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    IGW'15: "Much ado about nothing?"

    Conferences Governance Leadership Research
    Prof. Silke Machold delivered the second keynote talk at the International Governance Workshop in Barcelona. Machold, who has been researching boards for many years, is a researcher that I admire—for she has been able to gain access to boardrooms to observe boards in action. Here's a summary of her rather wide-ranging commentary on companies and corporate governance:
    • If we look back through history, a steady progression from city states, through church states to nation states is apparent. The latest development is large corporations, some of which are as large as nations (Apple is as big—in revenue/GDP terms—as Austria, for example). While size often begets influence, scale does not necessarily mean that corporations are 'good' or beneficial to society.
    • Myths: That the shareholder maximisation value is always 'good', and that shareholders are owners (I commented on this recently). If shareholders were owners, then they could enter the place the company operates from and they could take possession of the company's assets. Just imagine doing that if you were a Walmart or Tesco owner—you'd be arrested for theft or shop-lifting!
    • The strong focus on earnings, and board and managerial propensity towards short-termism is, in essence, 'fishing with dynamite'. While it is this dangerous, what's worse is that it is a self-fulfilling prophecy.
    • They way we tend to look at boards—as decorations (Mace, 1970) or as engaged actors (Huse, 2007)—is somewhat simplistic. Machold has observed boards that are or have been both active and passive at different times.
    • In respect of conflict in the boardroom, Machold called out two different types of conflict, one of which is healthy and the other which is not. Cognitive conflict (thinking about and debating problems is good) whereas affective conflict (debating personalities and emotions is destructive). Boards and management teams need to discover how to pursue CC.
    • Machold walked into the diversity discussion by suggesting some types of diversity are good and others are probably not as good. Personality diversity is probably unhelpful, because the tendency is to focus on personality differences rather than debate problems. Machold suggested that boards and recruitment committees should include personality profiling within their recruitment process because better cognitive debate is more likely to occur amongst directors with similar personalities (than directors with a considerable personality diversity).
    Machold summarised her talk by suggesting that much has been said and claimed over the years, and that much of it had led to people getting quite excited about factors and attributes that, quite frankly probably are immaterial—thus the title of her talk: Much ado about nothing.
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    IGW'15: A portfolio concept of board roles in SMEs

    Conferences Governance Leadership Management
    The paper offered some interesting insights relating to the emergence of corporate governance as a system within SMEs, and highlighted the need for a holistic, integrated consideration of board roles and board research, one that takes the company objectives and configuration into account. The research, to understand what this insight might actually mean is continuing apace.
    A team of researchers from Spain, France and New Zealand have been collaborating on an interesting project: one of understanding how board roles and contributions change in different firm circumstances. Khlif, Karoui and Ingley have identified five 'roles' that appear to emerge as firm circumstances change in two dimensions, as follows:
    The difference in the way the boards work (in terms of performing control, service, strategy and mediating tasks) appears to vary quite markedly when the difference between ownership and directorship is high (the directors are not owners), and when the difference between ownership and management is high (the managers and directors are not the same people).
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    IGW'15: Gender diversity on boards

    Conferences Diversity Leadership Management Performance Research
    The topic of gender diversity on boards has received a lot attention in recent years. Researchers, interest groups and the media have chased various agendas. Much has been written and many claims have been made. However, compelling conclusions remain elusive. The topic received more attention during the first session of the second day of the International Governance Workshop in Barcelona.
    Three speakers presented the results of their research, conducted in the Polish and Spanish contexts. The studies explored variations on the theme of the impact of women on various financial and non-financial measures. All of the studies were quantitative analyses, conducted using publicly available data and statistical techniques. I have been critical of the use of such techniques for social research in the past. Reductivist approaches rarely provide insight beyond straightforward correlations. Sadly, I heard nothing to suggest otherwise in these talks. 
    The challenge for board research is to move beyond the 'big three' assumptions--ontological reductionism, that a single objective reality might exist, and that a constant conjunction between variables constitutes a causal explanation—are inapplicable to board research, because boards and the context within which they exist, companies, are social constructions. Rather, the more demanding route, of qualitative research that explores boards in situ is more likely to reveal explanations that shareholders and director nomination committees can rely on.
    I remain convinced that women and people from a diverse range of background affect board practice. However, simple empirical research is not the appropriate pathway to understand and explain whether this is correct is not. More subtle approaches, that consider the context and behavioural nuances of individual directors appears to be crucial.
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    IGW'15: Governance in emerging markets (panel discussion)

    Accountability Conferences Governance Performance
    A panel of three very capable thinkers offered conference delegates insights into boards; board practice; and, continuing tensions between calls for corporate governance reforms in emerging markets, vibrant cultural differences and inconsistent capital market pressures. a summary of the insights and comments offered by panel members Thomas Clarke (UTS, Australia), Anderson Seny Kan (Université de Toulouse, France) and David Zoogah (Morgan State University, Baltimore, USA) follow:
    • Clarke observed the many emerging markets had, in fact, emerged. They have become powerful in their own right. However, varieties of capitalism exist (the BRICS economies were compared and contrasted), all of which stand in contrast to the Anglo–American model  of hard legal and regulatory structures, and market oriented corporate governance.
    • Seny Kan suggested the boards are 'social spaces' and that culturally appropriate tools are required to 'govern' such spaces. The emergence of post-colonialism has seen a marked reaction against colonial forces in many cases, thus leading to some very stressed and complicated situations. A regime of practices may be required to 'normalise' practices within each economy, but not to (re)impose Anglo models that simply don't fit the cultural context particularly well.
    • Zoogah took a slightly different perspective, by comment on something he called the 'natural resource curse'. The catalyst for the entry of many big firms into so-called third world emerging economies has been natural resources. this has brought employment and economic growth, however in many cases the modus operandi has been exploitation not endowment. Firms have failed to embrace the grand challenge of tidying up, or by sharing the wealth created in any equitable manner. 
    While the three panel speakers observed many idiosyncrasies between emerging markets and with developed Anglo–American economies, a common thread emerged during the discussion. In most cases exogenous forces have held much of the power but this is starting to change. The role of the company in each economy is pivotal, both to the effective and fair operation of markets, and to contribute to the well-being of all citizens. 
    While the panel members did not explicitly focus their comments directly on corporate governance, the linkages and implications for boards were clear: that company leaders and boards have a crucial role to play in the development of emerging economies, and that role needs to be taken seriously.
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    IGW'15: Opening Keynote

    Conferences Ethics Governance Leadership Management Performance Research Strategy
    The second International Governance Workshop got underway at Toulouse Business School, Barcelona Campus on Thursday 11 June 2015. Professor Morten Huse, an esteemed corporate governance scholar from Norway, provided the opening day keynote. Huse has been studying boards for a long time—the mid 1970s—so when he speaks, people tend to listen. Here's four of the points from his talk:
    Huse's talk set the scene for a lively debate through the balance of the conference. It will be very interesting to see how this develops.
    • The dominant logic of modern boards—independence and opportunism—has not delivered any significant value to shareholders over time. Rather, it has driven short-termism, strong norms of privacy and mis-trust.
    • The conception of corporate governance as a set of rules and regulations to keep management honest needs to be replaced. Instead, boards need to think and behave in terms of becoming value-creating teams.
    • A fundamental shift is starting to occur, if you look closely: Evidence is starting to emerge to suggest that boards that lead, seek to create value and are involved in the strategic management process are more likely to make positive and meaningful contributions. However, this is not guaranteed, as boards are comprised of people and complex interactions, and external forces exert influence as well.
    • Huse suggested that a common language is required. Too often, a speaker says 'X' only to find that other directors hear 'X', 'Y' or even 'Z'. He went on to overlay a common language and important board tasks over the value creation process (the value chain, if you will).
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    International Governance Workshop: starts tomorrow

    Conferences Management Performance Phd Research
    The annual International Governance Workshop, hosted by the Toulouse Business School, starts tomorrow in Barcelona. Although only in its second year, this conference is an important gathering because it has attracted many of the world's leading corporate governance and board researchers. To be in the same room as these people, to hear them present and debate the results of emergent research is truly an honour. In contrast to the scale of the ICGN annual conference, the IGW is more intimate and more focussed. However, the programme of topics to be explored is no less significant. 
    Session summaries will be posted here, as usual, so you can keep up to date. My paper will be delivered on Thursday afternoon.