Neglect minority shareholders at your peril
You create your own private company, you’re the majority shareholder and can vote your percentage any way you wish and you’re now omnipotent, able to pretty much have it all your own way, right?
Wrong – as many private companies, particularly family businesses where the siblings have fallen out, have found to their detriment.
That’s because when you create a company, you create another person independent of those who created the ‘person’, and it is your responsibility, when you choose to run your business as a corporation, to look after that ‘person’. Continue reading
You’d have to be nuts to behave like this!
With conflicts of interest and directors’ duties perennial topics in the world of governance, we thought we might have a bit of enlightening fun this week with a little story riddled with conflicts of interest. Your challenge is to identify the breaches of duty by this collection of ‘mixed nuts’, count them up and let us know how many you found. We’ll throw all correct responses in a hat, draw and announce the winner, present a prize and share the breaches in a subsequent blog.
Bob Jones, the local zone elected director of Bingledale Co-op, wore a worried expression as he entered the co-op’s hardware store in Palmville. The co-op had been formed over 50 years ago by a group of visionary peanut growers and had since swallowed up a number of smaller co-ops in the state. Bob, who had represented his zone for over 10 years, was a well-known figure in Palmville. Continue reading
The interesting case of CPA rebels’ crowdfunding push
It seems there is no end to the sorry saga of CPA Australia, with news recently emerging that a group of rebels within the accounting body is actively seeking to obtain crowdfunding to mount a legal case against the old board.
What I find particularly interesting is that their contention that the old board directors were in breach of their second most important obligation after fiduciary duty – and that’s the duty of care and diligence – appears to be more than just vexatious litigation.
Let’s look at the state of affairs which, on prima facie evidence, have a fair degree of merit…
Corporate karma will get you in the end
An article in a recent issue of The Australian Financial Review by former ASX CEO Elmer Funke Kupper on the goings on at AMP reminded me that corporate karma is alive and well.
Kupper reflects on comments made by AMP’s new chairman David Murray that the ASX governance principles were partly to blame for the widely publicised woes at the financial giant.
One of Murray’s arguments was that these principles expect too much of the board, to the point where management is hamstrung and unable to get on and do its job. Continue reading
The good and bad of board appointment processes
It’s not often the words Carlton Football Club have been used in a positive sense these past six or so months, just as things seldom get cloudy and a tad inclement for the ‘beautiful one day, perfect the next’ sunshine state of Queensland.
But that has seen a change in recent times, at least in the world of governance and more particularly when it comes to the processes followed when making board appointments.
When female director and Sex Discrimination Commissioner Kate Jenkins resigned from the Carlton board in July citing the increased demands of her commissioner role which made it impossible to do justice to both positions, the Carlton Football Club decided that, as an AFL football club, they needed to retain the board’s gender diversity. Continue reading
Three key steps to keeping your reputation unscathed
When then Treasurer Scott Morrison reviewed the Australian Prudential Regulation Authority’s (APRA) recently released final report of the Prudential Enquiry into the Commonwealth Bank of Australia (CBA), he was quick to describe it as “required reading” for all board members in Australia.
The report looked into governance, culture and accountability within CBA in the wake of incidents such as the AUSTRAC anti-money laundering proceedings and made 35 recommendations, all of which CBA has committed to implementing.
The Treasurer was right. It’s a compelling if hefty read. My perusal highlighted just three key areas directors would do well to focus their attention on: tell it like it is, warts and all; always question whether the decision you’re to make is not only legal but ethical and fair; and remember the value of non-financial performance metrics. Continue reading
Greater female presence on boards is a disease!
Now there’s a headline to get you reading further…
It’s actually true, but in a wholly positive sense.
It is the major finding of significant research into understanding the primary drivers behind women’s participation on boards across Australia’s ASX200 companies.
Conducted against the disappointing backdrop of fewer than hoped for Australian companies reaching the tipping point of 30 per cent female representation – where it stops being tokenism and starts making a real difference in areas like innovation – by the end of FY 2018, the research found that the only significant predictor that boards hit the 30 per cent target is that they have a director who sits on another board that has already achieved the milestone. Continue reading
Absolute need should dictate officer bearer board positions
It has largely been dealt with in the commercial world but not-for-profits and, particularly, professional associations still tend to lag a little and need to move with the times if they’re to achieve best practice governance.
"It has largely been dealt with in the commercial world but NFPs and, particularly, professional associations still tend to lag a little and need to move with the times if they're to achieve best practice governance" – https://t.co/OFtsKhCMw2 #boardpostions #corpgov pic.twitter.com/DSKy0Lczl4
— Governance Matters (@GovernanceMatt) July 30, 2018
I’m referring to the custom of a sea of director portfolios, filled by myriad office bearers who are increasingly superfluous to the smooth running of the organisation.
There was, of course, a necessity for this back in the old days when organisations were small and business was conducted in a more traditional fashion. Continue reading
Engaging with stakeholders, engagingly
It seems almost bizarre to suggest that effective engagement with stakeholders is a key element of best practice governance but recent disclosures to emerge from the Royal Commission into banking and the draft fourth edition of the ASX’s governance principles are a reminder that, well, sometimes we need reminding…
The Royal Commission is a stark reminder of the importance of the appropriate balance between the rights of the shareholders and other stakeholders in the company such as customers.
"The Royal Commission is a stark reminder of the importance of the appropriate balance between the rights of the shareholders and other stakeholders in the company such as customers". Click here https://t.co/1uUUfHv1iG to read our latest blog.
— Governance Matters (@GovernanceMatt) July 16, 2018
The ASX’s draft fourth edition, including mooted changes to Principle 3 which will require a board to consider the culture of the organisation and its social impact, reinforces this notion. As soon as the board is expected to assume responsibility for culture and social impact, it must critically examine its major stakeholders and develop an appropriate mechanism to engage with these groups in order to develop a trusted relationship, to the point where, if member of the public asked individuals within a stakeholder group what they thought of company X, they’d say “really good”. Continue reading
Keeping collegiality in check
The topical travails of Harvey Weinstein and his alleged sexual abuse of women is a timely reminder of one of the greatest potential pitfalls of a board – and that’s when the directors become too friendly among themselves and/or too in awe of a powerbroker on the board.
— Governance Matters (@GovernanceMatt) June 26, 2018
While some board members have subsequently said they did question him, the undeniable truth is that the majority of the board of Weinstein Co. turned a blind eye to the toxic corporate culture built and led by their friend and charismatic movie kingpin.
It’s a classic case of governance in freefall that extends beyond the abuse allegations to claims that Weinstein spent millions of dollars of the company’s funds on his personal projects. And while this is an extreme example, it does remind us of the dangers when a board is too friendly. Continue reading
Boards’ lights, camera, action moment is here
I’m sure even the best of us have had moments where we’ve become a little staid and comfortable with accepted processes, a little fixed in our ways and supportive of the status quo.
"Boards' lights, camera, action moment is here". Read our latest blog about how @netflix are an exceptional breaker of models. #Netflix #corpgov #leadershipandteamwork – https://t.co/Q7yAdWleUS pic.twitter.com/pnoGCWkZuI
— Governance Matters (@GovernanceMatt) June 18, 2018
In our world of governance, when boards reach the point where they lose the ability to see that things could be done differently, it’s time to resume the continuum that has defined the subject since it first came into vogue in the 1970s.
Initially, governance wasn’t taken seriously. When it subsequently morphed into a field of learning, people became interested in what good boards did. And, until recently, we’ve seen a strong divide between the role of the board and management enter the landscape.
Blaming poor performance on diversity just doesn’t cut it in 2018!
Board diversity, always a subject of interest and debate, is again hugely topical, with some of what has emerged from the current Royal Commission into our banking and financial institutions.
— Governance Matters (@GovernanceMatt) June 4, 2018
The topicality this time is driven by what I would like to think is pure coincidence but, sadly, I fear has plenty to do with something far more sinister and murky – and it’s that latent misogyny still has a pulse in corporate Australia.
The recent backlash on female board members as evidenced at AMP has seen some return to the hoary old argument that the travails of a few of our financial institutions can be traced back to society’s push for gender equality.
Banking on good governance
The ongoing Royal Commission into the nation’s financial services industry has opened a veritable can of worms.
We’re just a short time in and already we have heard a litany of appallingly unethical – if not illegal – behaviour that touches on everything from allegations of bribery and forged documents to lying to the regulators, selling policies to those who can’t afford them and even charging fees to dead clients.
The culture in some of these companies has been so shockingly toxic that not only have CEO and chair heads rolled but the Treasurer warned that wrongdoers could face gaol.
"The culture in some of these companies has been so shockingly toxic that not only have CEO and chair heads rolled but the Treasurer warned that wrongdoers could face gaol."https://t.co/Pl1ob8vIcc #corpgov #royalcommission
— Governance Matters (@GovernanceMatt) May 16, 2018
Taking the hit and miss out of board elections
Elections, by their very nature, carry the risk of the wrong people getting up, in companies, as much as politics.
After all, when board member positions need to be filled there is a process to be followed.
— Governance Matters (@GovernanceMatt) May 1, 2018
Under the constitution, the organisation will call for nominations, interested parties will put up their hands, they will embark on a campaign to whip up support from the other members and might go on to win a seat on the board.
It’s very hit and miss, with no guarantee that the person elected adds value by bringing the skills the board so desperately seeks at that particular juncture in the organisation’s life.
In short, such an approach is a long way off best practice.
Banking on transparent relationships
One of the more startling revelations to come out of the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry emerged in mid-March when the management of the Commonwealth Bank of Australia (CBA) was accused of having told its board one thing and the Australian Securities & Investments Commission (ASIC) something radically different.
— Governance Matters (@GovernanceMatt) April 16, 2018
It all had to do with CBA’s add-on insurance product that, under the Credit Card Plus banner, was sold to some customers who, because they were unemployed at the time of purchase, could never make a claim.
The bank executives knew there were some 64,000 affected customers – a figure that would rise to 100,000 following further investigation – but chose to greatly dilute the magnitude by advising ASIC that there were 27,800 cases. Continue reading
Trust is increasingly a must
There’s an advert doing the rounds that has a ‘trust is a must’ payoff line and while I seem to recall that it’s for a homebuilding company, it would make a perfect slogan for a campaign on the key institutions of Australian society.
"Trust is increasingly a must". Read our latest blog article here: https://t.co/RYHaFoFGdt
— Governance Matters (@GovernanceMatt) April 2, 2018
I was left with this prevailing thought after reading the somewhat alarming findings of a number of recent respected pieces of research, one the Edelman Trust Barometer and the other Roy Morgan Research. Both highlight that trust is a top priority and, in the case of the 2018 Edelman Trust Barometer – a global survey across 28 countries – it shows that each of Australia’s four key institutions of government, business, NGOs and media are among the least-trusted in the world. Continue reading
Let’s have a little introspection in governance reporting
Here’s a novel thought…
Let’s have a little introspection in governance reporting https://t.co/zYv8SVPbI0
— Governance Matters (@GovernanceMatt) March 19, 2018
Wouldn’t it be a breath of fresh air if, when attending to the regulatory requirement of reporting on governance, boards of listed companies reported on their governance performance to the external market.
Wouldn’t it be a breath of fresh air if, when attending to the regulatory requirement of reporting on governance, boards of listed companies reported on their governance performance to the external market. https://t.co/zYv8SVPbI0 #corpgov
— Governance Matters (@GovernanceMatt) March 19, 2018
Forgive me if I have missed something but in all my years in this profession, my take is that there has been very little – if any – reporting on the actual governance of the board itself. Rather, what we tend to get is listed companies adhering to ASX requirements and carrying a corporate governance statement either within the annual report or making reference to it in the report. Continue reading
It’s easier to be busy than strategic
There’s that old truism that any path will do if you don’t know where you’re going and sadly, it’s a maxim that rings true in too many companies and on too many boards when it comes to strategy.
— Governance Matters (@GovernanceMatt) March 2, 2018
For if there’s one thing I’ve learned over my long career, it’s that strategy without quantified measures of outcomes is, as Henry Ford would have said, bunk.
I recall talking to the managing director of a large Sydney-based company whose key responsibility was taking care of a philanthropic fund bequeathed to it and each year deciding which of the many worthy causes applying for a grant from an annual allocation of some $150-million would be successful.
Now here’s an inconvenient truth: small boards are better
While it’s one of the most vexing and hotly debated topics in governance circles, a growing mountain of research suggests we’re dealing with what Al Gore might well term another “inconvenient truth”.
I’m referring to the size of a board, what effect it has on the performance of the entity and whether there’s such a thing as an optimal number of directors.
— Governance Matters (@GovernanceMatt) February 14, 2018
In recent years, research across the globe has tended to find that small is good. There’s the 2016 study by Pascal Nguyen et al entitled ‘Board size and firm value: evidence from Australia’ that, using a large sample of Australian firms over the period 2001 to 2011, found strong evidence of a negative relationship between board size and firm value.
Guest blogger and a Group Chair for the mentoring and business coaching group The Executive Connection and lecturer at QUT Executive MBA, Guy Hamilton looks at a board’s role in spotting and managing a maturing business
Philips, once an electronics and white goods powerhouse that today occupies a much more modest position in the global market, is but one corporate reminder that markets and customer demands do not stand still. And that a business model left unchanged will, with few exceptions, mature and eventually decline.
With executive management focused on day-to-day performance, it’s vital that the board actively reviews and discusses the status of the current business model to determine whether it needs to be refreshed or changed. A business in decline not only erodes shareholder value – which for most boards puts them at risk of not delivering on one of their core responsibilities – but has other associated challenges such as the ability to retain staff.
Three simple steps to developing good strategy
Guest blogger Guy Hamilton, who’s also a Group Chair for the mentoring and business coaching group The Executive Connection, and lectures at QUT on strategy execution, shares some common strategy development pitfalls before offering three key steps to getting it right
One need only to reflect on the parade of large corporates who have announced bold new strategic initiatives that end up being unwound five or so years later – and often under the guise of ‘divesting non-core assets’ to appreciate that the process by which some boards review, approve and track strategic initiatives is often sub-optimal.
I was reminded of this when a colleague recently shared a paper which quoted 2013 McKinsey research showing that only 34 per cent of 773 directors surveyed thought their board comprehensively understood their strategy, just 22 per cent understood how their firms created value and a mere 16 per cent felt their board had a strong understanding of the dynamics impacting their business.
When facilitating a strategy session, I invariably ask two questions – what exactly is your business and what does it include and not include? And what does good look like in five years’ time? Continue reading
Governance key to NFPs managing nefarious risk
As the RAA ad says, trust is a must.
And so it is the country’s Not-For-Profit (NFP) sector which stands to be tarred, albeit unfairly, by a sweeping brush if it’s governance isn’t tightened up and moved towards best practice.
— Governance Matters (@GovernanceMatt) November 27, 2017
That’s the message I take from a recent report, the first of its kind in Australia, that found that good governance is the sector’s best ally if it’s to counter the risk of money laundering and terrorism financing.
Commissioned by our financial intelligence agency, AUSTRAC, and the Australian Charities and Not-for-profits Commission (ACNC) and entitled ‘ Australia’s Non-Profit Organisation Sector: Money Laundering and Financing Risk Assessment’, the report does stress that the risk is ‘medium level’ and proven instances remain low so it’s both unwise and erroneous to be alarmist. Continue reading
Making sure NFP mergers meet expectation
There’s no doubt the not-for-profit (NFP) landscape in Australia is in the throes of perhaps its most significant change in decades, driven largely by the ongoing expansion of the National Disability Insurance Scheme (NDIS).
— Governance Matters (@GovernanceMatt) November 9, 2017
And there’s no doubt that mergers are high on the list of board actions undertaken to, mostly, make the organisations more attractive to funders and more compliant with greater governance requirements.
But mergers – in the commercial world as much as in the NFP sector – bring their own challenges.
They’re seldom if ever a solution in themselves; rather they’re just one of a number of tools at our disposal, that we can call on and utilise to arrive at the solution.
Getting the ratios right
— Governance Matters (@GovernanceMatt) October 26, 2017
The pub test – now there’s a great Australian institution, that metaphorical test that unearths the thoughts and opinions of ordinary folk when it comes to judging the behaviour of groups or individuals.
It’s usually spot on, and no more so than in the perceptions of CEOs and their salaries, where those in the front bar will tell you – as they did recently in the case of Australia Post’s outgoing CEO, Ahmed Fahour – that there’s a yawning gap between public expectation and reality.
Indeed, a raft of respected research suggests that huge CEO salaries can have a detrimental effect on the organisation.
Reflection before reaction
— Governance Matters (@GovernanceMatt) September 27, 2017
My daily consumption of media had me pore over an article in The Conversation the other day, my head nodding like one of those kitschy dogs on the back ledge of cars and my mouth muttering yes, yes, yes.
And then I stopped, the affirmative pronouncements giving way to a reminder from way back, when a particularly wise person in my life once suggested we should pause to reflect before we react.
The article was all about APRA’s announcement of an independent inquiry into the Commonwealth Bank of Australia (CBA) and its governance, culture and accountability in the light of the money-laundering scandal embroiling the bank.
The author’s thrust seemed perfectly reasonable.
A hint of the climate that lies ahead
— Governance Matters (@GovernanceMatt) October 12, 2017
It’s one of the basic tenets of best practice corporate governance – and in what could become a global test case, a number of shareholders of the Commonwealth Bank of Australia don’t believe their board is particularly first-rate in this regard.
I’m referring, of course, to the board’s duty to act with care and diligence and to take into account all known facts that might impact the longer term outcome of a strategic decision they make.
— Governance Matters (@GovernanceMatt) October 12, 2017
And the case in question deals with a group of shareholders who have – in what is a world-first – commenced proceedings against the bank on the grounds that it failed to adequately disclose the risks climate change poses to the business in its 2016 annual report.
Growth – A lot more than just a strategy statement
Governance Matters Associate Guy Hamilton talks about economic growth…..
Since 2009, a feature of both global and local economies has been a prolonged period of slow growth and reduced customer expenditure. Excess productive capacity that had to be reduced or re-purposed, (“resized” becoming a popular term), cost reduction and cost efficiency strategies became prevalent and yield and margin management became common conversations in board rooms and executive management meetings.
Signs of enduring economic growth are emerging and with it the question is whether it is time to become growth orientated and look towards building increased enterprise value over the medium to long term? Intuitively, the answer is now “yes”.
It is easy to say, “we are now going to move to a growth strategy” but for many it will be a challenge to deliver enduring value growth as an outcome. Simply, in flat economic conditions management mindset is founded on “more from less” whereas growth requires focused investment and re-allocation of resources to ensure “more from more”.
The risks of “Groupthink” in Boards and Executive Management Teams
— Governance Matters (@GovernanceMatt) August 31, 2017
Governance Matters Associate Guy Hamilton looks at the risks of groupthink in Boards and Executive Management Teams…..
A definition: “The practice of thinking or making decisions as a group, resulting typically in unchallenged, poor-quality decision-making.
Groupthink is a phenomenon that occurs when the desire for group consensus overrides people’s common-sense wish to present alternatives, critique a position, or express an unpopular opinion. Here, the desire for group cohesion effectively drives out good decision-making and problem solving.”
“there’s always a danger of groupthink when two leaders are so alike”
I am increasingly interested in Groupthink and how it creates the real risk of sub-optimal decision making. Consider the numerous cases of corporates purchasing a “strategic asset” to “complement” their core business activities only to dispose of the same within 3-5 years as a “non-core asset”. It poses the obvious question of how a strategic imperative can become non-core so quickly assuming some quality analysis and planning was undertaken as a precursor to the original acquisition?
Exploding the ‘that’s the way the cookie crumbles’ myth
— Governance Matters (@GovernanceMatt) August 17, 2017
It’s a finding that is sure to have the tobacco tycoons coughing and spluttering into their ashtrays, the gambling gang seriously contemplating cashing in their chips and the munitions mob wondering where the target has gone and where next to take aim.
There are a good few others, to boot, the fossil fuel fraternity one that immediately comes to mind…
The finding I’m referring to is that of Responsible Investment Association Australia who, in its 2017 Responsible Investment Benchmark Report released in late July 2017, finally and irrevocably explodes the lingering myth that, when investing, you simply can’t have your cake and eat it.
Director’s head in the sand approach to cyber threats
When Governance Matters Associate Guy Hamilton came across an article in a recent issue of Harvard Business Review (HBR) that suggested a laxity from directors when dealing with cyber threats, he was astonished and decided to delve a little deeper…only to come up alarmed. Here, he shares his thoughts on this most ominous of governance issues
— Governance Matters (@GovernanceMatt) August 7, 2017
After reading this disturbing report, reflecting on the many malware attacks on businesses and digesting the IT professionals’ view that simply updating systems with the latest patches from the software suppliers would have prevented most infections, I couldn’t but shake my head in disbelief.
If it was that simple, why was it not done?
So I decided to catch up for a coffee with an IT support engineer friend to chat about cyber infections and found his analogy most illuminating. It’s a bit like walking through a house with many rooms and doors, he told me. Locked doors can’t be entered, open ones can – and the same goes for data files. If they’re properly compartmentalised with good access controls, a virus’ ability to spread is greatly limited. Continue reading
Ambiguity the culprit when things go awry – Part IV
— Governance Matters (@GovernanceMatt) July 24, 2017
As mentioned earlier in this series of blogs, conducting the board skills and diversity exercise has both immediate and longer-term benefit, the latter dealing with succession planning.
That’s the focus of Section Sixteen, where we put in place measures to ensure that when members retire or resign, the composition of our board is handled in a proactive fashion, thus increasing the chances of achieving the diversity required to do the organisation justice.
In Section Seventeen, we turn the spotlight on ‘Board Performance Evaluation’, with the recommendation that the performance of the Board, chair, the members and the various board committees are evaluated each year – and according to an agreed process.
I’ll skim over what’s in the next three chapters – Eighteen, Nineteen and Twenty – as, while focused on the CEO, they essentially contain information that has more or less been covered under other headings.
What don’t people get about conflict of interest?
— Governance Matters (@GovernanceMatt) June 26, 2017
Conflict of interest is a pretty straightforward and clearly understood concept, right?
We look at any number of definitions of the term and they all have the central tenet of incompatibility.
Some tell us it’s “a situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person’s self-interest and professional interest or public interest”.
Others talk of “a situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity”.
So what is it that people don’t get about conflict of interest? Continue reading
Ambiguity the culprit when things go awry – Part III
— Governance Matters (@GovernanceMatt) June 21, 2017
A reminder what we’re all about as we reach the halfway mark in our crusade towards clarity – we’re listing those topics that should form part of and be dealt with in detail in a Board Charter.
Section Eight takes us to ‘Board Skills and Diversity’, where the charter will list the skills and diversity the board requires if it is to meet the organisation’s strategic needs.
— Governance Matters (@GovernanceMatt) June 21, 2017
To arrive at this list, we’ll first need to identify the skills we’d require to have the ideal board. By comparing them with those already brought to the board by the existing members, we’ll soon see where the gaps are – information that will become very important when replacing a member who suddenly resigns or planning for succession. Continue reading
Ambiguity the culprit when things go awry – Part II
— Governance Matters (@GovernanceMatt) June 12, 2017
Continuing with our crusade towards clarity – and ever mindful that ‘as clear as mud’ creates chaos – let’s start by exploring Section Four and its subject matter of ‘The Board Role and Functions’, which traditionally contains general, overarching explanations about the primary roles and functions of the board.
It delves into matters such as accountability, strategy, risk, the performance of the CEO and all the other main high-level responsibilities.
In Section Five, we look at ‘Office Bearers’, those public officers such as the Company Secretary, and provides a concise position description for each.
Ambiguity the culprit when things go awry
— Governance Matters (@GovernanceMatt) May 29, 2017
My experience, over a good number of years in the governance field, is that the vast majority of board members are dedicated and committed people, desperate to do the best possible job, eager to serve on an effective, successful and respected board.
I’d go so far as to say this applies to 90 per cent of the men and women on Australian boards – but I’d also hazard a guess that when and where things go awry, there’s one common thread, 100 per cent of the time.
Clarity. Or, more to the point, lack of it.
Thankfully, there’s a readymade solution and it comes in the form of a document. Continue reading
In pursuit of faster, higher, stronger governance
— Governance Matters (@GovernanceMatt) May 15, 2017
Anyone with even a passing interest in Australian sport will be aware of the ongoing bun-fight between the Australian Sports Commission (ASC) and the Australian Olympic Committee (AOC) when it comes to how well – or poorly – national sporting bodies are doing in terms of governance.
And, more pertinently, what needs to be done about it.
It all started after the less than stellar performance of our athletes at the London 2012 Olympics when governance reform of the various sporting codes – in the shape of the first set of Mandatory Sports Governance Principles – was mooted and subsequently introduced. Continue reading
If gender diversity is broke, fix it!
— Governance Matters (@GovernanceMatt) April 27, 2017
It was Albert Einstein who once famously said that doing the same thing over and over again and expecting a different outcome was tantamount to insanity.
And his sage words should be heeded in the gender diversity debate where, despite years of well-intentioned initiatives to close the gender gap on boards and achieve greater diversity, only marginal improvements have been achieved – especially given the time, effort and money ploughed into these programs.
In fact, in a strictly business context, returns on investment of this nature would soon see companies out of existence.
This is why I found a recent article on companydirectors.com.au so informative.
Ton up…and time to reflect before we bat on
— Governance Matters (@GovernanceMatt) April 19, 2017
Bring out the cake, light the candles, pop the champagne and charge your glasses.
That’s what we’re doing at Governance Matters this week as we toast a significant milestone – this being our 100th blog – and celebrate a longevity that tells me from your feedback that what we’re sharing is resonating and, in its own way, playing a part in us becoming better leaders, directors and, ultimately, people.
While reflecting on this, I happened to come across the key findings of a comprehensive 10-year study into great executives and what they have in common and I thought it timely to set aside the cake and bubbles for just a moment and share them with you.
A new age of enlightenment for boards
— Governance Matters (@GovernanceMatt) March 30, 2017
Getting in the heads of the younger generation, talking in a language they speak and generally honing in on all those hot buttons that get them charged up, passionate, excited and engaged seems to be a perennial moan among people of our generation.
And, doubtless, the generations before, when confronted by we baby-boomers back in our salad days…and before our time too, probably all the way back to when Adam was a boy.
What’s more, it’s a challenge that goes way beyond the confines of the dinner table or social circuit discussions of the more mature generation and is increasingly being played out at board level, both in the corporate and not-for-profit sectors.
Howzat – a representative board that works well
— Governance Matters (@GovernanceMatt) March 17, 2017
We all know that representative boards bring challenges related to partisanship but they pale into insignificance when compared with the troubles that arise when the representatives don’t enjoy equal status at the boardroom table.
Just ask the International Cricket Council (ICC) who, about three years back, allowed something of a coup d’état – orchestrated by the so-called ‘Big Three’ of India, England and Australia – to occur.
They would stand alone, above and more important than the other seven full members, presumably as beacons of benevolence.
Adding a touch of spice to annual reports
— Governance Matters (@GovernanceMatt) March 6, 2017
You may recall that a good few blogs back, we touched on the great work a UK-based organisation, Eden Project, has done in consistently producing stimulating, refreshing and inviting annual reports.
And with annual report preparation season in Australia less than six months away it’s timely for listed companies, government organisations and not-for-profits to turn their thoughts to the 2016/17 annual report. So I thought I’d stress there are annual reports – and then there are annual reports!
Sadly most tend to follow a rather bland model that does little more than tick all the statutory compliance boxes.
Time to take a giant leap on the strategy front
— Governance Matters (@GovernanceMatt) February 16, 2017
Picking up on where we left off last time, may I start by saying that when we talk strategy these days, there’s a desperate need for us to take a giant leap.
Gone are the days of incremental change…the world changes rapidly and we must change with it.
A risk averse and compliant board tends to pull away from a risk-taking mindset.
And while strategy doesn’t always work out, boards need to have the integrity to invest in this.
Finbar raises the bar on risk and innovation
— Governance Matters (@GovernanceMatt) February 2, 2017
A recent blog, entitled ‘Success Comes from Seeing Ourselves as Others See Us’ and delving into board self-assessment certainly resonated with one of our readers.
So much so that he took time out to respond, initially with a short, sharp and succinct “nice article” and subsequently with some pertinent thoughts I think are well worth sharing.
You’ll recall the original blog argued the importance of self-assessment while warning against undertaking this exercise simply because it has become rather de rigueur to do so.
DGA launch signals new era in data governance
— Governance Matters (@GovernanceMatt) December 7, 2016
You may have seen a report earlier this month about the establishment of a new independent body tasked with setting industry standards around data.
You may have noted, too, how important a focus is being placed on the new group, with its head none other than the highly respected former chair of the Australian Competition and Consumer Commission (ACCC), Graeme Samuel; and the launch being told that “setting industry standards for the use, collection and application of data is something that cannot be avoided much longer”.
This is a significant moment for those of us who operate in the governance space as the formation of the new body, Data Governance Australia – or DGA – is overdue recognition that data and its handling is now very much a governance matter.
— Governance Matters (@GovernanceMatt) December 7, 2016
Asia’s shining stars in corporate governance
— Governance Matters (@GovernanceMatt) November 23, 2016
Okay, here’s a little quiz I suspect you’ll find rather interesting…
The latest Corporate Governance Watch 2016 findings for Asia have just been released, with rankings provided for the 12 key Asia-Pacific markets and over 1,000 companies operating across the region.
Can you name the companies, preferably in alphabetical order?
Just kidding, what I’d like to know is who you think came out tops, who took silver, who grabbed the last remaining spot on the podium and who picked up the dreaded wooden spoon?
Success comes with seeing ourselves as others see us
— Governance Matters (@GovernanceMatt) November 11, 2016
The famous Scottish poet and lyricist Robbie Burns is probably best known for penning the words of “Auld Lang Syne”, cheerfully muttered and spluttered at numerous New Year’s parties around the world.
What, you might well ask, has this to do with governance? Well, the man also known as the Bard of Ayreshire happened to write another poem entitled “To a Louse” which carried the immortal line “O would some power the giftie gie us to see ourselves as others see us.”
And I guess that’s where governance – and we at Governance Matters – comes in, with our Board Skill Set and Diversity Assessment.
Best practice board paper retention in the electronic age
— Governance Matters (@GovernanceMatt) November 1, 2016
A client recently asked for advice on best practice when it comes to the retention of board papers.
I had to compose myself to provide the answer as my head filled with images of the silly things people have scrawled in the margins of their hard copy papers and filed them, only for the scribbles to return at a later date to haunt them!
Yes, I’m pretty sure we all have some scary stories to share – and I’ll do so a little later – but for now, let’s consider what constitutes best practice.
Adding ‘foresight’ to ‘oversight’ responsibilities – Part 2
— Governance Matters (@GovernanceMatt) October 17, 2016
Our next trend that needs to be on board agendas is thinking the unthinkable. Astute and visionary boards will consider what’s out there, even potentially out there, that could seriously destroy their hitherto successful business model. They will keep this question in their collective heads day in and day out, forever examining the landscape and quizzing the shifting sands.
And when new marvels like Uber and airbnb suddenly present themselves, as if out of nowhere, you’ll have considered the impacts of such entrants and devised plans and strategies to deal with their presence.
Adding ‘foresight’ to ‘oversight’ responsibilities – Part 1
KPMG’s respected 2016 Global CEO Outlook landed on my desk not that long ago and while it’s packed with interesting information, perhaps most striking was the finding that close on half of all global CEOs expect their companies to transform into a significantly different entity in the next three years.
Of course, this presents opportunities, along with challenges and even threats, the most significant challenge for boards being trying to navigate between their ongoing ‘oversight’ or supervisory role and their increasing responsibility to provide ‘foresight’ when it comes to expectation and likelihood in a murky future littered with unknowns.
— Governance Matters (@GovernanceMatt) September 28, 2016
That’s where strategy, that perennial that must forever and a day be on the board’s agenda, comes in…and, with it, being visionary. And we know that the more diverse a board is in its make-up, the more visionary its strategy is likely to be and, in turn, the more prepared and successful the company can expect to be.
— Governance Matters (@GovernanceMatt) September 28, 2016
Boards are no place for sectarian sentiments
— Governance Matters (@GovernanceMatt) September 16, 2016
You’ll recall our last blog touched on the first of new British PM Theresa May’s two targets for a corporate governance overhaul – that of making shareholder votes on pay binding.
We now shift our focus to the second, and equally, ‘un-Conservative’ thrust that’s generally more aligned with the trade union movement… getting employees on to company boards.
Ms May may have lost the plot on this one, though. That’s my humble opinion.
When a binding vote shouldn’t be a bind for boards
— Governance Matters (@GovernanceMatt) September 1, 2016
New British PM Theresa May has hardly got her feet under the desk at 10 Downing Street and already she’s sending out signals that she’s committed to a corporate governance overhaul – making shareholder votes on pay binding and getting employees onto company boards her two main thrusts.
And while it sounds more like the words we’d expect from Labour leader (well, at least he is at the time of writing) Jeremy Corbyn, these sentiments are to be welcomed.
Let’s take a closer look at the first issue, that of giving shareholders a binding vote on executive remuneration, this week, before turning to the employee representative matter next time.
Taking committees to task
— Governance Matters (@GovernanceMatt) August 18, 2016
As mentioned in Part I of our discussion on types of committees versus task forces, the key differences are longevity and composition.
Governance committees are permanent structures, made up of board members, there to advise the board in an ongoing capacity. The board might also create shorter-term task forces – bodies like a building committee to oversee the construction of a new building. These task forces will typically comprise a mix of board members and external industry experts. They will then disband once the project is over.
There is, however, one exception!
Committees designing horses key to board governance
— Governance Matters (@GovernanceMatt) August 4, 2016
We’re all familiar with the analogy that a camel is a horse designed by a committee.
It’s a rather unflattering comment on the ineffectiveness that can arise when too many people with conflicting opinions need to arrive at a decision that, by definition, will reek of compromise.
Which is why the composition of committees – and, indeed, their close relations, task forces – is so important to a board fulfilling its primary governance function of wise and considered decision-making. The board needs the help, input and assistance from various committees to allow it to do just that.
We nominate for greater independence
There’s an inescapable truth – or what Al Gore might have branded an ‘inconvenient truth’ – that when the best skilled and equipped are in charge, the chances of everything running like a well-oiled machine are greatly enhanced.
— Governance Matters (@GovernanceMatt) July 20, 2016
And we’ll only get these when factors like impartiality and objectivity take centre stage and bias, prejudice and self-interest are pushed to the wings and beyond!
Which brings me to the vital role the nominations’ committee plays in increasing the chances of an organisation – be it a not-for-profit or a commercial entity – purring along smoothly.
Effective board papers….it’s as simple as E=mc2!
It was a very smart person who said something along the lines of “if you can’t explain it in simple terms, chances are you don’t understand it yourself”.
That smart person was Albert Einstein – and I’m delighted to be able to concur with him, certainly when it comes to the preparation of board papers from management.
My golden rule, especially when we’re dealing with those matters seeking a decision from the board, is for management (that’s you!) to think of the board members as 12-year-olds (no offence!) when writing up the papers.
Hanging ten on the technology wave of communication
— Governance Matters (@GovernanceMatt) June 24, 2016
Bob Dylan famously sang – some would argue barked – about ‘the times they are a’ changing’ and that’s pretty much the anthem boards need to adopt when it comes to communicating with their shareholders.
Quite simply, the traditional way is no longer the way. It’s not cutting the mustard, the technology has moved ahead and research trends tell us all we need to know about the appeal of the time-honoured Annual General Meeting (AGM).
So why do we find most boards still holding the traditional annual gig for shareholders in a traditional way?
A trio of tips so you don’t trip up on your journey to a Board
— Governance Matters (@GovernanceMatt) June 9, 2016
There’s a certain allure about serving on a board and it’s not hard to understand why. There’s the status, the professional development it offers, that special access to other influential business leaders and, of course, a warmth that comes from ‘giving something back’, especially when you’re sharing your talents with the not-for profit sector.
And while the motivators may be many, there are just three stages you need to cover off on if you’re to end up at the right company, on the right board. Let’s call them my trio of tips…
They cover what to do in preparation, what to do to make the approach and those things to consider before saying yes.
The ABCCC of Director Selection – Part 2
Picking up from where we left off last time while discussing the 11 key dimensions of character, as argued by a team of academics at Western University’s Ivey Business School in Canada in their “Leadership on Trial: A Manifesto for Leadership Development” research, coming in at number five is humility.
— Governance Matters (@GovernanceMatt) May 30, 2016
Like humanity before it, humility is paramount as without it, directors are incapable of learning from others. Or, indeed, from their own mistakes.
Then there is temperance, in essence the ability to remain calm while all about you are in a flat panic. Sadly, it is seldom top-of-mind…until some almost overwhelming risk blows up in the organisation’s face and its true value in the very fibre of directors becomes imperative.
The ABCCC of Director Selection
— Governance Matters (@GovernanceMatt) May 13, 2016
I had an interesting piece sent to me just recently, an exercise conducted by a research team from the Ivey Business School at Canada’s Western University that delves into the key criteria boards should consider when assessing and appointing anyone to a leadership position, including a director.
Entitled “Leadership on Trial: A Manifesto for Leadership Development”, the comprehensive paper identifies competencies, commitment and character as the three most important measures. It goes on to argue that of the three Cs, character is both the most important and most difficult to assess.
Competencies, of course, matter. Like commitment to the position and the organisation, they are pretty much givens as they define what a person is capable of.
When ethical behaviour sits comfortably alongside financial performance
— Governance Matters (@GovernanceMatt) April 29, 2016
ESG may sound like just another TLA (that’s three letter acronym) but it’s one that’s making quite a noise on the corporate governance landscape. And it’s poised to get a whole lot louder in the months ahead.
So listen up…
ESG, of course, stands for environment, social and governance…and the good news is it is requiring boards – particularly those in trustee positions – to shift their thinking from bottom line to triple bottom line.
The Seven Deadly Sins of Board Papers
— Governance Matters (@GovernanceMatt) April 15, 2016
A singular specimen of the scientific class of Aves contained within the boundaries of the upper prehensile is roughly equivalent to the double inventory of that item within a low-spreading thicket.
Simply put, that’s “a bird in the hand is worth two in the bush”.
And simply put again, such verbose and rambling language fills one of the spots in what I call The Seven Deadly Sins of Board Papers.
The shifting sands of auditing should send signal to boards
— Governance Matters (@GovernanceMatt) April 4, 2016
You might recall back in mid-2015 we chatted about the Australian Securities and Investments Commission – or ASIC – and its push to make it easier to prosecute company executives and directors for overseeing poor business culture that leads to very poor business performance.
We spoke then of it representing a seismic shift on the governance landscape and it’s good to learn that the rumblings continue, this time in the corridors of some of the world’s most prestigious accounting firms.
Just recently, KPMG announced that it has broken with a century-long tradition of hiring only accounting and economics graduates for its auditing section by taking on 42 graduates in this area who boast none of these qualifications. Rather, they come with what are termed “soft skills” – in areas such as mathematics, IT, social science…and even counter terrorism.
What’s more, KPMG anticipates that one-third of its almost 400 audit graduate intake this year will have no accounting background.
Bean there, counted that…
When I was approached recently to be part of a panel discussion on a board’s expectation of its Chief Financial Officer – or CFO – I thought: that’s easy enough.
— Governance Matters (@GovernanceMatt) March 22, 2016
But in preparing for the event, it dawned on me just how dramatically the CFO’s role has changed over the past decade, so dramatic, in fact, that I thought it worth sharing with you.
Back then, a short 10 years ago, your average CFO was predominantly concerned with budgeting, accounting, the financial statements and the considerable paperwork that accompanies all these important activities.
Bells set to toll for independent schools governance
If there’s one thing in Australia that’s almost as certain as death and taxes, it’s that what happens in one state or territory, particularly in the area of governance, is bound to send ripples into all others.
Which is why the recent announcement by the New South Wales government of increased requirements for non-government – or independent – schools should get the bells ringing across this educational sector, in every nook and cranny of the country.
People power on the rise as history repeats itself
There I was, trundling along in the car the other day when an interview on Radio National pricked my interest.
There was this chap chatting to Fran Kelly about co-operatives as a modern – and paradoxically, a rather old – answer to the growing trend of governments and businesses exiting from certain services.
He was saying citizens are increasingly coming together to take ownership of the problem or challenge and to do something for themselves.
This time, the joke is on me!
You will recall we had a look at some lighter moments in the boardroom, those generated by the chair and directors, in last week’s blog.
It’s now time to bring our blog program for 2015 to a close and, as promised, we’ll end with the joke being fairly and squarely on me…
— Governance Matters (@GovernanceMatt) November 26, 2015
It’s the silly season so time for a little light relief!
Yes, governance has something of a reputation for being a little dry, but believe me, there’s humour aplenty in the boardrooms of Australia, some of it generated by the members and directors, others by yours truly when consulting to boards.
— Governance Matters (@GovernanceMatt) November 23, 2015
And as most of it is unintentional, it only adds to the hilarity.
So, with the silly season on our doorstep, I thought we’d end the year on a lighter note by getting into the seasonal mood and closing with a two-blog series on boardroom comedy.
In the first blog, I’ll recall some of the funnies I’ve heard in my line of work and just to balance the ledger, I’ll devote the second to a few of my stumbles.
Taxing Times 2 – The Lore
The law behind us, let’s turn our attention to the lore and explore those changes afoot that are being driven largely by a growing global sense of fairness and the notion of good corporate citizenship.
Generally speaking, modern society holds the view that as a company benefits from the people and places where it operates, it should give something back.
Today, there’s very much a social contract to trade in a fair and community-minded manner in every jurisdiction where you happen to operate. And if you don’t, you run a very serious and potentially devastating risk to your reputation.
Taxing Times 1 – The Law
Tax and the taxing times it can potentially cause boards is something I’d like to look at over the next two blogs, spending some time on tax law and some time on tax lore!
Let’s start with the law, particularly the international implications of the various tax regimes across the different jurisdictions and the veritable tightrope boards sometimes need to walk to keep everything kosher with people like the USA’s Inland Revenue Service (IRS) and our Australian Taxation Office (ATO)…both understandably keen for their legally entitled slice of the tax pie!
For most boards of small Australian companies, there’s not too much to concern themselves with. After all, beyond the GST, providing for long service leave and perhaps attending to the odd acquisition, that’s generally as far as it goes.
Five simple steps to social media nirvana
Hi, Talia Hagon here again, to conclude our two-part social media soiree.
Okay, we’ve agreed that a social media strategy that feeds into the overarching corporate strategy is a vital component of the modern organisation. We’ve also accepted that the board must ensure that social media and the social media strategy gets the high priority it deserves if they’re to fulfil their primary role of charting a successful course for the company.
So what next? What are the most important things to consider before you launch your organisation into the dynamic world of social media? Continue reading
Radio Interview on ABC Adelaide with Ian Henscke on how ICAC findings and governance are connected
Our Managing Director, Kate Costello talks with ABC Adelaide’s Ian Henschke on the topic of how ICAC findings and governance are connected.
When it comes to social media, the greatest risk is….
Social media – two words that excite so many but fill others with white knuckle trepidation…and as many of the latter seem to find themselves sitting around the boardroom tables of corporate Australia, Kate Costello has asked me to share my social media thoughts with you.
My name is Talia Hagon and social media is my business. It brings me into contact with countless board members and directors and a startling observation is that many don’t have an understanding of or passion for the digital world.
So in a two-part blog, I’ll explain why boards should insist on their organisations having a social media strategy and conclude with what I believe are the mandatory elements of such a strategy.
The Super Shake-Up Solution
Regular followers of these blogs will recall that we ended last week on a contemplative note, pondering the dilemma facing not-for-profit super funds that might well have to change the make-up of their boards if proposed Federal Government legislation to improve governance in the sector gets through the Parliament.
To recap, the dilemma was that while these funds have tended to perform better than their corporate cousins, arguably because of their ‘we’re here for our members’ rather than ‘we’re here to make money for our shareholders’ philosophy, they’ve also historically had weaknesses.
So how do we retain those vital values while ensuring the boards have the requisite skills and diversity?
The Super Shake-up Dilemma
The Federal Government’s recently introduced Bill aimed at changing the governance landscape at non-profit superannuation funds, key among them that one-third of the directors are independents, as is the chairman, is to me a bit like the curate’s egg.
It’s good in parts, which probably explains the raft of opinions on the subject.
Banks like the model, unions don’t. But then powerful people like former Australian Workers Union boss and Australian Super director turned KPMG consultant Paul Howes likes it too, as does retiring SunSuper chief investment officer David Hartley.
Our states and their states of mind
I’ve often wondered whether we Australians are as parochial as we’re sometimes made out to be, whether our primary loyalty does indeed lie with our state, followed by our country. We’re said to be first and foremost South Aussies or Victorians, Tasmanians or New South Welshmen (and women!), Queenslanders or Western Australians – and let’s not forget our Territorian twins!
If an email I received the other day is any indication, there’s more than a grain of truth in that assertion.
You may recall a blog about two months back when I said the ability of a board to listen to stakeholders is perhaps the fundamental tenet of good governance – and it can be particularly tough, not to mention prickly, in federated member-based organisations where traditionally there’s a balancing act between listening to the regions and having functioning, national entities with effective boards characterised by impartiality and neutrality.
Tapping into advisory boards is an intelligent move
While there has been some debate around the importance or otherwise of advisory boards – and I guess the conclusion ultimately determines their value – there’s savvy aplenty in the general rule that getting added intelligence into the company can never be a bad thing.
Intelligence, of course, is one of the key currencies that separates the great companies and organisations from the good ones (and the not-so-good ones!) and any vehicle that can serve as an astute sounding board and inject some high level thinking into the corporate conversation should be welcomed.
As the name implies, the advisory board is there to provide advice, which can then be used to inform the decision.
When ignorance can be anything but bliss
We spoke last time about representative boards and the self-interest that can inflict them but equally disturbing is the role ignorance can play in both the creation and ongoing preservation of these boards.
The ignorance, of course, seldom comes from the individuals who sit on these boards.
Rather, it’s more likely to stem from the architects, those who establish them, often with little regard for how costly and ineffective the structure they are creating might be.
What the ICC is doing is just not cricket!
We’ve spoken about representative boards and the many challenges they face but as these seem to be akin to the gift that keeps giving, it’s timely to take another look.
When we last explored the subject, we concluded that representative boards – those national or international boards made up of representatives from the member states or countries rather than people best qualified for the tasks at hand – invariably carry baggage.
Self-interest and personal agendas immediately spring to mind. It’s very hard to think bigger picture when you’re answerable to your state or country.
When the honeymoon’s over
If there’s a truism in serving on a board, it’s that the smart money is on just about every one of us reaching our sell-by date and if we don’t read the signs, we can expect the dreaded tap on the shoulder.
Hi, my name is Dr Marcia Hewitt and during a recent chat with Governance Matters’ Kate Costello, we got onto the subject of the shelf life of a board member – and more importantly, how one deals with the perfectly natural feelings of disappointment that come with having to leave a board when you don’t want to go.
We threw a few thoughts around, before Kate thought it would be a good idea if I wrote a guest blog on the prickly issue.
So here goes, with thanks to Kate for some wise counsel along the way…
The good, the bad and the ugly of governance
It’s got to the point these days while poring over the raw results of board performance evaluations that we look across at each other and instinctively begin to hum that instantly recognisable theme tune from the movie ‘The Good, the Bad and the Ugly’, because that’s precisely what this potpourri perennially presents.
‘We’ happen to be Mel and Sascha, aka ‘the ladies behind the throne’ at Governance Matters, and our years of backroom experience in examining unsanitised results has given us what we believe is an if not unique then certainly different perspective on board behaviour.
We thought you’d be interested to learn what we’ve found to be the most common shortcomings of boards – and what’s surprising is not so much our list but the fact that these seemingly no-brainers make it onto the inventory in the first place!
The ten steps to Federation nirvana
As we’ve discussed in earlier blogs, the world of federated entities is complex in a governance sense, with regional baggage and partiality just two elements adding to an already tricky landscape.
So I thought it timely and beneficial to devote some time to sharing what I believe are the 10 steps to success for federated entities in the not-for-profit sector.
Firstly, there needs to be a common strategic direction, a plan for the entire country, with each entity’s strategic and annual plans aligning with the national direction and fitting in with the Australia-wide umbrella.
How to tell the star CEO from the ‘disa-star’ CEO
Every board, across all sectors, has as its most important job the selection of the CEO, hopefully a very good or exceptional CEO as they’re the stars you want, they’re the ones who produce current and future success for the entity.
However, one of life’s little ironies tells us that often it’s the troubled organisations that have the ‘star’ CEOs and in my time I’ve seen too many examples of so-called star CEOs, overflowing with charisma, who have driven the entity into the ground.
They’re either megalomaniacs or they push their own agenda which ends up failing or they’re profligate in spending money.
So how do you know a real star from a disa-star?
Too many CEOs a sure sign that something’s rotten
It was Marcellus in Shakespeare’s ‘Hamlet’ who famously said ‘something is rotten in the state of Denmark’ and there’s a reason why he said ‘state of Denmark’ rather than just Denmark; he’s emphasising that all is not well in the very top echelons of the political hierarchy.
Enough of my recollections of my school set works but this is not idle rambling… there’s a point to it.
And it’s this…in the world of corporate governance, it’s true to say that when there has been CEO churn, there’s something foul and unpleasant at the top of the organisation, in its boardroom.
Sense and sensibility of strategy sessions
Our experience, through board evaluations we conduct, repeatedly tells us that more than 80 per cent of directors feel they don’t spend enough time on strategy or are as effective as they should be when it comes to setting strategic direction.
That’s a startling – and scary – finding, especially as strategy and strategic direction is one of the primary functions of a board.
What’s perhaps even more startling and scary is that boards, generally speaking, tend to continue to walk down the same ‘strategy path’ even when history tells them it’s not the cure-all, the magic bullet it’s made out to be.
Listen up…here’s the primary tenet of good governance
For most of us blessed with hearing, it’s probably true to say not too many of us are great listeners. Yes, we all hear, but do we really listen?
I pose the question because in the world of good governance, perhaps the fundamental tenet, the beacon that stands head and shoulders above all others in this multi-faceted discipline is the board’s ability to listen – really listen – to its major stakeholders.
The primary stakeholder is, of course, the owner or owners and shareholders of the entity or, in the not-for-profit world, the members.
ASIC looks to get tough on corporate culture misfits
When companies collapse and the extensive forensic investigations have been completed, there’s usually a common element lurking in all corporate collapses, in all countries, all over the world.
A toxic corporate culture that has been allowed to fester.
All of which makes the recent news out of Canberra that the corporate watchdog, the Australian Securities and Investments Commission – or ASIC – is pushing to make it easier to prosecute company executives and directors for overseeing poor corporate cultures that lead to poor outcomes for consumers.
FIFA’s many own goals…..and our complicity
There are few, if any, organisations on this planet that could have provided us with such a litany of case studies on how not to go about your business as our dear friends – or is that fiends? – at FIFA.
Indeed, anyone who has followed FIFA’s history knows that they’re seldom far from controversy when it comes to business dealings and the organisation’s sorry governance track record. You could say they’re clearly in a league of their own when it comes to scoring own goals.
Which begs the question…why did everyone sit around and do little or nothing until the US regulators started to investigate the organisation and found all was not as it should be?
Getting antsy about ACNC governance standards
It looks like the ACNC may well survive. On 24 June the Senate moved a motion calling on the Government to withdraw the ACNC Repeal Bill. Many see this as good news.
The ACNC is widely applauded but, I have to say, I was disappointed in the set of governance standards realised by the ACNC last year.
That mildly crude old Australian expression of being as useful as a one-legged man in an arse kicking contest came to mind when I first saw the documented standards.
Now I’m not having a dig at the Commission, but…………
It’s time to blow the whistle on negative connotations
Now there’s a word to conjure up a raft of emotions, almost every single one of them negative.
That’s quite ironic as I believe the term was coined back in the 1970s by US civic activist Ralph Nader to avoid the negative connotations associated with words like “informer” and “snitch” – and in the Australian vernacular, “dobber”.
Before moving away from the semantics, may I just say how much I personally detest the word “whistleblower” as the act itself should be one overflowing with positivity and celebrating undeniable and admirable ethics.
Bringing bad directors to book
The world’s full of good and bad – good and bad foods, good and bad books, good and bad movies. The list is endless and somewhere in there you’re bound to find good and bad directors.
As it’s the bad directors who threaten to disrupt the good workings of the board and, in turn, the entity they serve, it’s worth having a look at just some of the tell-tale signs of bad behaviour.
But before we do, it’s best to consider what we can do about it, to turn it around for everyone’s benefit. After all, we’re all about finding solutions to issues and challenges, right?
The short answer is: talk to the chair as it is their responsibility to lead an effective and functional board.
And if the chair won’t address it and allows the bad behaviour or practice to continue, there’s your problem – a deeply deficient chair who needs replacing…and a reminder of the old proverb that a fish rots from the head.
Let’s get back to bad behaviour.
You may wish to start by asking yourself whether you have ever seen any of the following happening at board meetings…
The reality of neutrality
The famous Scottish poet, Robbie Burns, once wrote “Oh would some power the gift give us, to see ourselves as others see us” and that’s pretty apt advice when it comes to impartiality – in all walks of life, including the boardroom.
We all like to think of ourselves as balanced, fair and neutral individuals and for the most part, most of us are. But there’s one area of governance where it gets tricky: our ability – or lack thereof – to look at something objectively when facing a decision that might negatively impact on us personally.
Going back a good few years, I was involved with an 11-member board and it soon became abundantly clear that the evidence suggesting a board should never exceed nine members was spot on.
When ABC stands for appallingly bad conduct….take two
You’ll remember I ended last week’s blog on the subject of abject behaviour saying we’d need another blog to bring the theme to an end – and here it is.
So let’s look at a few more examples before we close the chapter and look ahead to brighter days around the boardroom table.
No session on boards going bad would be complete without mention of that perennial poison, conflict of interest. As with last week’s example, what makes this one particularly galling is that it is again committed by a legal professional, who should know better.
When ABC stands for appallingly bad conduct….
I thought I’d spend a couple of minutes today mulling over a few situations where the behaviour of a board member has done nothing positive for the organisation and its smooth functioning.
And perhaps most disturbing is that it’s more often than not done without realising the negative implications and comes down to ignorance, hubris, nepotism or an inability to convert the intellectual into the practical – or any number of toxic cocktails of the three.
Orica ‘explosion’ highlights payout pitfalls
Corporate bullying has been in the news again lately, this time the incident at mining explosives supplier Orica in late March grabbing our attention in the media.
But when the TV and radio news bulletins move on and the papers become tomorrow’s fish and chip wrappings, we’re left with the stark reminder that, if companies are to protect and retain their standing as good corporate citizens, the days of rewarding recalcitrants are well and truly over.
Or at least they should be.
If you’re not familiar with the details of the Orica explosion, I’ll recap briefly…
Radio Interview on ABC Adelaide Mornings with Ian Henschke
Listen as our Managing Director, Kate Costello talks to ABC Adelaide’s Ian Henschke about bullying on Boards.
We are never too old to learn
We’re coming to the end of our ‘Top 10 Steps to Being an Effective Director’ series of blogs and I sincerely hope it has been a learning journey.
Which, conveniently, allows us to segue to our final topic – and that’s a desire to continue to learn, continue to improve.
Research, empirical and anecdotal, has long highlighted the fact that we’re at our best when constantly engaged in personal and professional development. We’re never too old to learn and those directors who adhere to this truism are invariably at the top of their game.
Continuous improvement for board members comes in two forms – personal evaluation and ongoing education.
No women, no high!
I’m just taking a momentary break in our ten part blog series on what makes a director effective because of recent Australian research…..
I recall a number of years back and when the lonely female on one particular board, the chair was prone to saying things like “…let’s get the violins out…” whenever I raised gender issues or distributed articles on corporate diversity.
Well, I’m sure he was well and truly rosin up the bow when respected new research was published just last month highlighting that those Australian companies with at least 25 per cent female boards perform more than seven per cent better than those with all-male boards.
The research, by the Centre for Gender Economics and Innovation and Infinitas Asset Management, also found that while the level of gender diversity is “frustratingly low”, it is growing, with 63 companies in March 2015 achieving the 25 per cent threshold compared with just 15 in mid-2010.
When abiding by the law alone is not enough
It should come as no surprise that one of the key attributes of a good and effective board member is an unswerving commitment to ethical and fair behaviour.
But that’s not as simple and as straightforward as it sounds, especially in a world where what’s lawful may be frowned upon by large sections of society and viewed in a particularly negative light.
It demands of the modern director to be attuned to what’s going on, both when making judgement calls as an individual and as a member of the collective – the board.
Tri is the trick to articulation and persuasiveness
We’ve all come across them in our time, those individuals on boards who fail to be heard by their co-directors.
There are those who simply can’t be heard because they’re as quiet as proverbial mice, seldom saying anything. Then there are those who are so damn garrulous that they find it impossible to pause even at hefty punctuation points, their voices so constant that they soon become little more than background drones.
In a word, both are dispensable – precisely because superior board members make an effective and positive contribution…and you can only do that when you’re articulate. With articulation comes persuasiveness.
Raise your glass to the cocktail of differing points of view!
International governance expert Dr John Carver is on record as having said that just because you establish a group of intelligent, competent and caring individuals does not mean that as a group they’ll make intelligent, competent and caring decisions.
He argues further that all too often it’s because we as human beings lack the courage to say what we really think, for a variety of reasons.
And yet, it’s the cocktail of differing points of view – in life as much as around the boardroom table – that invariably leads to healthy and robust discussion and debate…and generally speaking, great decision-making.
So what is it that prevents us from displaying this courage – and more importantly, how can we rediscover our mettle?