Governance - Peter Crow | Helping boards govern with impact

Published on: 19 March 2014

Feltex: A lemon with the juice squeezed out?

Feltex Carpets, once a great New Zealand business went public a decade ago, in May 2004. However, the business was mismanaged and it went bust within two years. The $185m case against the board, brought by a former shareholder, is now before the High Court in Wellington. The primary defendant is the board (actually, the directors). The second and third defendants are Credit Suisse Private Equity (promoter of the sale) and Credit Suite First Boston Asian Merchant Partners (CSPE parent).

During submissions yesterday it was revealed that the company was likened to a lemon from which most of the goodness had been squeezed out. Further, one director referred to "these lousy shares" in an email several months before the company's IPO. These startling revelations place the defendants is a rather awkward position. How material will these pieces of evidence be to the overall case?

The case, which is expected to last nine weeks, is being watched closely by company directors, the IoD and many others, for it will more than likely set a precedent against which future cases of mismanagement and poor governance are measured.

Published on: 15 March 2014

On entrepreneurial thought and action: getting the low down

Delegates at the International Conference on Management Leadership and Governance are in for a treat next week. Dr Leonard Schlesinger, Professor of Business Administration at Harvard and leading company director (including Forbes and Demandware), is the keynote speaker on Fri March 21. He'll be talking about the entrepreneurial thought process and the conversion of thinking into action.

Dr Schlesinger is highly regarded in the business and academic communities, and I'm looking forward to hearing what he has to say. I'll post a summary of his talk here, as part of my commitment to provide reflections and comments throughout the ICMLG'14 conference, for the benefit of those that can't attend.

Published on: 13 March 2014

ICMLG'14: just around the corner

The International Conference on Management Leadership and Governance (ICMLG) is only a week away. This year, the conference is being held at Babson College, just outside Boston. The programme looks really interesting. I'll post reflections and comments here during the conference, so please check back if you are interested.

I leave home on Mon 17 on the Air New Zealand evening flight to San Francisco, to meet a United flight across to Boston. The conference dates are 20–21 March, so I will have some time beforehand to reacquaint myself with a city that I last visited 20 years ago, and to attend meetings with some highly regarded governance advisors who are based in Boston. My paper will be presented on the first day of the conference, and I will chair a session the second morning.

Immediately after the conference, I fly out to northern Minnesota, to visit the family I lived with as an exchange student 35 years ago. It'll be my first trip back since 1990, and possibly the last time I see my now elderly host parents. While the schedule is tight, I am looking forward to this trip very much. I'll keep you informed.

Published on: 12 March 2014

Do unto others as you would want done to you...

An email arrived from the convenors of the upcoming British Academy of Management conference a couple of days ago. It contained a request to review submissions from two different authors hoping to have their papers accepted onto the conference programme. The review process is a double-blind affair, meaning I don't know the author's identity and they don't know who reviewed their paper. My membership on the review panel is a consequence of submitting a paper myself. Submitters are asked to review other papers, which is fair enough.

I printed both of the papers today (I review documents the old fashioned way—with a pen in hand). On first glance, one of the papers appears to be well-written and the other less so. As I skimmed through the less well written paper (ahead of a comprehensive review in the next week or so), my mind wandered towards thoughts of quality, acceptance threshold and the reputation of the conference. Superficially, the paper is marginal in terms of acceptability. When I read the paper thoroughly, I must form an opinion about the paper: should it be rejected or should it be accepted albeit with robust feedback? Without wishing to preempt the review process, my instinct suggests the provision of robust feedback is probably the better choice, because it creates a learning opportunity. It's simple really. My paper is going through the same process. How would I like to be treated? Some carefully crafted statements will probably be required, so that any biases I might have in terms of the topic, the way the paper has been written, or from my first impressions are kept in check. Fortunately, I have a couple of weeks to complete the review and decide how to respond.

Published on: 11 March 2014

Major health and safety reforms (for the better) ahead

The New Zealand government has just announced the introduction of new health and safety legislation. It requires companies to keep their employees safe or face some stiff penalties. While many boards and senior management teams display responsible attitudes towards the safety of their employees, some have been been quite cavalier in their approach. The reforms include making directors personally liable for breeches—the penalties being fines of up to $3m (companies) and $600,000 (individuals).

Some may see the proposal as being 'over the top'. However, it has been well signalled: new guidelines for directors were announced ten months ago, in May 2013. The proposal will be a helpful addition to the governance landscape if it drives directors towards taking greater responsibility for their decisions. Certainly, the move towards holding directors accountable for inaction will be welcomed by many.

Published on: 8 March 2014

On women in leadership, the glass ceiling and statistics

The glass ceiling seems to be alive and operating well in New Zealand—or so a reporter's interpretation of a recently published report by Grant Thornton would have us believe.

Whereas New Zealand was the first country in the world to embrace universal adult suffrage, it now ranks 15th in terms of the proportion of senior executive positions held by women (down from fourth a decade ago). The reporter seems to have used this statistic to make the glass ceiling claim. The Grant Thornton spokesman has made similar claims. However, when one reads the Grant Thornton report more carefully, the picture is actually somewhat different. The global average has also stalled. The proportion of women in senior executive positions jumped from 19% to 24% in the three years from 2004 to 2007 but has remained largely static since. (The New Zealand proportion is 31%.)

Rather than make speculative claims, of a glass ceiling, the discussion needs to centre on why the proportion has stalled. It could be that a quarter to a third is representative of the number of effective female leaders available to contribute. Or, it could be that more are willing, but they lack the expertise to be truly effective when measured against male counterparts. Or, it could be due to a myriad of other contributing factors. Whatever the reason, business and society would be well served by finding out. Notwithstanding this, simplistic approaches (like counting things) are unhelpful. They cannot produce anything more than correlations, statements of what 'is' and emotive claims. The problem is complex, so a different research approach is required to reveal the underlying mechanisms. However, such research is typically slow and demanding, as I've discovered in my own research work. In the meantime, reporters like Mr Foreman would be well served by taking a little more care in their reporting.

* For the record, I am a strong advocate of appointing the best and most capable person to any role, regardless of their gender or any other diversity variable.

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