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    Come hither employee directors?

    Accountability Decision Making Governance Performance
     British Prime Minister, Theresa May caught the attention of many recently when she raised the possibility of requiring companies to reserve positions on company boards for employee directors. This proposal, which was suggested amongst other measures as a means of curbing perceived corporate excess in the UK, has received a mixed response, including support from the Institute of Directors and wonderment from others.  
    Increased diversity has been associated with improved decision quality, so including employee directors at the board table should be to the organisation's advantage, shouldn't it? On the surface, yes. However, experience tells us that one of the very real challenges of reserving places on boards, be it via a gender-based quota mechanism (e.g., Norway) or to provide a voice for an interest group (e.g., parent representatives on school boards), is that people bring baggage. Representation is a problem: candidates appointed because they meet the representation criteria often struggle to act in the best interests of the organisation when they take their position at the table.
    The conflict (of interest) that employee directors face is even tougher to manage because it is directly personal. On one hand, employee directors are paid to perform work and implement strategies, while on the other they are expected to make decisions in the best interest of the company. Decisions made in the boardroom may not be to the employees advantage (e.g., to close a loss-making division, resulting in job losses). To expect an employee director to subordinate their personal and collegial interests in favour of what might be best for the company is likely to be a tall order; it may not even be realistic.
    Yet the German experience (one of the most successful economies since World War II) suggests that the inclusion of employee directors can be made to work. But the German system of corporate governance is framed on the notion of two-tier boards, and employee directors sit on upper (supervisory) board not the executive board where the important strategic decisions are made. Also, supervisory boards normally only meet a few times each year, meaning the focus is more directly one of oversight, in a manner not dissimilar to an annual general meeting of shareholders in the unitary system. 
    If the corporate excess that May has called out is to be corralled (as it should be), the underlying basis of corporate governance (the means by which companies are directed and controlled) should be reviewed. A holistic review is needed to ensure the addition of specific measures (e.g., representative positions) does not inadvertently introduce other problems like suboptimal decision-making. Any review needs to extend beyond board structure and composition to the behaviour of directors and the activities of boards. Directors themselves also need to take responsibility for their actions; invest time understanding the business of the business; and, take their commitment to act in the best interests of the company seriously. I've written and spoken about this many times in the past. If directors embrace these suggestions, enforced structural provisions (e.g., representative groups) may no longer be required. But this relies on directors behaving well and doing 'the right thing', a reliance that has a chequered history.
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    Poor corporate governance or plain fraud? Where's the line?

    Accountability Decision Making Ethics Governance Performance
    South Africa's flag carrier, South African Airways, has hit turbulence. Severe turbulence. The airline, which is in financial trouble as a result, most probably, of some poor decisions in the past, has been negotiating a debt refinancing package. However, the package reportedly contains some unusual characteristics (read: extremely high fees). Now, a staff member has blown the whistle; the board has been called out; and, the matter is being investigated. 
    Even a cursory inspection suggests that something is amiss, and badly so. Problems that seem to stem from poor decision-making at the top of the organisation appear to be endemic. Whether the underlying driver is greed, hubris, corruption, ineptitude or something else remains to be seen. Regardless, South African Airways is in trouble. The board appears to be missing in action and the 'corruption' word has been mentioned making situation very messy, to say the least. 
    Sadly, SAA is not an isolated case. Recently, Sir Philip Green fell from grace; and, it was not that long ago that FIFA, Toshiba and Volkswagen suffered 'setbacks'. It's little wonder that hard working people have any time for boards of directors. The sources of governance failure are well-storied. However, the natural response—hard law—has done little to improve things (because people who want to generally find their way around things that inhibit them). Different measures are required, perhaps starting with culture, values and purpose. Board appointment processes also need to change. Unless and until 'bad eggs' are exorcised from boardrooms and held to account, the actions of a few will, no doubt, continue to make life hard for the rest of the director community.
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    On purpose, strategy, execution: Together is best

    Accountability Decision Making Governance Leadership Performance Strategy
    Last week, I had the privilege of spending an entire day with the directors and executives of a highly-regarded architectural practice. The large practice has developed a great reputation over several decades for creating 'meaningful' architecture—buildings and spaces that 'fit' the surrounding environment, and that people enjoy living and working in. The job at hand was to facilitate a strategy development workshop, working with eleven capable and motivated men and women to select a course to guide the further growth and development of the practice. In essence, the day was about looking up and looking out.
    Using the StratCross framework and summaries of PESTEL and SWOT analyses completed prior to the workshop, we got stuck in. Before we knew it, the time was 4:30pm and the intense but enjoyable workshop was over. As we packed up, several directors indicated that the workshop had been "hugely valuable", "challenging" and "galvanising", and that they were looking forward to seeing the fruits of their labour. On the way home, my thoughts wandered, reflecting on the day and why it had been so much fun. Here's a few observations that came to mind. You may find useful for your next retreat or planning session:
    • All of the attendees had a comprehensive understanding of both the business of the business and the wider environmental context within which the practice operates. They had done their homework—and demonstrably so. Also, and unlike some boards that I have worked with, everyone wanted to be in the room and to make a contribution. These two factors were foundational to creating an environment which encouraged the informed, healthy debate that seemed to flow naturally throughout the day.
    • Directors (especially) were quick to latch on to the importance of the first question, "Why does the business exist?" It was as if they knew that if strategy is built without a clear and agreed purpose, the resultant output (i.e., the strategy) would be reduced to, simply, a collection of activities. 
    • The attendees recognised that many architectural projects take several years from initial ideation to completion, and some can take more than ten years. Consequently, a long-term view is necessary. This spilled over to the discussion of how far ahead the strategy should look. The group was happy to look more than ten years out, on the basis that goals would take time to realise and the proviso that the resultant strategy was not prescriptive (it was not) and that it was reviewed regularly. 
    • During the afternoon, a couple of the attendees (one director and one manager that I noticed, there may have been more) voiced a desire to build action plans and get underway. They said liked what they saw at the high-level but were concerned that the good work could be for nought unless clear action plans were developed and a commitment to execution ensued. Others agreed this was vital.
    • Despite some of the managers operating at fine levels of detail in their day-to-day work, the group as a whole agreed that "less is actually more helpful". Why write 20 or 30 pages of detail when 3–5 pages can actually provide a more holistic understanding? This demonstrated a clear awareness that strategy is a 'big picture' activity, and that detailed action plans and operating budgets are supporting documents that are the responsibility of managers. 
    • Finally, together is best. Every the director and executive was 'present' in the room throughout the day. Also, there was no sense of 'us and them' nor any visible expression of 'power'. Rather, the attendees worked together collaboratively, functioning as a group of peers committed to achieving an outcome. Compare that with common practice, which suggests that distance and a clearly-defined separation between board and management is appropriate.
      (Note: The action of one manager who collected everyone's phone as the workshop started may have contributed to this. If nothing else, her action triggered a bit of light-hearted banter to kickstart the day!)
    So, overall it was a good day, with some observations to boot. While most attendees came away hopeful of an even brighter future for the practice, they also realised that, despite a coherent strategy (to be written up in the coming days) and a commitment to execution once approved, success is not automatic—unlike the arrows in the picture imply. A realistic way to end the day.
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    Guidance for coping with change

    Accountability Decision Making Diversity Governance Performance Societal Wellbeing
    In 1970, Alvin Toffler's book Future Shock was published. It quickly became a bestseller. Toffler died recently, triggering a series of articles and reflections (including this one published in the New York Times) about his life and 'the book'. Toffler had an amazing ability to look well ahead of almost all of us, to think critically, and to make some sense of it all. Consider these observations by Manjoo in his reflection:
    Alvin Toffler ... warned that the accelerating pace of technological change would soon make us all sick.
    Yet in rereading Mr. Toffler’s book, as I did last week, it seems clear that his diagnosis has largely panned out, with local and global crises arising daily from our collective inability to deal with ever-faster change.
    That societies are racing with great speed to embrace new ideas and innovations, yet without the ability to cope with the consequences of high rates of change, might be one of the great problems of our age. Perhaps those in influential positions in society have a responsibility to shift their gaze, from their own ambitions towards altruistic ideas that serve the greater good? This is by no means a call to embrace utopian principles nor uniformity because we are all different. Much pragmatism is needed if society is to continue to endure. 
    Leaders—of all types but especially business leaders, company directors, politicians and academics—could do well by (re)reading Future Shock. We need to talk about stuff, because we all have much to learn.
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    Governance evolution and trends: Brisbane, May 2016

    Accountability Decision Making Diversity Family Business Governance Performance Speaking Engagements Strategy
    Recently, I had the privilege of addressing several groups of directors and executives in Brisbane, Australia on the topic of emerging governance trends. Over 200 directors of family and privately-held companies attended breakfast and dinner events hosted by TCB Solutions, Hanrick Curran and AMPLiFi Governance. The talks and the panel discussion that followed provided a candid ​summary of some of the challenges boards face and offered suggestions to guide boards intent on achieving high performance and good returns to shareholders.
    The dinner event was recorded. Clips of my talk (in two parts) and the panel discussion (in three parts) that followed are now available:
    If you have a question or a comment arising from these clips, or want to discuss the possibility of me speaking at an event or sharing ideas directly with your board, please get in touch. I'd be delighted to hear from you.
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    On the director–shareholder relationship

    Accountability Decision Making Ethics Governance Performance
    It had to happen. Someone just asked one of 'those' questions. Should boards of directors communicate with shareholders? Great question Lex Suvanto! You can read his blog post here. Amongst his comments, Suvanto makes two quite startling observations: 
    Many directors are passionately against the idea of engaging directly with shareholders.
    Directors also correctly point out that the board should not say anything out of step with management anyway, so they question the value of this effort, especially given limited available time that directors can devote.
    These observations, and others in the article raise important supplementary questions about how boards conceive their role and the mindset of directors—including these:
    Ultimately, appropriate responses to these questions are straightforward if boards understand the statutory framework and directors have a clear understanding of both why boards exist and what boards (should) do (i.e., corporate governance).
    ​Directors are appointed by shareholders to ensure the effective operation of the company, in accordance with shareholder wishes (whatever they might be). If the senior-most decision-maker in the company is the board, is it not reasonable to expect the board to both understand what the shareholders want from their investment and subsequently provide an account to those that put them there? I think so. Suvanto's article contains some helpful suggestions to get started. I'm available if you want to chat further.