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    Armstrong's fall from grace

    Grahan Dunbar summarised the views of many this morning with this directly worded piece:

    Forget the seven Tour de France victories. Forget the yellow jersey celebrations on the Champs Elysees. Forget the name that dominated the sport of cycling for so many years. As far as cycling's governing body is concerned, Lance Armstrong never existed. Once considered the greatest rider in Tour history, the American was cast out on Monday by his own sport, formally stripped of his seven titles and banned for life for his involvement in a massive doping programme that tainted all of cycling and his own reputation. "Lance Armstrong has no place in cycling and he deserves to be forgotten in cycling," said Pat McQuaid, the president of cycling's governing body. "This is a landmark day for cycling."

    Initially, I sidled with those who were slow to condemn Lance Armstrong, primarily because no direct evidence (a positive drugs test) had ever been reported. Other drugs cheats had either been caught red-handed (blooded!) with a positive test, or admitted their guilt. Not Armstrong. Either he was clean throughout, or dirty but one step ahead of the testers. I wanted to give the man the benefit of the doubt. However, on the weight of much evidence, including many affidavits from teammates who broke the code (of silence), USADA and UCI have determined Armstrong cheated. I too am now convinced. Irrespective of the politics and personal motivations (and payments?) to speak out, the circumstantial evidence provided is compelling. Armstrong cheated. Now he must face the consequences.

    But tomorrow will dawn a new day. We must move on. My hope and prayer is that professional cyclists, their minders and the sport's administrators learn from this sorry case. There is no room in any sport for cheats. Man has much to gain from competing, but only when the competition is clean and fair.
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    Back on deck after a wonderful road trip

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    This is a quick note to let you know that I am back on deck after a wonderful road trip with my wife.  We clocked up 1200 miles (sorry, the odometer in our old car registers "miles") during our holiday in the South Island of New Zealand. Along the way, we walked, talked, sat, saw some stunning scenery and spent some time with our two sons. While I've really enjoyed the time out, my doctoral research was never far from my mind. Normal [blog] transmission will resume in the next day or two.
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    Expecting (start-ups) to fail is dumb

    One of the joys of being a researcher is that you get to read widely. Alongside the governance and research methodology material that comes across my screen every day, I see articles about related topics like philosophy, strategic management, start-ups and leadership. 

    One particular article about start-ups and venture capital caught my eye today. The WSJ correspondent cited new research from Harvard Business School that three out of every four VC-backed companies fail to return their investor's capital. That's right, three out of four. And that's the good news. The failure rate of non-VC-backed companies is worse.

    "Venture capitalists make high-risk investments and expect some of them to fail, and entrepreneurs who raise venture capital often draw salaries". Why is this? To my arguably naive mind, expecting a business fail is just plain dumb. Why aren't VCs more discriminating? Surely, some more effort up front, to assess an opportunity more rigorously and ensure a robust strategy is selected, would make sense? Or is that akin to asking an adrenalin junkie to avoid high-risk pursuits? Perhaps it is, but more so, perhaps it's time for the VC community to adopt a less cavalier attitude with what is often other people's money in the first place. I suspect the failure rate associated with pushing unsustainable ideas would decline. And if that happened, we'd all be better off, I'm sure.
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    Governance and professionalism: time to raise the bar

    Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.

    During the wide-ranging discussion, several participants suggested that governance should be professionalised, like medicine, accountancy, law and several other professions. I support these calls—strongly. Why? Well, stories like this get under my skin. While the majority of directors fulfil their legal and ethical responsibilities well, sadly there are a few bad eggs that discredit governance in the public's eyes.

    The mechanism would be relatively straightforward, involving perhaps:
    • entrance tests (competency, references and interviews)
    • maintenance of professional standards (on-going education)
    • periodic re-registration (two- or three-yearly)
    • tiering (a general registration, and a higher level for directors of large, widely-held or publicly-listed companies)
    • a disciplinary tribunal (with teeth and a propensity to act)

    The IOD's optional accreditation scheme provides a useful starting point, but it falls short because participation is optional. In my opinion, governance must be professionalised, with a robust body and process not dissimilar to medicine (Colleges of Practice, Medical Council of New Zealand, Disciplinary Tribunal). Perhaps then the concerns expressed in the article—that directors can dodge bans—will become a thing of the past. Here's hoping.
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    Time to resolve governance conflicts in CCOs

    An outstanding Editorial appeared in our local newspaper, the DominionPost, today. The editorial highlights the significant conflict of interest that exists when local government politicians are appointed to the boards of Council Controlled Organisations (CCOs). The appointment of local councillors—many of whom lack sound governance expertise, and all of whom are conflicted as the editorial argues—must stop. 

    Councils and local communities would be far better off if independent directors were appointed to the boards of CCOs (and held accountable through normal shareholder and fiduciary processes). Independent, commercially astute directors would focus entirely on their role of acting in the best interests of, and maximising the performance of, the company. In so doing, the returns to shareholders would more than likely improve over what would otherwise be possible with a highly conflicted Board.

    PS: I disagree with one sentence towards the end of the Editorial "...over time, superior systems will produce superior results." No. Governance is a complex and socially dynamic phenomenon. Over time, superior systems should produce superior results. 

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    Ethical governance on the rise?

    Against a backdrop of greed, examples of New Zealand companies taking a strong ethical stand and "doing the right thing" are starting to emerge. This week, Keith Turner, Chair of publicly-listed company Fisher & Paykel Appliances was reported as saying that his approach was to resist trading (in FPA shares) while the Board was debating and commercially analysing ideas that could have material value implications. This strong ethical stance—based on what is best for the company—bodes well for the somewhat sullied reputation that governance boards have suffered recently. 

    Well done FPA Board, your ethical stance is an example that others should follow.