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    ICMLG'15: Breaking to mould—new perspectives on executive development

    Conferences Language Leadership Performance Research
    Dorothy McKee, University of Ulster, Northern Ireland, presented a fascinating paper that explored the extent to which executive development (read professional development for executives) that focusses on leadership, governance and business ethics has a positive impact on business performance.
    The research was insightful, for it bridges the oft-discussed chasm that exists between academia and practice. Courses bathed in research rigour and practical application are far less common than you'd expect. I have been critical of the way many academics happily resist any activities that might see them becoming tainted by 'the real world'. Yet McKee walked right into the centre of the issue, and intentionally so, to try to gain some understanding as to what is really going on and what needs to go on to ensure executives are appropriate equipped to to lead and direct well. She surveyed and interviewed a group of business executives who are also graduate business students (Masters level). The findings were very revealing:
    • Leadership is a key feature that differentiates effective from ineffective boards, and collaborative leadership was particularly important
    • Many executives believe that gender balance has a positive impact on leadership decision-making, event though the research does not categorically support this perception
    • Effective interpersonal relationships are crucial to optimise the workings of the board (read: board processes and practices)
    While none of these insights were particularly revolutionary, they reinforce the "I think this is correct but can't put my finger on it" perceptions held by many working directors and business executives. The insights provide great guidance for professional bodies (including the Irish Institute of Directors) to inform the development of their professional development programme. They also speak volumes to academics, to get busy and to produce some meaningful theory-based models and frameworks to support the emerging perceptions of skilled and insightful executives.
    Given the overlap between our research interests and professional backgrounds, McKee and I plan to get together in a few months time, and advance these ideas, with a view to developing some new professional programmes for working directors. If you are interested in learning more, including the possibility of becoming an early adopter, please contact me.
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    ICMLG'15: Does ethics have any place in effective corporate governance?

    Accountability Ethics Governance Performance Research
    Patricia Grant of AUT, New Zealand, posed a very interesting question this afternoon. For some time now, she has been wondering whether ethics might be an important element in the oft-discussed but poorly understood relationship between what boards do and business performance.
    The seemingly standard response to corporate or systemic failures in recent decades has been to introduce a new layer or new type of structure or compliance framework. For example: Following the failures of the early 2000s (Enron, MCI Worldcom et al), Messrs Sarbanes and Oxley sponsored a new statute in the USA. While the intent was good, the implementation was terrible. In effect, the statute imposed a new set of compliance demands and overheads. A new generation of consulting businesses (to either implement or avoid Sarbox) followed not long after. Further, and worse, Sarbox did nothing in terms of preventing the GFC because, human nature being what it is, directors and executives eventually found ways to circumvent the provisions.
    Grant suggested that regulators and boards need to move beyond structural responses to failure because such responses can't be relied on to work consistently and effectively. She added that researchers, regulators and boards need to look at behavioural responses and, more specifically, at the ethics and moral motivations of directors. It turns out these dimensions have not received much attention. Grant has decided to dig into this. However, two rather demanding challenges need to be resolved before much more progress can be made:
    • While all directors (individually) have a moral or ethical compass to guide their decision-making, how does one go about making a group decision when there might be as many different moral compasses guiding the process as people in the room?
    • What exactly is 'ethics'? (yes, it does mean different things to different people, so a common understanding needs to be discovered and agreed.)
    The audience seemed to agree that Grant might be on to something quite significant. If you'd like to help Grant, or offer your board as a participant, please contact me and I'll put you in touch with Grant. If her idea gets some traction, it could spawn a whole new field of research, and move the expectations of and on directors to quite a different place. And that could be exciting or scary, depending on your frame of reference.
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    ICMLG'15: the state of corporate governance research

    Accountability Conferences Governance Performance Research
    James Lockhart, of Massey University, presented the results of an investigation he undertook, to understand what the research community has added in terms of knowledge about corporate governance in the last two decades. He did this by re-reading every issue of the top corporate governance journal (entitled Corporate Governance: An International Review). Over the 22 years since the first issue, 782 papers have been published (totalling 11,063 pages!). Lockhart has reviewed all of them, categorised them and done some analysis.
    Sadly, his findings provide little comfort for the research community. They also challenge many of the commonly-held 'maxims' that have defined the commentary of belief system about the phenomenon:
    • There is no unifying theory—simply put, we don't have a common understanding of what corporate governance is or does
    • There is no coherent research agenda.
    • The rate of progress (of research) is perhaps best described as 'plodding'.
    • There seems to be a fundamental failure amongst researchers to understand the motivation of business.
    • While most researchers claim 'agency theory' is the dominant theory, the reality is quite different: Approximately 42% of the research is based on agency theory. The rest is fragmented across five or six other theoretical frameworks.
    • Only 21 of the 782 papers even attempted to attribute causality or approach the subject of prediction (that if boards do X, then the likelihood of performance outcomes is Y).
    Gosh, this is a real indictment. It's little wonder that boards are reluctant to admit researchers to boardrooms to undertake research. Researchers are producing outputs for sure, but the queue of companies and directors waiting to consume the findings because they are relevant is remarkably short.
    Lockhart's verbal summary was consistent with my own findings: that much of what business schools produce is of questionable value. If the research agenda is to be advanced in any meaningful way, then a whole new approach is not only warranted, it is crucial.
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    Qualities of directors and boardroom behaviours that actually make a difference

    Accountability Governance Leadership Performance Research
    Have shareholders worked out that the appointment of women to corporate boards per se is not a ticket to improved business performance? The challenge of lifting representation has been embraced by many groups across the Western World, including the 25 Percent Group. Yet the numbers are not stacking up in the way many had hoped. While some countries have implemented quota systems, conclusive evidence is yet to emerge to show that, by adding one or more women to a corporate board, business performance will increase.
    Diversity amongst directors makes sense, because a mix of backgrounds and experiences tends to produce a wider range of options for consideration. If the debate is healthy and vigorous, higher quality decisions can follow. However, women should not be appointed for political or social reasons. The conversation needs to move on, beyond simple numbers and the presence of absence of XX and XY chromosome pairs, or any other specialist technical skill for that matter. Physical attributes and technical skills are inputs (only), their presence does not produce results.
    Researchers and professional directors need to dug deeper, to discover the qualities and behaviours of directors that are likely to contribute to better outcomes. In other words, what directors do and how they think in boardrooms. If we can discover these qualities and the social interactions that flow from them(*), and nurture their expression in boardrooms, then increased business performance might not only be possible, but perhaps sustainable. The likelihood of a mix of male and female directors is pretty high as well, I would have thought.
    (*) This is the essence of my doctoral research. Details will emerge during 2015. Contact me if you want to be notified when papers and articles are available.
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    International Conference on Management, Leadership and Governance

    Conferences Governance Leadership Management Research
    Are you interested in the latest developments in management, leadership and corporate governance? If so, you might like to check out the 3rd International Conference on Management, Leadership and Governance being held in Auckland, New Zealand on Thu 12 Feb and Fri 13 Feb. Details are available here.
    The keynote speakers are:
    The two previous editions, in Bangkok and Boston, were great forums. Auckland will be no different: ideas will be shared, emergent research findings presented and new ways of improving business performance debated. In addition to the main conference topics, the following themes will be discussed during mini track sessions:
    • Pluralistic approaches to effective corporate governance research
    • The role of leadership in effective corporate governance
    • Research into cultural and gender leadership
    • Effective corporate governance
    • Effective leadership at different stages of organisational growth
    • The role of women in sustainability management
    As usual, summaries of each session will be posted here throughout the conference. Please let me know if a particular paper or conference track interests you and I will do my best to attend and report on it.
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    When publicly-listed companies miss revenue forecasts

    Accountability Governance Performance Research
    When publicly-listed companies miss their revenue forecasts, as Wynyard Group and Orion Health both did recently, the stock market generally responds by discounting the share price. That's because the 'value' attached to the business is a mathematical calculation involving both current inherent value (generally represented by customers, intellectual property and other assets) and future value (expected revenue). 
    Knowing this, some companies announce somewhat optimistic forecasts, both to challenge sales and delivery teams, and to send signals to the market. When forecasts are achieved, everyone is happy. However, if forecasts are not met, the natural reaction of the market is to back out the value. Sometimes the market reacts quite strongly, especially if the share price has climbed significantly on the back of optimistic forecasts, press release statements and marketplace hyperbole. This raises some interesting ethical questions:
    • Are share price movements simply the natural forces of the market at work in response to stimuli including forecast information?
    • Is any further action required to protect various parties from the vagaries of optimist forecasts?
    • What sort of guidance should publicly-listed companies provide to the market, or should companies remain silent on future revenue and profit expectations? 
    • What constitutes 'realistic guidance'?
    I don't have any strong views on these questions at present, other than to suggest they seem to be important to the smooth functioning of the market. Therefore, they probably deserve some air time. Depending on the responses to these questions, I may initiate some further research and develop some recommendations.