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    Checking the big picture: Are we still on track?

    Accountability Capitalism Complexity Decision Making Governance Leadership Performance Value Creation
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    The prospect of looking back on the year past at this juncture seems a little odd, even presumptuous, given five weeks remain in 2023. And yet, with the onset of the holiday season (Christmas, Hanukkah, Diwali, as relevant in your cultural setting), I have noticed minds are starting to turn; casual comments in my hearing indicate some people are starting to reflect on the year soon-to-be-gone; others upon what the future might hold.
    As someone called on to think broadly about organisational challenges and opportunities, and to share insights that might be helpful to helping boards govern with impact or realise organisational potential, I too, take time to ponder. To think about what has passed, what lies ahead, and how one can help is not only smart, it is vital—if one is to learn, make adjustments to stay on track and achieve goals and, over time, become a better person.
    Turn now to the person you see in the mirror. What did you set out to achieve in 2023? Did you set specific goals? If so, have you checked progress? Are you still on track? ​Have you taken into account changes in the environment around you and made adjustments, or have you pressed on in spite of changing circumstances? As a leader, you owe it to yourself—and all those you interact with—to check progress periodically and make adjustments if you have veered off track or lost sight of the goal.
    For the record, my goal for 2023 was audacious; to ensure every director and board I had the privilege of serving, globally, derived some benefit from the interaction. The goal was audacious because 'every' set a high bar; essentially, it left no room for slippage! Thankfully, feedback to date suggests I'm doing OK. Hopefully, the feedback still to come is consistent with that received through the year. If it is, I'll wrap up the year contented; tired but contented.
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    Picking an adjective...

    Accountability Capitalism Corporate Governance Effectiveness Governance Performance Value Creation
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    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.
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    Misalignment: The elephant in the room

    Accountability Capitalism CEO Chairman Corporate Governance Effectiveness Governance Leadership Performance Productivity Strategy Value Creation
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    News of Emmanuel Faber's dismissal as executive chairman of Danone, a French food conglomerate, has caused quite a stir. Mr Faber, a fervent proponent of stakeholder capitalism and ESG, had led the company for seven years. Since 2017, he has held both the chair and chief executive roles (a situation disfavoured by many investors, academics and advisors due to concentration of power risk). Though charismatic and influential, the record shows that company performance has languished under Mr Faber's leadership, and staff turnover increased too. Clearly, something was amiss.
    Sustained pressure from activist investors, disgruntled by Danone's performance (relative to its competitors, over several years), finally elicited in a response. The Danone board decided to separate the chairman and chief executive roles; Faber would remain chairman of the board and a new chief executive would be recruited. But this attempt by Faber to placate the activists while also retaining power was received poorly. Faber was, in the eyes of the activists, a lead actor and, therefore, a big part of the problem. He had to go they thought. Realising this, the board ousted Faber.
    Proponents of both stakeholder capitalism and shareholder capitalism have taken Faber's demise as an opportunity to come out from their respective corners to argue the merits of their favoured ideology. The purpose of this muse is not to add to that discourse; it is to consider another matter brought in to view by the case at hand: that of misalignment.
    If a Chief Executive acts against the direction of the board (or without the board's knowledge), or if a board is disunited over a strategically important matter (purpose or strategy, especially), company performance (however measured) will inevitably suffer. Danone is a case in point. 
    Matters of misalignment, either amongst directors or between the board and chief executive, need to be resolved promptly. Similarly, if purpose and strategy are clear, coherent and agreed, but subsequent implementation is poor or ineffective (the saying–seeing gap), the board probably has a leadership problem. ​Attempts to satisfy all interests—appeasement—rarely achieve satisfactory or enduring outcomes, as Neville Chamberlain discovered in 1938–1939. 
    Directors need to be alert (individually and collectively, as a board); united in their resolve to pursue agreed goals; and, their tolerance for underperformance must be low. If the board is complacent in the face of misalignment or poor strategy execution, and it does not act, it becomes part of the problem. Sooner or later, shareholders will notice, and it is reasonable to expect they will act, to protect their investment.
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    "Capitalism is predicated on bad behaviour" 

    Capitalism Ethics Governance Societal Wellbeing
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    I've been thinking a lot about the seemingly steady stream of corporate failures and litigations that have filled the front pages of our newspapers in recent times. What has caused these failures? Why have men and women become so motivated by greed that they have compromised the hand that feeds them?

    I've rationalised the situation by deciding that there's been a few bad eggs that have caused the trouble. Most corporate directors and executives behave ethically, I thought. Then I came across this opinion piece published in  The New York Times. Deresiewicz tackled the issue head-on. He argued that "capitalism is predicated on bad behaviour". Gosh.

    Clearly there is a problem with the system at present. However, capitalism has provided the foundation for many great economies. So, is the capitalist system sound but simply out of balance at present? Or is the foundation that many western economies are built upon fundamentally flawed? Does a new system need to emerge? What do you think?