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    How can boards exert influence from the boardroom?

    Accountability Decision Making Family Business Governance Research
    A burning question for many directors is encapsulated in the title of this muse. In recent years, the business media has published many stories about boards; questionable board practices; assertive CEOs that 'take over': and, missteps and failures that seem to emanate from the boardroom. Some of these stories are justified, whereas others lack substance. Alongside, the academic community has investigated the question, although typically from the perspective of a desk-based researcher using public data or, at best, interview comments. Reliable knowledge about the board's role in influencing business performance has remained elusive. Sadly, unsubstantiated claims have filled the void.
    I have spent several years investigating the question of board influence beyond the boardroom as well, to discover whether boards are simply disempowered groups that meet to rubber stamp decisions, or whether influence (especially over firm performance) is possible. The quest has included longitudinal observations of board meetings; interviews with chairmen, directors and chief executives; and, the analysis of very large piles (mountains, seemingly!) of board papers, minutes, reports and observation notes. Useful insights have been gleaned from informal discussions with directors have provided useful insights as well.
    While no definitive answers to the burning question have emerged (in any predictable sense anyway), a pattern is clearly apparent:
    • Influence is possible. The board's active and sustained involvement in an agreed set of strategic management tasks (especially strategy formulation, strategic decision-making and verifying strategic outcomes are being achieved) is crucial if the board's interventions are to have any effect on the achievement of desired business performance goals. Director capability, board activity and boardroom behaviours matter. Specifically, the harmonious expression of five underlying behaviours are necessary if the board is to have any impact.
    • However, outcomes are not guaranteed. The board does not operate the company directly (that task is normally assigned to the chief executive), and many other factors both within and outside the company (most of which are outside the board's direct control) can affect actual performance. 
    Findings have been written up in my doctoral thesis. These findings are summarised in two published papers, with similar sounding titles.
    • How boards influence business performance: Developing an explanation. This paper was published in Leadership and Organization Development Journal (Volume 37, Issue 8), an academic journal.
    • Board influence from and beyond the boardroom: A provisional explanation. This paper was warmly received (it received the best paper award) at the European Institute of Advanced Management Studies' 13th Annual Workshop on Corporate Governance in Milan in late October 2016.
    Copies of the papers are available here. If you want to know more, please get in touch. I'd be glad to discuss the findings (especially the implications and guidance for practice) with any board or group intent on realising and sustaining high levels of company performance.
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    Improving board effectiveness: Let's meet, in Sydney

    Accountability Conferences Decision Making Governance Research
    If I had a dollar for every time questions of board effectiveness and how to drive performance from the boardroom has been discussed in my hearing, I'd be well off. My role in answering these questions will continue in Sydney at the end of the month.
    • The organisers of the Governance Institute of Australia annual conference (28–29 November) have invited me to be a panelist alongside Simon Pordage and Amanda Wilson. I am looking forward to serving the Australian board and governance community in this way. The topic that the panel will be wrestling with, "The pursuit of productivity", promises for a lively discussion!
    • Following the conference, I will remain in Sydney for two days (30 November and 1 December) for private meetings with directors, boards and other leaders. If you would like to meet to explore good corporate governance; how to respond to emerging challenges in your business; or, the results of my latest research and the implications for more effective board practice, I'd be delighted to sit with you. Please get in touch to schedule a meeting.
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    Best paper award!

    Conferences Decision Making Governance Research
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    The 'best paper' awards from the 13th Annual Corporate Governance Workshop (of the European Institute for Advanced Studies in Management, held in Milan last week) have just been announced. The Award Committee recognised Board influence from and beyond the boardroom: A provisional explanation, my paper. While the paper was warmly received when it was presented and many interesting discussions followed during the conference and since, the award was an unexpected surprise. ​​That the findings from my governance research have been recognised by an international group of scholars is truly gratifying. Thank you, I am honoured.
    If you want to learn more about the research and findings (especially the practical implications for boards), please get in touch. 
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    EIASM'16: Day two summary

    Accountability Decision Making Governance Research Strategy
    The 13th edition of the Corporate Governance Workshop convened by the European Institute of Advanced Studies in Management (EIASM) was hosted by SDA Bocconi in Milano, Italy. Approximately 50 leading thinkers and researchers from over 20 countries gathered to explore emerging trends in the fields of board practice and corporate governance. Nearly 50 presentations were accepted onto the two-day programme. Highlights from the second day follow, together with some overall reflections (highlights from the first day are posted in a separate summary):
    • Emmanuel Zenou (Burgundy, France) discussed the relationship between board capital (i.e., director expertise, experience, reputation and ties with other firms) and innovation. This presentation was of special interest to me, given my long-standing view that boards need to be involved in strategic management if they are to have influence on firm performance. Zenou asserted that innovation is a key element for helping firms gain competitive advantage and expand market share and, therefore, the intensity of (commitment to) innovation is an important predictor of future firm performance. This is intuitively attractive at a management level, but what of the board's contribution to innovation? Does that matter? Zenou discussed this, saying that firms with high innovation intensity have appointed directors with specific skills, and that different forms of innovation require different profiles of directors. More specifically, advanced education (especially a doctoral degree or an education in law); experience in manufacturing, marketing, international business and people management; and, extensive networks with directors and leaders in other firms were all identified as being helpful. Interesting, experience in finance was negative, suggesting that the propensity to appoint accountants and finance experts might be counterproductive if innovation is a important priority. Zenou's paper suggests that board expertise a more important indicator of performance than structure or composition per se. This is consistent with my research findings
    • Several people spoke about the roles of the chief financial officer and executive compensation in business, especially in the context of international business (Frederic Altfeld, France) and 'say on pay' (Will Mackay, Australia) and board compensation committees (Hugh Grove, USA). The general theme to emerge from this group of speakers was that the chief financial officer has an important role to play as an enabler (but explicitly as a leader) and that executive compensation perceptions of often (and unfortunately) uncoupled from reality. Expanding this second point, Mackay said that the problem with published executive compensation details was the lag between when the package and associated key performance indicators were negotiated and when the results (the pay) was reported. The primary problem is that the media has no memory. This point places a crucial responsibility on boards, to ensure that appropriate context is provided for payments made to executives—especially in the case where the executive has been paid well great historical performance but the company has entered a period of tougher trading conditions when the pay is reported in the annual report.
    Overall, the conference provided a wonderful forum for leading board and corporate governance researchers from around the world (especially Europe, but also North America and Asia) to get together to share ideas and discuss emerging trends. The collaboration produced some wonderful debates; strong agreement that less is known about corporate governance than what most researchers and consultants (especially) claim to know; and, an invitation to return in 2017 (which I will probably accept). However, there was one notable disappointment: mine was the only presentation informed by observations of what boards actually do. Researchers and consultants need to get off their backsides and get inside boardrooms if they are to truly understand corporate governance and provide credible recommendations of what boards should do in practice.
    ​More personally, I was approached by three different people to collaborate on a few different projects, which was gratifying. Two approaches in particular led to further exchanges over lunch and dinner: one to synthesise the learning from my board observation studies (the board's influence on firm performance) with research into psychological factors and group decision-making, and the other to dig into the performance of local government councils (this second project is of special relevance given an independent assessment project I'm currently involved with). Where these will lead remains to be determined. However the fact that people around the world are starting to realise that we need to understand how boards can be a source of value creation (because this relationship is simply not understood now, despite what most consultants claim) was heartening. I look forward to the journey in the coming months, including return visits to UK, Finland, The Netherlands and Italy in early 2017.
    If you wish to know more about the conference; receive papers on topics of interest; or, pose a question or commission some applied research, please get in touch. I'd be delighted to hear from you and to serve you.
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    EIASM'16: Day one summary

    Accountability Decision Making Ethics Governance Research
    The 13th edition of the Corporate Governance Workshop convened by the European Institute of Advanced Studies in Management (EIASM) was hosted by SDA Bocconi in Milano, Italy. Approximately 50 leading thinkers and researchers from over 20 countries gathered to explore emerging trends in the fields of board practice and corporate governance. Nearly 50 presentations were accepted onto the two-day programme. Highlights from three of the papers presented on the first day are summarised here (highlights from the second day are posted in a separate summary):
    • Alessandro Merendino (Coventry University) opened the conference with a very interesting presentation on the subject of the governance of mega-events. His case (the 2016 Rio Olympics) provided some very interesting insights about how mega-events are governed. The analysis of 43 in-depth interviews (with very senior managers and board members) revealed considerable structural complexity, partially dictated by political drivers at both the country and the Olympic Games organisation levels. Surprisingly (given a clear purpose was established—to deliver the Games), the primary focus of the system of corporate governance lay firmly on the monitoring end of the conformance–performance. However, when other factors including that the roles of president of Rio16 and the chairman of the board were held by the same person, and the other board directors were appointed by the chairman are factored in, the strong compliance focus is perhaps less surprising. The preservation of personal reputation appears to have been a far more significant moderator of the behaviour and decision-making than the successful delivery of the Games. Given these insights, it is little wonder why the pre-Olympic planning often runs late, and the Games invariably end up costing far more than originally anticipated (leaving the host city with a long-term debt burden). Consequently, those considering 
    • Jari Melgin (Finland) delivered a powerful paper that revealed some great insights about decision rights and where power actually lies (in the boardroom or the executive suite?). Thresholds of decision rights determine the boundaries of power between board and management. If decision thresholds are too lax for example, boards may not properly represent shareholder interests. Similarly, if decision thresholds are too tight or too extensive, then powers transform boards into management teams. He summarised the results of an extensive research project. A core funding was that the  power to make decisions (of various types but especially strategic decisions) has 'formal' (stated decision rules: what is supposed to happen) and 'real' (what actually happens) characteristics. Decision control can be stratified into hard law, soft law (codes, etc), articles (company specific rules) and board rules layers. Melgin concluded that 'board rules' are especially significant because they provide guidance to the board in the case that a decision fits within the boundaries of hard and soft law and articles but the basis and delegation (for the decision) is still not clear.  
    • Joanna Pousset (Barcelona) presented an interesting talk on conflict amongst corporate elites (i.e., between directors and the chief executive). Using the largest construction company in Europe (VINCI), Pousset described a series of conflicts that have entered the public domain, in an attempt to understand the intrinsic motivations of boards and executives during times of conflict. Pousset conducted an extensive analysis of media reports to build a picture of each conflict (there were several). She concluded that CEO duality (whether the CEO and chairman roles were held separately or by the same person) was a material factor. This finding was in stark contrast with a large body of research that shows that CEO duality is not a reliable indicator of board or board performance, at any level. That the analysis had arrived at this point was worrisome. Why the chairman or CEO was not approached for their perspective, even to support or refute the analysis, beggared belief.
    In sum, the day revealed a mix of interesting insights and concerns. In particular, one long-held concern (that many researchers continue to conduct research based on the analysis of publicly-available quantitative data) was upheld. Why researchers continue to investigate boards and corporate governance from a distance (outside the boardroom) is a mystery to me. If we are to truly understand what boards do, how decisions are made and influence is exerted by boards from and beyond the boardroom, then researchers need to adopt the recommendations of others: that direct observations are crucial to the gaining of reliable insights.
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    Improving board effectiveness, in pursuit of business success 

    Conferences Governance Research
    I'm returning to the UK and Europe in a few days' time—to attend meetings with business leaders in London and to present a paper on corporate governance at a conference in Milan.
    • London (19–25 October): Interest in board performance has been steadily increasing recently, as directors have begun to acknowledge that it is possible to influence business performance from and beyond the boardroom. I'll be sharing the findings from my latest research and discussing practical implications for boards while in London. There are some gaps in my diary (Fri 21 and Mon 24 October), so if you would like to take advantage of my proximity, I'd be delighted to hear from you. ​
    • Milan (25–28 October):​ I'll also be attending the 13th EIASM Corporate Governance workshop, to meet colleagues and present a paper entitled Board influence from and beyond the boardroom: A provisional explanation. You can read a copy here.
    If you want to ask a question, make a request or schedule a meeting, please get in touch.