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    Are the latest OECD #corpgov principles an opportunity lost?

    Accountability Decision Making Ethics Governance Leadership Performance
    Finance Ministers from the twenty most powerful trading nations, the G20, have endorsed a new set of corporate governance principles published by the OECD. The principles provide recommendations on matters including shareholder rights, executive remuneration, financial disclosure, the behaviour of institutional investors and how stock markets should function.
    The OECD principles have been promoted as contributing to more effective corporate governance. That sounds good—but what does 'effective corporate governance' mean and why might it be important? The OECD preamble offers this guidance:
    Good corporate governance is not an end in itself. It is a means to create market confidence and business integrity, which in turn is essential for companies that need access to equity capital for long term investment.  
    Wow, this suggests that corporate governance is a mechanism to protect investors and markets. The responsibility of the board for business performance is not mentioned—thus implying that  corporate governance is not a performance-based mechanism through which to pursue wealth creation. Rather it is positioned as a conformance tool to manage agency costs. What is the likelihood of boards spending time thinking about the purpose of the company, strategy or future performance if they are beholden to a set of conformance-oriented principles? 
    Sadly, it would be appear that these latest OECD principles represent an opportunity lost—for medium-sized and privately-held companies at least.
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    Do you have a wicked #corpgov question?

    Governance Research
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    Much has been written about corporate governance, board practice and business performance in recent years. Many claims have been made along the way as shareholders, directors, researchers, consultants and members of the business community have tried to understand what boards do and how they influence business performance.
    Despite the best efforts of many—and many claims that various observable attributes of boards are causal to performance—credible answers have been few and far between. That we cannot explain how boards influence the achievement of business performance outcomes remains a rather large blindspot, especially as boards hold the responsibility for business performance. Hopefully, help is not far away.
    In the meantime, we have much to learn from each other. If you are wrestling with some aspect of corporate governance, board practice or value creation that is proving to be a thorn in your side or the side of your board, I would like to help you wrestle with it and, perhaps, even resolve it.
    Please ask your wicked question (either by posting a reply or sending an email), and I will do some research and provide a reply as quickly as possible.
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    "Rise but seldom..."

    Accountability Governance Leadership Management Performance Societal Wellbeing
    In November 1787, George Washington offered this advice in a letter to his nephew Bushrod:
    “Rise but seldom—let this be on important matters—and then make yourself thoroughly acquainted with the subject. Never be agitated by more than a decent warmth, & offer your sentiments with modest diffidence—opinions thus given, are listened to with more attention than when delivered in a dictatorial stile. The latter, if attended to at all, although they may force conviction, is sure to convey disgust also.”
    What profound advice. Could it still be relevant in the always-on and rather selfish culture that has pervaded the twenty-first century? We live in a world infested by sound-bites in search of ears. Sadly, many offer little more than noise. The paucity of in-depth or critical thought is stark, yet we continue on—often blindly—in pursuit of change.
    If real progress is to be made to effect change, whether it be in the halls of power, boardrooms, executive suites or on the factory floor, might a 'rise but seldom' philosophy offer more hope than the prevailing sound-bite culture? On Washington's example, the answer could be 'yes'.
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    Cybersecurity: is it time for a Goldilocks conversation?

    Accountability Decision Making Governance Leadership Performance
    Cybersecurity is getting lots of airtime at present, often for all the wrong reasons. Reports of leaks, hacks, and data breaches pervade news sites on an almost daily basis it seems. Sadly, many news articles are sensationalist: but that is what sells the news, I guess.
    Many studies have been conducted to try to understand the problem—most of which seem to offer little when it comes to meaningful recommendations for directors seeking to mitigate business risk. Consequently, most studies and reports go in one ear and other the other.
    However, a recent study by the Ponemon Institute does make interesting reading (link here). The purpose of the study was to determine if boards of directors are a help or hindrance to creating a strong cybersecurity posture. Significant differences between how boards and IT security folk perceive risk (especially cybersecurity risk) were exposed. The technical people tend to talk it up (validly or otherwise), whereas directors typically consider cybersecurity as one risk amongst many others. That directors and technical people have quite different perceptions about cybersecurity is hardly a surprise. However, it does highlight an operational problem. The perception gap has the potential to see either too much or too little invested in appropriate risk mitigation measures. Either way, the impact on the overall performance of the business is likely to be significant. How might this be addressed?
    Perhaps the answer lies in a candid Goldilocks meeting, whereby directors, executives and IT security folk meet together (for as long as it takes), to discuss and reach agreement on two things:
    • Understand cybersecurity from a risk perspective
    • The nature of cybersecurity risk and how it might be addressed
    A Goldilocks meeting should have the effect of ensuring that the board is suitably informed about cybersecurity matters, and the IT security people should gain an appreciation of the balance of the risks the board needs to consider. An appropriate action plan, agreed between the parties and based on a common understanding, could ensue.
    To have the board, executives and technical people working together with an agreed purpose and outcome in mind, rather than talking past each other as is typical in many cases I have witnessed, might sound fanciful. However, it's bound to do wonders for morale and culture. Perhaps it might be the most beneficial outcome!
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    Boardroom behaviours: What role culture?

    Accountability Ethics Governance Leadership Performance Strategy
    I've been reading back through some older Musings this week, to review (and smile at) ideas that were front-of-mind a couple of years ago. Which ones have been superceded or discredited; which has been forgotten; and, which are still topical?
    This one, on boardroom motivations and habits, appears to still be topical today—perhaps even more so than when it was written in April 2012. How so? I was party to a discussion on boardroom behaviour today and a question of culture was raised. To what extent might culture drive conduct and ultimately business performance? The results of a recent survey conducted by Grant Thornton suggest that culture is a huge factor in corporate governance and strategy. There is much evidence to suggest that good business performance is an outcome of 'good' culture (here's one piece).
    However, culture is complex. Consequently, when one of the discussants said that a senior leader at ASIC is looking for policies and procedures to support [a positive] culture in boardrooms I was bemused, to say the least. How might one successfully codify—much less 'legislate'—culture, in pursuit of good conduct and presumably good business performance? 
    A long time ago, Drucker famously said that culture eats strategy for breakfast. Might the corollary be that a well-written code of ethical conduct that is periodically discussed, agreed and pursued by directors trump any attempt to 'legislate' any particular culture into being?
    Compliance-based regimes rarely achieve much more than to incur expense, resentment and, sometimes, avoidance. That is well-known. However, while codes are by no means fool-proof they can be helpful if every director 'signs up' and willingly embraces them. My research suggests that the key lies with director behaviour and social interactions in the boardroom, not the code per se. 
    That said, why all boards that are serious about creating a positive culture both within the boardroom and the wider business they govern have not implemented a suitable code of conduct is beyond me. It is a matter of accountability. Perhaps boards that decline to travel this path have not realised that the fish rots from the head!
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    Research update + heartfelt thanks

    Governance Phd Research Research Update
    Over the last month or so, I've begun to receive questions—several per week—about my doctoral research. Most have been variations on these themes:
    • Has the thesis been examined yet / have you get your PhD yet?
    • Can I have a copy (or a summary) please?
    That people beyond close friends and associates might be interested in the status of the research and in reading the outputs has been gratifying. Sadly, process delays have impeded the provision of affirmative responses for the time being. The background and current situation is as follows:
    On the examination: I had hoped to have some news by now, as eleven weeks has passed since the dissertation was submitted for examination (oral examinations normally occur about 8–12 weeks after submission). However, there was a problem with the examiner panel and some seven weeks elapsed before it was resolved. I've now been told to expect to expect the oral examination during the week of 19 October—another nine weeks away! Thankfully, my head supervisor is trying to accelerate the process, and I've got other things to be going on with.
    On the request for a copy of the full dissertation: A copy of the dissertation (The influence of boards on business performance: Evidence from inside the boardroom) will be posted here after the examination and emendation process is complete. A copy will also be available via academic search engines in due course. In addition, I plan to consolidate the main research findings into a slim (but readable, with practical implications) volume. If you would like to be added to a mailing list to receive a copy when it is available, please let me know.
    Notwithstanding the rather annoying delay, feedback from several people who know about the research findings suggests it will be worth the wait, both as a useful guide for boards and as a basis for future research. However, such claims are preemptive and presumptive in my view: the dissertation needs to emerge from the examination process first! 
    My heartfelt thanks for your interest in the research, and your patience while the examination process runs its course. My hope is that your interest and patience will be satisfied soon!