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    IGW'15: Overcoming barriers to deploying complex technologies

    Conferences Decision Making Governance Leadership Performance Research
    The deployment of complex technologies can be a demanding problem in modern societies, especially when various interest groups support or oppose such deployments. The magnitude of the challenge was not lost on Alfred A. Marcus (Carlson School of Management, University of Minnesota). 
    Using the example of implementing wind turbine systems as a source of renewable energy generation, Marcus compared the approaches taken in Texas and Minnesota. Both states have the high and relatively consistent wind runs considered to be a necessity for large farms of wind turbines. However, renewable technologies such are wind turbine farms are not universally supported. Some like the romanticism of the blades gently turning in the breeze; others assert they are a blight on rural vistas; and, yet others both like the idea but oppose local deployment (the pejorative NIMBY). 
    Marcus observed that Texas' approach to decision-making and deployment was more top-down in nature, whereas the Minnesota experience was more bottom-up (and highly politicised). In considering this, he suggested that charisma without supporting regulation can lead to short-lived benefits. In effect, some ideas and decision processes need top-down 'support' to gain traction. Drawing on the work of Wilson (hierarchical decision-making) and Ostrom (collective action), Marcus proposed four 'rules' that can help, as follows:
    • Boundary rules
    • Allocation rules
    • Conflict management rules
    • Rules for changing the rules (!)
    In effect, Marcus' proposal was that a combined approach—incorporating hierarchical governance structures and decision-making processes and collectivism—was probably necessary if the not inconsiderable barriers to the deployment of complex and somewhat contentious technologies (like wind farms) are to be overcome.
    Although he did not explicitly extrapolate his comments, Marcus' suggestions are relevant and applicable to boards of commercial businesses. Many decisions, especially strategic decisions, fail to gain traction in implementation because a suitable framework for both decision-making and monitoring and verifying implementation is not established. Perhaps boards might like to consider Marcus' proposal, and see how it might apply. I suspect the answer in many cases will be 'well'—so long as a shared commitment to a common and singular purpose was in place.
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    IGW'15: Gender diversity on boards

    Conferences Diversity Leadership Management Performance Research
    The topic of gender diversity on boards has received a lot attention in recent years. Researchers, interest groups and the media have chased various agendas. Much has been written and many claims have been made. However, compelling conclusions remain elusive. The topic received more attention during the first session of the second day of the International Governance Workshop in Barcelona.
    Three speakers presented the results of their research, conducted in the Polish and Spanish contexts. The studies explored variations on the theme of the impact of women on various financial and non-financial measures. All of the studies were quantitative analyses, conducted using publicly available data and statistical techniques. I have been critical of the use of such techniques for social research in the past. Reductivist approaches rarely provide insight beyond straightforward correlations. Sadly, I heard nothing to suggest otherwise in these talks. 
    The challenge for board research is to move beyond the 'big three' assumptions--ontological reductionism, that a single objective reality might exist, and that a constant conjunction between variables constitutes a causal explanation—are inapplicable to board research, because boards and the context within which they exist, companies, are social constructions. Rather, the more demanding route, of qualitative research that explores boards in situ is more likely to reveal explanations that shareholders and director nomination committees can rely on.
    I remain convinced that women and people from a diverse range of background affect board practice. However, simple empirical research is not the appropriate pathway to understand and explain whether this is correct is not. More subtle approaches, that consider the context and behavioural nuances of individual directors appears to be crucial.
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    IGW'15: Governance in emerging markets (panel discussion)

    Accountability Conferences Governance Performance
    A panel of three very capable thinkers offered conference delegates insights into boards; board practice; and, continuing tensions between calls for corporate governance reforms in emerging markets, vibrant cultural differences and inconsistent capital market pressures. a summary of the insights and comments offered by panel members Thomas Clarke (UTS, Australia), Anderson Seny Kan (Université de Toulouse, France) and David Zoogah (Morgan State University, Baltimore, USA) follow:
    • Clarke observed the many emerging markets had, in fact, emerged. They have become powerful in their own right. However, varieties of capitalism exist (the BRICS economies were compared and contrasted), all of which stand in contrast to the Anglo–American model  of hard legal and regulatory structures, and market oriented corporate governance.
    • Seny Kan suggested the boards are 'social spaces' and that culturally appropriate tools are required to 'govern' such spaces. The emergence of post-colonialism has seen a marked reaction against colonial forces in many cases, thus leading to some very stressed and complicated situations. A regime of practices may be required to 'normalise' practices within each economy, but not to (re)impose Anglo models that simply don't fit the cultural context particularly well.
    • Zoogah took a slightly different perspective, by comment on something he called the 'natural resource curse'. The catalyst for the entry of many big firms into so-called third world emerging economies has been natural resources. this has brought employment and economic growth, however in many cases the modus operandi has been exploitation not endowment. Firms have failed to embrace the grand challenge of tidying up, or by sharing the wealth created in any equitable manner. 
    While the three panel speakers observed many idiosyncrasies between emerging markets and with developed Anglo–American economies, a common thread emerged during the discussion. In most cases exogenous forces have held much of the power but this is starting to change. The role of the company in each economy is pivotal, both to the effective and fair operation of markets, and to contribute to the well-being of all citizens. 
    While the panel members did not explicitly focus their comments directly on corporate governance, the linkages and implications for boards were clear: that company leaders and boards have a crucial role to play in the development of emerging economies, and that role needs to be taken seriously.
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    IGW'15: Opening Keynote

    Conferences Ethics Governance Leadership Management Performance Research Strategy
    The second International Governance Workshop got underway at Toulouse Business School, Barcelona Campus on Thursday 11 June 2015. Professor Morten Huse, an esteemed corporate governance scholar from Norway, provided the opening day keynote. Huse has been studying boards for a long time—the mid 1970s—so when he speaks, people tend to listen. Here's four of the points from his talk:
    Huse's talk set the scene for a lively debate through the balance of the conference. It will be very interesting to see how this develops.
    • The dominant logic of modern boards—independence and opportunism—has not delivered any significant value to shareholders over time. Rather, it has driven short-termism, strong norms of privacy and mis-trust.
    • The conception of corporate governance as a set of rules and regulations to keep management honest needs to be replaced. Instead, boards need to think and behave in terms of becoming value-creating teams.
    • A fundamental shift is starting to occur, if you look closely: Evidence is starting to emerge to suggest that boards that lead, seek to create value and are involved in the strategic management process are more likely to make positive and meaningful contributions. However, this is not guaranteed, as boards are comprised of people and complex interactions, and external forces exert influence as well.
    • Huse suggested that a common language is required. Too often, a speaker says 'X' only to find that other directors hear 'X', 'Y' or even 'Z'. He went on to overlay a common language and important board tasks over the value creation process (the value chain, if you will).
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    International Governance Workshop: starts tomorrow

    Conferences Management Performance Phd Research
    The annual International Governance Workshop, hosted by the Toulouse Business School, starts tomorrow in Barcelona. Although only in its second year, this conference is an important gathering because it has attracted many of the world's leading corporate governance and board researchers. To be in the same room as these people, to hear them present and debate the results of emergent research is truly an honour. In contrast to the scale of the ICGN annual conference, the IGW is more intimate and more focussed. However, the programme of topics to be explored is no less significant. 
    Session summaries will be posted here, as usual, so you can keep up to date. My paper will be delivered on Thursday afternoon. 
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    Martin Wolf at ICGN'15: "Let a hundred flowers bloom"

    Accountability Ethics Governance Leadership Management Performance Societal Wellbeing
    Martin Wolf CBE, Associate Editor and Chief Economics Commentator at the Financial Times, delivered a rousing keynote talk to wrap up the final day of the ICGN annual conference. After observing that the limited liability, joint-owned corporation had been the cause and consequence of almost all economic activity over the last two hundred years, Wolf posed and commented on four questions. He qualified his comments by saying that he expected they might raise some profound questions. Indeed, some of Wolf's comments were controversial—the evidence being the questions asked by some members of the audience after he finished speaking.
    What is a limited liability corporation? They are a semi-permanent entity designed to outlast small-medium enterprises (because founders retire—the corner store conundrum) and markets, and they are a construct for the consolidation of relational and implicit contracts. Their genius is the importation of older hierarchical forms (to get things done) into the market system. With scale comes efficiency, endurance and effectiveness (but not always!).
    What is their purpose? The apparent purpose of the LLC is to generate economic value. However, this is insufficient. Wolf asserted that LLCs should also pursue a wider remit, by seeking to 'add value' in social terms (through the provision of payments for services rendered—wages and salaries—for example).
    What is their operational goal? The oft-quoted goal, of maximising shareholder returns, is far too simplistic, according to Wolf. It is selfish and can only lead to failure elsewhere in society. Rather, the operational goal of LLCs needs to include ethical constraints to protect all participants and in so doing ensure the good of society (at no point did Wolf pursue or even imply any form of Marxist agenda).
    Who should control them? Economically, shareholders bear residual risks following corporate activity and, therefore, shareholders should possess control rights. Wolf challenged this commonly-held view as folly because shareholders are unable to exert full control over the affairs of the corporation. Managers may manipulate the affairs of the company, sometimes to the detriment of shareholders and other stakeholders. Short-term incentives, implemented to motivate managers towards the maximisation of shareholder returns, rarely position the company for longer-term success.
    Wolf concluded by saying that LLCs are a wonderful construct. However, he went on to say that the two associated doctrines (of shareholder control and value maximisation) are unhelpful because they are too short-sighted. He told the shareholders in the room that "it is in your interest not to control the corporation completely". Other parties—large bondholders, for example—also bear residual risks. Why would they not have decision rights?
    Wolf's comments were demonstrably controversial (amongst some of the audience at least). However, the poor reputation of big business amongst the general populace suggest Wolf's comments might be closer to the 'truth' than what many in the audience might care to admit. 
    Wolf closed with this demanding challenge: A better approach might be "to let a hundred flowers bloom", so that the best [control] model might rise up and be applied for a given situation—the beneficiary being society at large.