performance. However, this will require researchers to embrace a new generation of more sophisticated research methods. Standing on the outside of boardrooms and counting things, or interviewing or surveying directors about what supposedly happens inside the cloistered boardroom, is unlikely to reveal meaningful knowledge.
    • A commitment to continuing professional development, for all aspiring and incumbent directors, needs to emerge, to build a sizeable pool of highly capable 'board ready' directors for shareholders to select from.
    If these things (and others, no doubt) occur, then the unhelpful patterns of behaviour witnessed in India will, hopefully, be consigned to history. However, this hope is predicated on an underlying [cultural] change taking place, whereby the focus of shareholders and boards moves from conformance and compliance, to performance. Is this something worth pursuing, or might it be a bridge too far?
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    Changes at Diligent. I'm confused.

    Accountability Governance Leadership Performance Strategy
    Diligent Board Member Services has just announced the appointment of former McKinsey partner Brian Stafford as chief executive. Stafford takes over from outgoing chief Alex Sodi, "who will become chief product strategy officer and remain on the board". This second part of the announcement caught me by surprise and, quite frankly, confused me.
    I'm not sure I'd want to be in Stafford's shoes just now. The former chief executive is now both his boss (a director) and one of his staff. Consequently, the moral ownership of strategy implementation, and of product strategy in particular, is unclear to say the least. Why the Diligent board chose to structure the company in this way, and why Stafford agreed to the appointment given the challenges of 'above-and-below' reporting is beyond me. I can't see how this sort of anomaly is conducive to a high trust and high performance work environment.
    Perhaps a 'better' approach might have been for Sodi to perform one or other of the two roles (director or strategy office), or to leave the company. If any readers have any insights as to why Diligent made these decisions, or how the new structure might add value to the business, I would love to hear them!
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    The board's contribution to strategy and business performance: Some thoughts to ponder

    Accountability Governance Performance Strategy
    The topics of strategy in the boardroom and the influence that boards have (or not!) over firm performance have been in the minds and on the lips of many people in recent months. From high-quality articles on websites and respected magazines, to academic research papers, speeches at conferences and symposia and casual thoughts expressed in private, the conversation has ebbed and flowed.
    That these topics remain on the radar suggests that directors are starting to recognise that the board might have a role beyond approving strategy and monitoring performance. But what role? To assist the discussion, here are some thoughts published on Musings in the last twelve months:
    I hope this collection of links is of some use. Please contact me if you would like to pick up on any of the points made here or elsewhere.
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    Petrobras initiates #corpgov review, albeit from the inside

    Accountability Ethics Governance Performance
    Petrobras, Brazil's state-owned oil company, hit the headlines today, saying that it intends to revise its governance and organisational management model. The company has had problems with corruption and, just recently, employed a governance, risk and compliance (GRC) officer, its first.
    Interestingly, the review will be conducted by a "group of executives with experience in various areas of the company". This sounds reasonable enough, until you consider that the stated problem is corruption. The review is being conducted by the very people that may (or may not) have been involved. How much confidence should one place in the internal panel isolating the problem(s) and, having done so, the Petrobras board making changes to get its house in order? Usually, such reviews are conducted by external parties, if they are to be afforded any credibility.
    This will be interesting to watch.
  • Published on

    On consultants and selling #corpgov short

    Accountability Governance Leadership Performance
    Why do consultants spend so much time on hobby horses, promoting their own capabilities and frameworks? Shouldn't the focus be on thinking about and promoting options that are genuinely in the best interests of the clients and marketplace they seek to serve? Take this example, which suggests that good governance is built on good information and data governance. The author cites several technical frameworks and acronyms (COSO and COBIT are mentioned), none of which I understand. 
    That a strong focus on standards and frameworks might be sufficient to ensure good governance (an oft cited but rarely defined term) is misleading in the least. Necessary maybe, but sufficient? No. The root of governance emerges from the Greek word kubernetes, which means to steer or pilot, typically a ship. This suggests governance is an activity associated with movement; with setting direction, navigating or guiding something—presumably towards a longer-term or major goal, or at least with a purpose in mind.
    I have no doubt that frameworks are necessary within organisations to support regular business activity. However, to imply that good governance (and, presumably, business performance, although the author makes no mention of this) will emerge from the application of standards and compliance frameworks is misleading. Looking backward (monitoring) or to standards (compliance) may satisfy egos that work is being performed, but to think that either will drive performance is folly. Compliance with standards can only ever achieve one of two things: compliance or dissidence. Compliance-based frameworks (Sarbanes-Oxley, amongst others) did little to prevent the GFC of 2007–08. Some say the focus on compliance may have contributed to the failures. If businesses expect to achieve certain desired outcomes, the board needs to look to the future by building appropriate plans (strategy); providing resources to the chief executive; and, monitoring and verifying the agreed strategy is being implemented and expected performance targets achieved.
    Consultants that continue to promote compliance-based technical frameworks as 'solutions' and associate them with 'good governance' are, quite frankly, doing their clients a disservice. Business leaders need to test consulting proposals thoroughly, by asking how (ask for specifics, don't accept general statements) the suitor's proposal will assist with the achievement of the business's strategy. This will probably be threatening to some consultants—but if it moves the focus onto business performance and economic growth, wouldn't that be a good thing?
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    "Completely overhauled" actually means "musical chairs", or so it seems

    Accountability Governance Performance
    I'm staggered. According to the Merriam–Webster dictionary, to overhaul something is to "to look at every part of (something) and repair or replace the parts that do not work". By extension, a complete overhaul is to repair or replace the entire system. The people I spoke with in the UK and the EU last week were consistent in their expectations: that many directors should be replaced with directors untainted by the failures of governance that have occurred. HSBC has a proud tradition, but a new start is needed. Sadly, this does not seem to be happening. The promised complete overhaul seems to be just a shuffling of roles—musical chairs if you will.
    How confident can or should investors and account holders be after hearing of these changes? A damp squib might be a more appropriate description of the proposed changes, but that wouldn't sell many newspapers or engender much confidence would it?
    HSBC has been under the hammer for several weeks now, as people have waited—expectantly—for news of what "completely overhauled" might actually mean. Then, late last week, the picture started to come into view: Several changes in the boardroom were announced.
    • Rachel Lomax, board member since 2008, becomes senior independent director
    • Sam Laidlaw, board member since 2008, becomes head of committees
    • Sir Simon Robertson "steps down", but remains deputy chairman for another year
    The headline implies a wholesale change, but the reality that seems to be emerging is somewhat different: it turns out that the promised overhaul might actually just be a shuffle. Consider this: