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    Corporate boards: are things finally starting to improve?

    Governance Management Performance Strategy
    I smiled quietly while reading an article in The Economist this morning, for it seems that calls for boards to add value are finally appearing in mainstream publications with large readership bases. A recent Schumpter blogpost with the rather unfortunate title From cuckolds to captains noted that boards are starting to play a more prominent role in steering companies—and not before time. Are American companies, so long the bastion of the rather legalistic and adversarial agency theory, starting to explore new models of governance? It seems so.

    While Schumpter praised recent developments, several important questions were raised. Are boards capable of understanding the business sufficiently well to make informed strategic decisions? Will the CEO forfeit power? Can directors work with the CEO to set strategy and fulfil their monitoring duties? If boards are prepared to engage, and directors co-operate, then the answers to these questions just might be 'yes'. But time will tell. A few boards need to be bold enough to step out from established norms and try these proposals, to see what happens. If they do, they just might be surprised with the result. The proof of the pudding is in the eating, not the making, after all.
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    AUT governance symposium: reflections

    Conferences Governance Leadership Management Research Strategy
    I had the privilege of attending a corporate governance symposium in Auckland yesterday. The one-day symposium, hosted by Auckland University of Technology (AUT), was held in the recently opened Sir Paul Reeves Building on the main AUT campus. It's a great facility. Approximately 30 researchers and other experts, including several international speakers, gathered to discuss recent developments in the field of governance. Topics included ethics, performance, diversity, technology and remuneration. There were seven main presentations throughout the day, and twelve supporting papers (presented in two concurrent streams after morning tea and after lunch). Some of the main presentations are summarised below:
    • Thomas Clarke (University of Technology, Sydney) provided the opening keynote. He spoke about emerging challenges for directors, not the least of which is structural. While the four primary functions of the board are strategy formulation, policy making, monitoring and supervision and accountability (see, R. I. Tricker), most boards spend most of their time monitoring performance, a past-focussed, internal activity. The changing context of business requires that boards embrace change, lest any value that they are able to deliver is lost. This includes the adoption of meaningful (board performance) evaluation processes, embracing a greater level of diversity around the board table, and the gaining of a greater knowledge of the business being governed.
    • Vincent Naidu (VINCI Law) provided a sobering reflection when he spoke about the duties directors owe to shareholders and to the company, and the consequences of not fulfilling these duties. He suggested that nine out of every ten failures fall into the second category—failures by directors to fulfil their duties to the company. Most of the breaches can be described with one of four summary descriptors: responsibility transference; passing the buck; "it wasn't me, it wasn't me"; and, "it's all about me". Naidu reminded delegates that the word governance is derived the Greek word kubernao ("to steer"). Directors need to keep a watchful eye, and they cannot afford to fall asleep at the wheel. Sadly, many still do.
    • Julie Cassidy (AUT) summarised proposed changes to the Companies Act, particularly provisions to criminalise breaches of certain duties of directors. The proposed changes are limited to serious breaches of sections 131 (act in good faith) and 135 (reckless trading). In contrast, the scope of the provisions in the Australian statute is much more extensive. Cassidy called for officials and politicians to look at the Australian context more closely, with a view to including a more extensive set of provisions. There is considerable resistance to the addition of any criminal consequences in some quarters (surprise, surprise). However, the disreputable actions of some have tarnished the reputations of the majority (who are well-meaning and hard-working). So, something needs to be done. 
    • Kevin McCaffrey (Effective Governance Consultants) spoke passionately about advisory boards. He asserted that many owners of small-medium enterprises (SMEs) and consultants to SMEs simply don't understand vital differences between boards of directors and advisors to boards. In the eyes of the law, groups of advisors that meet regularly and perform duties similar to those of directors may be deemed to be acting as directors. Consequently, they bear all of the legal responsibilities, accountabilities and consequences of a director, even though they don't realise it. The safest way forward for groups of advisors is to avoid "advisory board" language, and to meet on demand for specific advisory tasks only. McCaffrey's talk provided a welcome and timely wake-up call. SME consultants, business incubators, angel investors and professional bodies all need to take note.

    The symposium delivered great value to attendees—if the many complementary comments overheard during drinks at the end of the day is any indicator. Dr Coral Ingley's vision, and hard work to breathe life into it, needs to be acknowledged and applauded. Well done Coral. I hope the AUT corporate governance symposium becomes an annual event, to bring researchers, experts and (importantly) practitioners together to share and test ideas, in order to improve governance in this part of the world. It would fill a gaping void.
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    ANZAM'13: final reflections

    Conferences Governance Leadership Management Performance Research Strategy Teaching
    A couple of correspondents have noticed (and commented!) that my dispatches from the ANZAM conference, held in Hobart 4-6 Dec, appeared to be incomplete because the last dispatch posted covered the keynote at the beginning of the second day. Indeed, this is correct. Most of the leadership and governance papers that I was interested in were presented on the first day. I spent much of the second day in one-on-one discussions with other researchers, exploring ideas that had been presented earlier in the conference, and testing a few ideas of my own. This proved to be a very valuable albeit more private time for me, because I was able to correct a few assumptions and misunderstandings, and get some additional clarity on some concepts that I didn't grasp well when they were first presented.

    One session that proved to be very interesting was the interactive session on management education and the rise of MOOCs (massively open online courses). This new concept, of an entire course of material delivered online has caught the attention of many. The concept sounds great on paper, particularly to extend reach. However, the delivery model is not without its challenges (no opportunity to interact with others to thrash out ideas on a whiteboard, for example), and the financial model needs work (currently, access is free). Notwithstanding these points, the concept has merit as a delivery model alongside others. MOOCs should not be regarded as a panacea to replace the traditional (though high-cost) classroom learning model, as some have suggested.

    Overall, the conference met my expectations. It was well-organised, with plenty of opportunity to interact with other delegates. However, the quality of the papers was lower than I expected. Some described some simply outstanding pieces of research, but, many others were straightforward reports of statistical analyses of readily available data. Papers in this category lacked any insightful commentary to assist future research, or help managers improve their performance in the field. In my opinion, some of these papers should have been rejected at the review stage. A smaller collection of higher quality papers makes for a better conference. If this shortcoming can be addressed, then the appeal, relevance and usefulness of ANZAM—to researchers and managers alike—will be enhanced I'm sure.
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    Does better governance lead to better company performance?

    Governance Management Performance Phd Research
    It's been said that better boards usually lead to better business performance. Such claims have been widely reported—in the press; in classrooms; amongst consultants; and, during informal chatter amongst business executives—however they are potentially misleading.

    I am amongst those who would like to think that better leads to better performance. However, I'm not sure what "better" means, nor that any direct link exists between governance and performance. Does "better" mean more active, more experienced, more diverse, more engaged, or more something-else? We need to find out, so we know what we are talking about. To the second point, we don't know how boards influence performance. Several researchers have postulated a relationship between governance and performance but, as yet, conclusive explanations have remained elusive. Thus, my doctoral research.

    If you have grappled with these questions, I'd love to hear from you, with a view to sharing some ideas and testing a few theories that are starting to form in my mind.
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    On governance in local government

    Governance Leadership Management Performance Strategy
    Local councils have had a rough time of it lately. Earlier in the year, the Christchurch City Council lost the ability to issue building consents in its own territory. More recently, the Office of the Auditor-General issued a report highlighting governance failures at Kaipara District Council as one contributing factor in the Mangawhai sewerage project debacle. 

    Sadly, these failures of governance are not isolated cases. While some local councils govern well, the quality of governance in local councils in New Zealand appears to be quite variable. In an effort to address this, Lawrence Yule, President of Local Government New Zealand (LGNZ), recently announced that LGNZ has partnered with the Institute of Directors (IoD) to develop and deliver a new governance training programme—the goal being to improve governance standards amongst elected councillors. 

    LGNZ should be congratulated on this initiative. A high-quality professional development programme should enhance the quality of governance at local councils, provided councillors embrace the programme and the learning therein. However, the challenge—and it's a big one—is to gain traction quickly. Councillors live with a three-year horizon (the triennial election cycle), so they may find themselves surplus to requirements if voters are not happy with progress when they return to the ballot box. Hopefully, the opportunity to make a difference will provide sufficient motivation for mayors and councillors to act expeditiously. Time will tell.
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    ANZAM'13: Leadership & Governance interactive session

    Conferences Governance Leadership Management Performance Research
    A new innovation that has been introduced to the ANZAM conference this year is the Interactive Session. Whereas the format in the main conference sessions emphasises the presentation (with 5 minutes for questions), the interactive session encourages conversation, with several quick-fire presentations followed by an extended discussion. Many of the papers I heard can best be described as research works-in-progress, rather than completed studies.
    • Derek Man spoke about value of moving beyond "hero" leadership, towards an alliance model, not dissimilar to that employed by companies endeavouring to form strategic alliances. He asserted that the increasing complexity of business demanded a new approach, but stopped short of providing any robust theory or evidence of how such a model might work effectively in the anglosphere. Man's ideas are not dissimilar to those discussed by Dimovski at ECMLG several weeks ago.
    • Clive Boddy provided a very revealing insight, by drawing a link between the descriptions of toxic and destructive leadership in the psychology literature, and the traits of leaders in company failure situations. Boddy's noted that the behaviours and excesses of leaders in many failure situations are remarkably similar to those of psychopaths. He introduced the term corporate psychopath, applied it to the triumvirates that held power in several high-profile failures (Enron, Worldcom), and   described some of the behavioural indicators that characterise such leaders.
    • Kumudini Heenetigala questioned the shareholder primacy "value" that dominates governance practice, particularly in AngloAmerican jurisdictions, and noted that many "causes" of company failure can be traced back to factors commonly associated with the agency perspective of governance and the shareholder primacy value. These include a lack of accountability at the board level; unethical practices by board and management; duty of care breaches; and, acting in a reckless or irresponsible manner.

    This session really caught my imagination. The three studies summarised above are a small sample of over 100 studies presented in thIn my view, sessions like this should be included in the programmes of all research-oriented conferences. The supportive, collegial style of engagement by other speakers and attendees provided a considerable amount of useful feedback, much of which should lead to more robust research outcomes as the various studies are finalised, I'm sure.