Governance - Peter Crow | Helping boards govern with impact

Published on: 16 November 2013

ECMLG'13: Don't forget the stakeholders' interests

Marina Lovrincevic (University of Split, Croatia) presented a very interesting paper on the relationship between supervisory board efficiency and stakeholder orientation. In so doing, Lovrincevic exposed a chasm between the Euro-centric view of the sustainable purpose of the company (based on stakeholder theory) and the Anglo-American view (agency theory).

Lovrincevic's analysis, of empirical data from a sample of Croatian non-financial listed companies, asserted that supervisory boards are helpful to protecting the interests of the wider set of stakeholders. An interesting debate ensued, essentially comparing and contrasting the Friedman view (value maximisation for the shareholder) and the stakeholder view (value distribution). The audience seemed to agree that the paper provided an interesting platform for future research, particularly research to explore whether a modified view of stakeholder theory might provide a more complete basis for effective governance.

Published on: 15 November 2013

ECMLG'13: Reflections from Day 1

The first day of the 9th European Conference on Management Leadership and Governance is over. During the course of the day, some 29 peer-reviewed research papers were presented, in addition to Sloan's keynote at the beginning of the day. Some of the highlights and reflections from day 1 are listed below:

We have much to learn from each other. For example, I sat with a Professor from Neapolis University (Pafos, Cyprus) over dinner. We had a great, wide-ranging conversation, which included the sharing of some stories about the demands of tertiary education, and especially the challenges of securing a place in undergraduate programmes in highly-regarded universities around the world. I concluded that New Zealand students have it easy, especially when compared to the demands of entry at places like Imperial College in London (mind you, it is one of the top five rated engineering schools in the world).
We have much to learn from each other #2. In a side conversation between sessions, I was told that an Australian-based doctoral candidate had recently completed a multi-year case study of leadership in several organisations, using direct observation as a key data collection method. This is the first time I have heard of any study (anywhere) that has attempted the same sort of design as I am using. Hopefully, when more details are available in the next week or two, I'll be able to assess the correspondence between their study and mine, with a view to securing a meeting to learn more—especially to discover what learning might be applicable to my own work.
Many of the papers from Eastern European contributors followed a predictable pattern, of the statistical analysis of a set of quantitative data gathered from publicly available records. Some of the conclusions presented were a little tenuous, which is not surprising given the difficulties reporting generalisations about social phenomena from statistical data. Notwithstanding this, it was great to hear from enthusiastic researchers from a part of the world that I know little about, apart from what I have been exposed to in books and television programmes.
My own paper seemed to be well-received, despite a small audience. I appreciated the opportunity to summarise my work; to field questions from the floor; and, defend the philosophical and methodological approach that underpins my work. I am looking forward to more conversations on day 2 and beyond.
The conference dinner was held at Schloss Maria Loretto, on the shores of Wothersee. This beautiful castle that dates back to 1700s. The schloss is a short 8-minute walk from the conference hotel, so many of the delegates took a "walking bus" to get there. The food and service was outstanding. It was raining when we left, so many of us "enjoyed" the stroll back to the hotel in the gentle rain. My day ended damp but happy.

Published on: 15 November 2013

ECMLG'13: Moving boards from agency to performance

James Lockhart (Massey University, New Zealand) presented a paper which challenged the underlying foundation that has supported the majority of the governance research and practice over the last four decades. Lockhart opened by contending that the focus that many boards have on compliance has produced a generation of defensive, reputation-protecting boards, as opposed to boards that focus on business performance. Lockhart asserted that governance attention needs to change, away from compliance and towards factors that effect performance:

Division of labour: A clear division of labour, between boards and managers (cf. the often ambiguous roles of governance and management) is crucial to deciding who does what (efficiency and effectiveness)
Power: Hubris in the boardroom tends to determine what gets discussed, and therefore, what gets implemented. In contrast, humility and a commitment to cooperation should be conducive to refocussing attention on collegial efforts to discover, agree and work together towards the corporate objective.
The role of the owner: In many governance situations, the role of the owner has been forgotten or ignored. This should not be a surprise, because the governance legislation in many countries requires the board to act in the best interest of the company (cf. the owner). If the role of the owner is reasserted, boards' attention should move to the making of decisions that affect the goals and strategies of the owners/shareholders.

These points provide a useful basis for future governance research, and for practice. However, they assume that directors and boards have the competence and inclination to change their behaviours and embrace them—an assumption which, unfortunately, cannot be taken for granted.

Published on: 14 November 2013

ECMLG'13: Opening keynote address

The 9th European Conference on Management Leadership and Governance was held at Alpin-Adria University, Klagenfurt, Austria.

The opening address, by Julia Sloan of the USA, explored the topic of learning to think strategically, and the importance of such thinking to sustainable business performance. Sloan drew a clear demarcation between strategic thinking, strategic planning and strategic implementation. She asserted that most organisational leaders have reasonably well-developed planning and implementation skills, but poorly developed thinking skills.

Whereas strategic planning tends to be linear, tidy, convergent, clean and aims to solve problems, strategic thinking tends to be non-linear, iterative, messy and aims to suspend problem solving while the nature of the problem is more clearly understood. Sloan suggested that leaders need to become skilled in strategic thinking and strategic planning. Otherwise, if leaders can only but plan in detail—without asking questions of context—and, as a result, expose their organisations to the very real chance of getting it wrong.

Sloan's thesis is as compelling as it is self-evident—which begs the question: Why do so many leaders ignore the strategic thinking element? Is it too hard, too complex, or is it simply a case of leaders not knowing what they don't know? Perhaps more importantly, how can this gap be bridged? Our business schools probably have an important responsibility in addressing these questions. They need to take stock of Sloan's thesis, with a view to adjusting their curricula, to emphasise the cognitive skills that are so obviously missing from the graduates emerging from their programmes.

Readers wanting to more should read Sloan's book "Learning to think strategically", the second edition of which has just been published.

Published on: 10 November 2013

ECMLG'13: Observations and insights

Later this week—on Thu 14 and Fri 15 November—I will be speaking at the 9th European Conference on Management, Leadership and Governance in Klagenfurt, Austria. I'm looking forward to renewing acquaintances and making some new connections; to presenting a paper to an international audience which will include some of the world's leading governance scholars; to testing some emergent ideas; and, to learning from others throughout the two days.

I plan to post reflections here during the conference, so check back if you'd like to hear about the latest developments in management, leadership and governance research and practice.

Published on: 9 November 2013

How much time do you spend in your board role?

The National Association of Corporate Directors (NACD) has just published its 2013–2014 Public Company Governance Survey. The news release and several top-line findings are available here. A copy of the full survey report is available from the NACD bookstore.

The report makes for interesting reading. One metric that caught my attention was the average amount of time that board members commit to their work. Respondents claimed their annual time commitment was 235 hours per board. Using an 8-hour day as the basis, this means that directors of public companies in America commit, on average, 2.5 days per month to each board of which they are a director. Does this sound like a lot of time, or not much? By way of comparison, most boards of public companies in New Zealand meet ten or eleven times per year, and board meetings typically last between four and seven hours. Even taking the generous end of these ranges, and doubling the figure to account for committee work and pre-reading, the figure for a New Zealand director is about 154 hours, or roughly two-thirds of the American figure.

What amount of time is reasonable? Clearly, boards and companies are complex, socially dynamic, and subject to the vagaries of markets and many internal and external factors, so every situation is different. However, I would have thought that a figure closer to 400–450 hours per year would be necessary, if a director is to understand the business of the business well (this being a prerequisite to making an effective contribution to the development of strategy and the making of informed strategic decisions), and monitor performance well. Could the lower levels of commitment that seem to be typical be material to the various failures of governance that have come to light in recent years?

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