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    Gosh, is this a good governance practice?

    Governance Performance Societal Wellbeing
    Several months ago, Tony Marryatt left his job as CEO of Christchurch City Council, following a falling out with Mayor Bob Parker (now Sir Bob) and others. As part his severance deal, it appears that Marryatt agreed to resign also from the board of Civic Assurance (more correctly, of the parent, Local Government Insurance Corporation Limited), the Council's insurer (yes, that sounds like a conflict of interest to me as well). 

    Marryatt did fufill his commitment to resign from the LGIC board as required. However, he was reappointed immediately. Wow, this sounds like a highly unusual decision process, to say the least. Some serious questions need to be asked. Two that spring to mind are:
    • Why did Marryatt allow his name to be considered for reappointment, when many questions hung over his reputation and recent performance? (Marryatt's unhappy departure from the CEO role was not his first.)
    • Why did the LGIC appointment panel even consider Marryatt as a candidate, let alone immediately re-appoint him?

    The matter raises many more questions as well, mostly about the quality of governance practice and decision-making at LGIC. LGIC is owned by several local councils, a sector that has endured a few failures of governance in recent times. Transparency and accountability are crucial if the confidence of the public is to be maintained. Hopefully the LGIC board will put its collective ego (and political motivations?) to one side and commission an independent evaluation, of its appointment process and its overall performance. 
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    New Years Honours: where is the consistency?

    Governance Leadership Management Performance
    I'm confused. The New Years honours list has just been announced, and it appears some odd choices have been made. Two recipients of high honour are Dame Alison Paterson and Sir Robert (Bob) Parker, both of whom are well-known in governance circles. When one looks at the credentials of Dame Alison, it's easy to see why she was nominated and supported. However with Sir Bob, the picture is less clear.
    • Dame Alison has served as a company director and board chair for four decades. She was a pioneer in terms of female directors, and most of the companies she has been associated with have performed well. Dame Alison is widely respected.
    • Sir Bob is a well-known media personality and former mayor of Christchurch. While he was the 'face' of the Christchurch earthquake response, he has also been associated with several failures of governance, including a CEO pay debacle and the Council losing the right to issue building permits. His knighthood has polarised opinion.

    On the surface, one recipient has served consistently, with distinction, over a long period. In contrast, the other has been a mediocre contributor, save a high-profile media role following a natural disaster. The credibility of the honours system, particularly the bestowing of knighthoods, is dependent on the consistent application of demanding criteria, lest it be reduced to 'gongs for mates'. 

    Have I missed something, or are there a few inconsistencies in play this time around?
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    Do you remember the Cadbury Report (1992)?

    Governance Leadership Management Performance Research Strategy
    Christmas 2013 is now history, which means 2014—and all the rituals associated with New Year—is nigh. For many people, the act of hanging a new calendar on the office wall in the last few days of December carries far more significance than simply closing off one year and opening the next. It stirs thoughts of the future, of what lies ahead, of one's dreams, hopes and aspirations. I am amongst those that think about the future and what lies ahead when the new calendar is hung. However, this year, I'd like to briefly look back before looking forward, lest an important anniversary in the world of corporate governance is overlooked.

    The Cadbury Report has just turned 21 years old. Do you remember the Cadbury Report and the recommendations it contained? The so-called Cadbury Report was actually the Report of the Committee on the Financial Aspects of Corporate Governance. An archive containing copies of Sir Adrian Cadbury's speeches, the report itself, and other related matters is now available online. The Report was commissioned following several scandals and company collapses, and the damage to investor confidence that ensued. It provided several recommendations to improve corporate governance. Amongst other items, these included:
    • that the roles of Chair and CEO be separated and held by two different people
    • that the majority of the board be outside directors
    • that an Audit committee, comprised of outside directors, be appointed

    The goal was to improve trust, transparency and performance. Subsequent to the Report, many companies have adopted the recommendations (motivated perhaps by the London Stock Exchanges "comply or explain" requirement), although not without resistance and reluctance in some quarters.

    The question to be asked on the occasion of the Report's 21st birthday is whether the recommendations have improved corporate governance and, perhaps more importantly, company performance. Sadly, the evidence is mixed, very mixed. History shows that the structural provisions, including those contained in the Cadbury Report, were insufficient to prevent the high-profile failures of the early 2000s (Enron, WorldCom, Tyco, et al), the global financial crisis of 2007–2008, and some more recent failures in New Zealand and elsewhere as well. But that should not be a surprise to anyone, because the purpose of rules and structures is to provide boundaries. Rules and structures cannot ensure or predict any level of future performance. The human condition; ethics; and, the propensity to act in good faith (or otherwise) need to be factored in, if a performance orientation is to be pursued.
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    On shareholder primacy, groupthink and hubris

    Governance Leadership Management Performance Research Strategy
    I spent much of the day yesterday in the company of my doctoral supervisor, an outstanding Masters candidate and a very capable governance consultant. The purpose of the meeting was to tackle some interesting—and rather challenging—questions to do with the practices of governance, hubris and groupthink, collective decision-making and cognitive biases. In addition to being topical (read further down this blog), these topics seem to be important building blocks towards gaining a robust understanding of governance in practice. Others appear to be exploring similar topics as well.

    We made good progress, but a long list of questions and opportunities to dig deeper remain. While I'm not at liberty to discuss what emerged, several seemingly separate strands of thought, research and practice appear to be coalescing. Normally when I come away from such sessions, I listen to a podcast to clear my mind. However my mind was in overdrive yesterday as I drove home. Could a grand theory of governance, so long ruled out by many, be possible after all? 
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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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    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.