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    ICMLG'14: Accountability in cases of corporate failure

    Conferences Governance Leadership Management Performance Research Societal Wellbeing
    Dr James Lockhart, of Massey University, New Zealand, spoke to the highly topical issue of governance accountability in cases of corporate failure or fraud. After introducing the topic and comparing rules-based and principles-based systems of governance, Lockhart discussed several cases of corporate failure that have occurred in recent years, including:
    • Case #1: Approximately 70 finance companies went bust due to mismanagement, resulting in the loss of $850bn of investor's funds. Directors, CEOs and related parties were held accountable through the legal system, and several spent time in jail as a consequence of being found guilty.
    • Case #2: Twenty-nine employees and contractors were killed in a major industrial workplace accident. The CEO and some other parties were initially charged, however all charges were subsequently withdrawn, in effect removing any accountability.
    • Case #3: Hundreds of Asians became sick and six died as a result of contaminated milk products exported from New Zealand. No one, in either the affected country (China) or in New Zealand were charged.

    Lockhart's conclusion was telling: if boards and managers lose large sums of money they will be held accountable. However, if lives are lost different accountability rules will apply. The evidence analysed suggests that lives lost are accorded a lower standard of accountability. That seemed odd—tragic even—to Dr Lockhart, and to many members of the audience. 

    The question that lingered in my mind as I left the room? How long it will be (or how many more accidents will it take) before something is done about this glaring inconsistency?

    Disclosure: James Lockhart is my PhD supervisor. However, the paper he presented was entirely his work and I had no involvement in it.
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    Major health and safety reforms (for the better) ahead

    Governance Management Performance Societal Wellbeing
    The New Zealand government has just announced the introduction of new health and safety legislation. It requires companies to keep their employees safe or face some stiff penalties. While many boards and senior management teams display responsible attitudes towards the safety of their employees, some have been been quite cavalier in their approach. The reforms include making directors personally liable for breeches—the penalties being fines of up to $3m (companies) and $600,000 (individuals).

    Some may see the proposal as being 'over the top'. However, it has been well signalled: new guidelines for directors were announced ten months ago, in May 2013. The proposal will be a helpful addition to the governance landscape if it drives directors towards taking greater responsibility for their decisions. Certainly, the move towards holding directors accountable for inaction will be welcomed by many. 
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    On women in leadership, the glass ceiling and statistics

    Governance Leadership Management Performance Research Societal Wellbeing
    The glass ceiling seems to be alive and operating well in New Zealand—or so a reporter's interpretation of a recently published report by Grant Thornton would have us believe.

    Whereas New Zealand was the first country in the world to embrace universal adult suffrage, it now ranks 15th in terms of the proportion of senior executive positions held by women (down from fourth a decade ago). The reporter seems to have used this statistic to make the glass ceiling claim. The Grant Thornton spokesman has made similar claims. However, when one reads the Grant Thornton report more carefully, the picture is actually somewhat different. The global average has also stalled. The proportion of women in senior executive positions jumped from 19% to 24% in the three years from 2004 to 2007 but has remained largely static since. (The New Zealand proportion is 31%.)

    Rather than make speculative claims, of a glass ceiling, the discussion needs to centre on why the proportion has stalled. It could be that a quarter to a third is representative of the number of effective female leaders available to contribute. Or, it could be that more are willing, but they lack the expertise to be truly effective when measured against male counterparts. Or, it could be due to a myriad of other contributing factors. Whatever the reason, business and society would be well served by finding out. Notwithstanding this, simplistic approaches (like counting things) are unhelpful. They cannot produce anything more than correlations, statements of what 'is' and emotive claims. The problem is complex, so a different research approach is required to reveal the underlying mechanisms. However, such research is typically slow and demanding, as I've discovered in my own research work. In the meantime, reporters like Mr Foreman would be well served by taking a little more care in their reporting.

    * For the record, I am a strong advocate of appointing the best and most capable person to any role, regardless of their gender or any other diversity variable.
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    CEO quits: But what of the board?

    Governance Leadership Management Performance Societal Wellbeing
    News emerged today that Peter Campbell, CEO of Brackenridge, an intellectual disability facility, has resigned after five months of investigations and media scrutiny. Tragically, three residents died at the facility last year. There have been a series of complaints relating to safety as well.

    Clearly, there have been operational problems at Brackenridge—the review concluded that management had been distant and unresponsive. Notwithstanding this, I suspect there has been a failure of governance as well. Some important questions that need to be asked are:
    • What has the board been doing in the period leading to the review and since?
    • Did the board know about the "series of complaints" that precipitated the review? If so, why did it not investigate and act? And if not, why not?
    • Why has the chair chosen to defend the CEO, when clearly something was amiss?

    Superficially, the board appears to have been quite passive, to the extent it may have failed to discharge its legal and moral duties effectively. Notwithstanding the remedial plan now in place, the performance of the board needs to be reviewed. Weaknesses need to be identified and changes made, to improve the process of governance and quality of oversight at Brackenridge. The residents and their families deserve as much.
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    Straight talking trumps politically correct platitudes

    Readings Societal Wellbeing
    I read two straight talking articles this week that provided welcome relief from the rather superficial and politically correct reporting that seems to dominate newspapers like the Dominion Post these days:

    Thank you for Messrs Morgan, Guthrie and du Fresne for your forthright articles which, I suspect, reflect the views of the majority of New Zealanders. The time for the silent majority to push back on those self-indulgent folk who make an art-form of political correctness and living off the state is upon us.
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    A better world through a better Internet...really?

    Societal Wellbeing
    InternetNZ's new vision was published today (posted here). It left me totally flabbergasted and completely cold, to the point that I wondered whether the people responsible for it actually understand their own business. The "vision" is about as inspirational as "a better world through better roads", or better telecommunications or better power distribution for that matter.
    1. Providers of Internet networks need to realise that their role is the same as other utility provider. The man in the street wants a reliable "dial tone", that's all. He wants to be able to connect and do stuff, without worrying about the network that supports it all.
    2. A better Internet (roads, power, telecommunications) doesn't make for a better world. A better utility simply makes for a more connected world. A better world emerges from  morals, culture, ethics and other social phenomena. 

    Or have I missed something?