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    Ten days in the UK & Europe: A snapshot

    Accountability Corporate Governance Diversity Family Business Leadership Research Strategy Value Creation
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    I have just arrived back in New Zealand, from ten days in the UK and Europe. My meetings with directors, advisors, academics, students and directors’ institutions had two primary objectives: to listen and to share. The listening aspect was to gain firsthand knowledge of issues and opportunities; the sharing aspect to provide updates on the craft of board work and my experiences as a practicing director.
     Learnings (a few immediate observations, in no particular order):
    • Directors say they are finding it hard to distinguish between signal  and noise—that which is material to monitoring and verifying performance and progress, and that which is, essentially, argumentation from stakeholders asserting preferences with only tenuous associations with sustainable performance.
    • ESG remains 'hot', although everyone I asked said the marketplace was fracturing. Acolytes are becoming more assertive, especially in their expectations that companies prioritise net zero, climatic change response, and equity above all else. Others are less convinced, as they are yet to see any increase in company performance or alpha. The gap between the groups is growing too—adherents have started using the 'anti-ESG' moniker, in an effort to claim the high ground. Detractors have not been silent either, saying the discourse needs to move away from what they describe as ideological fervour to pragmatism and common sense. 
    • Increasingly, directors are questioning whether quarterly board meetings (common in Europe) is actually a good idea. The directors I spoke with said they find it really difficult to keep up with compliance matters, much less contribute well to strategic items. The power balance leans reasonably strongly in favour of the CEO too.
    • Calls for optionality to be removed are becoming more commonplace. (Optionality meaning all directors of companies of substance should be required to be professionally qualified, in the same way as doctors and lawyers need to achieve and maintain a relevant professional accreditation.)
    • Geopolitical turbulence is front of mind (greater in Eastern Europe than Western Europe). The situation is exacerbated by economic headwinds and energy security concerns (think: gas and electricity supplies) despite Europe emerging from a mild winter. The UK and France (in particular) are also struggling with high inflation, strikes and, in France, a proposal to raise the age of retirement. Given the uncertainties, many leadership teams have shortened their strategic horizons and some have become quite defensive.
    • The Credit Suisse bailout by UBS unfolded before my eyes—I was in Zürich the day after the failure. Like many other failures, this one came as little surprise to insiders; the company has endured scandals and criticism for some years. (My early assessment: the board appears to have been asleep at the wheel.)
    • Directors continue to struggle with what corporate governance is and how it should be practiced. Sadly, the confusion observed during this trip is as widespread as in the past. Directors' institutions have a critical role to play, to clearly and straightforwardly assert what corporate governance is and, critically, what it is not. 
    Amongst it all, there were some gems:
    • ​Several directors spoke passionately about their work, and how efforts to engage more actively, with an underlying sense of purpose, is starting to make a difference.
    • Researchers are moving focus, from quantitative studies using public data, to trying to get inside boardrooms to observe boards in action (ie: the practice of governance).
    • Advisors to General Counsels, CEOs and SME founders have recognised a different conversation is needed to appeal to boards and directors. I was pleased to offer a few insights and suggestions.
    • I had the delight of delivering a guest lecture to forty or more researchers and students at Leeds Beckett University. The Q&A was fascinating—a candid exchange with people passionate about helping boards govern well.
    Several followup visits are now being planned, to advise, assess, educate and speak on topical board and organisational performance matters. If you want to discuss a matter of interest, or check my availability to assist, contact me for a confidential, obligation-free discussion.
    The headline picture, showing a derelict property in Soho, London, is analogous to the state of governance in many places in Europe: structurally sound but outwardly messy.  
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    Picking an adjective...

    Accountability Corporate Governance Effectiveness Governance Performance Value Creation
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    When aiming to achieve something in business, is it better to be good, or effective, or both? ​Should boards for example pursue good governance, or prioritise effectiveness? And, are these qualifiers mutually exclusive, or can a board claim both? These 'challenge' questions have beset contemporary boards of directors, more so as various stakeholders have sought to impose their expectations and ideological preferences onto corporate values, purpose, strategy and decision making.
    If these questions are to be considered and answered well, agreement on the meaning of the adjectives is necessary. To wit:
    • 'Goodness' speaks to benevolence and decency—of doing the right thing. It conjures an ethical or moral motivation, of acting in the best interests of someone else. 
    • 'Effectiveness' is about producing an effect or achieving a goal, result or outcome.
    Instinctively, good governance sounds attractive. It satisfies a human condition; of doing the right thing and acting in the best interests of someone else (a particular stakeholder interest, for example). But what if doing the right thing has the effect of compromising the competitive position of the company; the achievement of agreed performance objectives; or, potentially, the viability of the company? And, what might be considered good by one person or group may not be upheld elsewhere. Turning to effectiveness, the threshold is more objective—either the goal is achieved or it is not. But, what if the pursuit of an agreed objective results in environmental or social harm, or some other negative consequence?  That is not acceptable either.
    Given the extremes, some sort of balance is needed, in the same way that every board must ensure conformance requirements are satisfied (compliance, value protection) and performance objectives are achieved (value creation). If this is reasonable, should a different adjective be used, to more adequately describe the value of the board's work?
    My recommendation: drop goodness and effectiveness, for one (at least) is highly subjective and has become emotively charged (think, what ESG has become), and the other focuses more on the goal without necessarily considering unintended consequences. Ultimately, in extremis, neither is sustainable without the other. Instead, boards should pursue enduring impact.
    Boards that strive to be effective in role without incurring social or environmental harms are more likely to exert a positive and enduring influence beyond the boardroom (that is, have impact). As a result, they should be well-regarded by shareholders and legitimate stakeholders as well. The Strategic Governance Framework offers insights to boards intent on realising the full potential of the companies they govern.
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    Ramping up, for the year ahead

    Accountability Corporate Governance Family Business Performance Value Creation
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    And with little more than a blink, January 2023 is, nearly, done. January is, for me, a time to relax, reflect on the year past, spend time with family and friends, read and get ready for what lies ahead. 
    In the last ten days, things have started to ramp up again: international calls, my first board meeting for the year, and local enquiries—all indicators that minds are turning to board work and the pursuit of sustainable performance once more. ​Soon, I shall be travelling again too, in response to requests to discuss corporate governance, board work, and the role of the board in realising organisational potential.
    After a good break, I not only feel ready for what lies ahead, but excited at the opportunity to help boards and directors, academics and regulators grapple with some complex issues. The first three trips for the year are scheduled, as below—and planning is already underway for several more in the months to come.
    While events and engagements are being loaded into the diary daily, some gaps remain, mainly in Singapore and England. So, if you want to take advantage of me being in your neighbourhood, best to get in touch soon! If you want to talk or meet, but the timing doesn't suit, let me know anyway—there will be opportunities later in the year.
    Dates
    Location
    6–9 February
    Melbourne and Sydney, Australia
    12–15 February
    Singapore, Singapore
    13–25 March
    England, Scotland, Romania, Switzerland, Czechia
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    The power of story, to influence decision-making

    Accountability Corporate Governance Decision Making Effectiveness Performance Value Creation
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    The claim, that a picture is worth a thousand words, is widely known. Pictures are valuable because they capture one's attention, often evoking memories of significant or special events (as real of imaginary as they may be), or of possibilities. Indeed, the phrases 'every picture tells a story' and 'the picture tells the story' encapsulate the essence of pictures—they tell stories. But visual images are not the only means of stimulation and sharing ideas. Words are important too, especially when the ideas they convey are presented as a story.
    Over the seasonal break, I have been delving into a selection of books, in search of stories and ideas. The very practice of reading is, I find, a powerful enabler—to provoke, gain insight, form opinions, and learn and build knowledge about all manner of things. I have also gone back through the Musings archives and re-read many older posts. Several that piqued my attention were re-posted on LinkedIn (check my feed) to share with a new generation of readers. To my great surprise, many of these re-posts garnered considerable attention and engagement. That some ideas continue to be relevant is gratifying. Thank you to readers who have engaged with those posts.
    Notice the mechanism at play: hearts and minds are captured through 'story'. Pictures and words are important without doubt, but they are, simply, delivery channels: two of four mechanisms (the others being aural and kinesthetic (experiential)—together, VARK) to communicate the message.
    Information and its effective delivery is crucial in organisations too; board work in particular. In such situations, stories can be incredibly influential for informed decision-making, a precursor of all that follows:
    • Managers: The next time you need to prepare a board paper or proposal, think 'story'. How is the central idea conveyed? Is the document simply an assemblage of business case numbers and words, or does the paper tell a story? Is the proposition linked explicitly with the company's purpose and approved strategy? If it is, the likelihood of it being considered in a positive light (and approved) is higher than any straightforward statement of facts.
    • Directors: You stand a greater chance of influencing your board colleagues if you use 'story' to convey ideas, especially if the perspective being offered is somewhat different from others already shared and explored.
    As managers and directors, the way we present and consume written reports, and ask and answers questions, is material to informed decision-making. Ultimately, the board's provision of effective steerage and guidance to achieve the organisation's strategic goals depends on it. Such is the craft of board work. ​With this in mind, what refinements might you consider to lift your game in 2023, and lift the effectiveness of your board?
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    On directorship: Distinguishing signal from noise

    Accountability Corporate Governance Effectiveness Governance Performance Value Creation
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    The role and contribution of the board of directors in companies has become a source of fascination for many; curiosity growing with each corporate failure or significant misstep emanating from the boardroom. 
    On paper, the role of the board is straightforward: to steer and guide the company towards agreed objectives. The legal framework within which directors operate is both stable and adequate, duties are specified and the principles are clear. So, what could possibly go wrong?
    Guidance to help boards govern well is not in short supply. Many researchers have postulated the configuration of the board is material to effectiveness and outcomes; some say the key lies in board process and policy; and yet others point to boardroom behaviour. Consulting firms and directors' institutions have proposed models too. While these proposals are enticing, failure studies and other analyses suggest none provide surety in terms of helping boards operate effectively in practice. 
    One of the reasons reliable guidance remains elusive is that board work is far from straightforward. Long-term studies of boards informed by direct observations of boards in session are few and far between. And, boards need to consider many things, debate options, weigh up risks and, ultimately, make decisions—all within an environment characterised by ambiguity and change. And if that is not enough, the board does not operate the company, the executive does. 
    If a board is to have any hope of discharging its duties, much less govern well, a solid foundation is crucial. That means directors need to understand their role and duties, and make sense of information.
    • Role clarity: Boards that struggle to exert much influence beyond the boardroom tend to be confused about their role. Privately, a significant number of directors have volunteered they have become confused over the role of the board, what corporate governance is, and how it should be practiced. They say competing recommendations, each claiming "best practice", tend to obfuscate not enlighten. Further, many directors do not know (or, more charitably, cannot recall) the duties they owe. These shortfalls are an indictment on both directors themselves and the institutions that claim to represent them. How can a director discharge his or her duties well if they do not know what they are?
    • Making sense of information: Directors are bombarded by information as a matter of course—and volumes of data and levels of prescription are only heading in one direction: upwards. Executive teams have a propensity to produce retailed reports, as if to pre-empt questions or because they think it is required to satisfy compliance needs. Boards will drown in the detail if they are not careful. If the board thinks the executive is presenting too much detail, it needs to say so. ​Externally, lobby groups present arguments requiring boards to prioritise various interests or activities over others, and to make disclosures, in relation to ESG and sustainability in particular. Some groups have gone further, arguing for changes to the fundamental purpose of the corporation. Most proposals are well-intended responses to prior corporate missteps and failures, but some seem to be motivated by ideological preferences. Distinguishing what is material to the board's work and duties, from what is not, is a foundational skill for any board hoping to be effective.
    If a board is to exert any meaningful influence beyond the boardroom, directors first need to understand the duties of a director and role of the board. Competence gaps are not tolerated in medicine or engineering: No one would expect a doctor to use a carpenter’s tools, or accept crayon drawings from an engineer. And yet such acceptance is tacit amongst directors and shareholders. What is more, if a director transgresses, the likelihood of being held to account before the judiciary is relatively low. A commitment to professional development, and the professionalisation of directorship, are proposed as mechanisms to close the competence gap.
    Once in the boardroom, directors need to apply their collective knowledge and expertise, maturity and wisdom as they consider information, distinguish signal from noise, and make decisions. If that can be achieved, the likelihood of the board making an effective contribution greatly is enhanced.

    The gap between the board's provision of steerage and guidance (i.e., governance) and business performance has been at the core of my work over the past two decades, motivating my formal research, practical enquiry and contributions as a director. If you would like an update on recent progress, please contact me.
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    Taking stock at year’s end; and peering into 2022

    Corporate Governance Decision Making Director Development Governance Leadership Research Tough Questions Value Creation
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    December is a significant month for many peoples around the world. It is the month in which two of the three great Abrahamic faiths have a major festival (Jews, Hannukah; Christians, Christmas), and the Japanese observe Omisoka. For others not professing a faith, December is significant to the extent that it marks the end of the Julian calendar. Each of these observances is distinctive, but a common thread runs through them: celebration and dedication.
    Yes, December is a time to reflect on the year gone and give thanks, and to ponder what lies ahead.
    Through this muse, I too wish to give thanks, to the many board directors, business leaders and students that I have had the good fortune to work with during 2021—both in person in New Zealand, and via video link in the United Kingdom, the European Union, the Caucasus region, North America and the Caribbean, India, several African and Middle Eastern countries, and closer to home in Australia. I have learnt a lot, and hope others have derived value from the interactions. Thank you.
    Peering into 2022, the prospect of travelling internationally to work in person with boards and students is enticing. Once the coronavirus situation stabilises, border restrictions are relaxed and travel becomes viable again, I will accept bookings. But in the meantime, I have decided to take on a new project.
    For over two decades now, I’ve had the privilege of working with aspiring and established directors on five continents, helping them wrestle with problems, consider opportunities, make decisions and learn what it means to be an effective director. Over the same period, two friends have encouraged—even nagged—me to consolidate my ideas, experiences and insights into a book. And each time it has been mentioned, I have pushed the idea away, citing lack of head space. But circumstances have changed in 2021 and the time now seems right to reconsider the prospect of writing 50,000 words about governance and the craft of board work. So, that is what I will attempt in 2022.
    (*) The image shows the Marsden Cross, which marks the location of the first Christian mission settlement in New Zealand, and the spot Samuel Marsden preached the first Christian service, on 25 December, 1814.