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    Perhaps Board composition does matter after all?

    Governance Performance Research
    An interesting article appeared in the Financial Times about a week ago. I've been pondering it for a few days now, because it challenged my perception that Board composition has relatively little bearing on company performance outcomes.

    The article reported the results of a comprehensive survey into US company performance in the decade 2000–2009. The results revealed that the prevalence of lawyers on Boards increased from 24% (2000) to 43% (2009)—and that the levels of litigation, malpractice and corporate risk-taking declined markedly—through the decade. The results are not that surprising, given the introduction of Sarbanes-Oxley and other compliance measures in the survey period.

    On the surface, this study suggests that the presence of lawyers on Boards does make a difference in some areas (and therefore composition may matter). But what about the big question: Does the presence of lawyers lead to increased company performance? The study enhances the case for lawyers on Boards for their contribution to the risk conversation. However, this should not be misunderstood as providing evidence to link the presence of lawyers with increased company performance. Increased performance is dependent on innovation, the taking of risks and the making strategic decisions—all of which are somewhat of an anathema to many members of the legal community.

    So, does Board composition matter when it comes to company performance? On the evidence provided by  this study, we still can't tell—but I doubt it.
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    ICMLG Conference: Post-conference summary

    Conferences Governance Management Performance Research Societal Wellbeing Strategy
    I've just arrived home after a demanding but highly enjoyable trip to attend the ICMLG Conference in Bangkok. On the long flight back to New Zealand I found myself reflecting on the conference overall. Here's a selection of what I wrote down in my notebook:
    • While diverse in topic, research methodology and scope, the general calibre of papers and presentations was impressive. ACI did a great job pulling together and running the conference.
    • Input-output research designs and quantitive data sets continue to dominate the research landscape, despite qualitative data and empirical data being more well suited to understanding and explaining social dynamic phenomena (like governance).
    • The case study approach appears to be gaining ground as a credible methodology for governance and leadership research.
    • Those researchers who are using qualitative methods are attempting to move from purely descriptive (exploratory) studies towards explanatory studies. (One of my objectives in attending ICMLG was to gain a better understanding of contemporary research methodologies.)
    • Relatively few researchers are investigating the link between governance and company performance.
    • I met some wonderful people! The conference was a melting pot of cultures. People from many different nations, religions and cultures were in attendance—a true "global village".
    Overall, I learnt a lot and the investment was well worthwhile. ICMLG 2014 will be at Babson College in Boston, Mass. On the strength of this year's conference, expect to see me in Boston in 2014!
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    ICMLG Conference: Reflections #3

    Conferences Governance Management Research Strategy

    Management attitudes toward currency hedging in a dynamic environment

    Worasinchai (Bangkok University, Thailand) investigated the relationship between management attitudes and hedging risks in foreign exchange transactions. She analysed data gathered from semi-structured interviews, and presented an interesting theoretical model created to inform best practice to assist firms, trading partners and central government trading with Thai firms.

    Worasinchai concluded—for large Thai firms and firms trading with Thai firms at least—that management attitude has an important impact on the strategic choices that a firm makes when considering currency hedging. She found that more conservative attitudes seem to be associated with a longer-term planning horizon. When asked about risk and subsequent performance, Worasinchai acknowledged this work is yet to be undertaken. If progress can be made in this area, and relationships and correlations between hedging, risk and subsequent company performance identified, then the prospect for a more stable global trading environment may well await.

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    ICMLG Conference: Reflections #2

    Conferences Governance Research

    Intellectual Capital and knowledge sourcing in a governance context

    Ingley and Mowbray (AUT, New Zealand) described research conducted to understand how the collective and individual ability of directors add value to organisational performance occurs. They reported that performance was enhanced when the Board and management worked together, and that effective knowledge sharing and intellectual capital appeared to be important contributing factors. They introduced the notion of a “third team”, whereby the Board and management (who normally work separately) work together in some way on particular matters. The work of the third team is defined by something Ingley and Mowbray termed “behavioural governance”. They asserted that new insights will come from an increased understanding of a complex mix of (primarily behaviourial) governance characteristics, rather than continued pursuit of individual characteristics.

    Aspects of this study are consistent with prior literature that suggests behavioural characteristics are more important than structural characteristics. The study provided a useful basis for future research into the import of behaviourial and knowledge sharing factors, particularly of larger samples of company data. However, a working model or theoretical framework of the so-called third team may continue to be problematic, given the complex and dynamic nature of governance, and the (often) transient balance of power and divisions of labour that are often present in governance environments. Notwithstanding this, the research and addressed raised some very good possibilities for future research.

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    ICMLG Conference: Keynote address

    Conferences Governance Research Societal Wellbeing Strategy

    The keynote address was delivered by Richard Hames, a corporate philosopher. Notes and observations from Hames' address:

    Leadership is changing and needing to change—in response to a major transition occurring in the world. We are moving from industrial economism (which has sustained the world for the last 300 years) and a new world order. Population growth is putting huge pressure on “life critical” systems, systems initially created to sustain order in our society. These included the economy, trade, production and distribution of food, cleaning drinking water, education, and the law.

    The occidental lens, through which most world systems have been developed, is no longer valid. Systems are beginning to fail. Extreme events (weather, for example) are fundamentally changing life on the planet. The pressures being exerted and the emergent failures are now creating opportunities for change, particularly in the leadership arena.

    The emergent change is that we are starting to exit the CEO (competitive business achiever) meme, and to enter a “community” meme, where shared purpose (collaboration) will begin to prevail over the accumulation mindset. Hames said the vehicle to lead through this transition are the “the five literacies of leadership”.

    Hames’ talk was interesting, and the five literacies coherent. However, the talk seemed to assume that the CEO meme is inherently flawed (ie: selfish and subject to corrupt practice) and must be replaced. This troubles me. Cannot CEO and community memes co-exist? 

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    ICMLG Conference: observations and insights

    Conferences Governance Phd Research Strategy

    Later this week—on Thu 7 and Fri 8 February—I will be speaking at the International Conference on Management, Leadership and Governance in Bangkok, Thailand. I'm looking forward to the challenge of speaking to a learned international audience, and to learning from other speakers and researchers throughout the two days.

    I plan to share session summaries, observations and insights here during the conference, so check back if you'd like to hear about current developments in the fields of management, leadership and governance.