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
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.
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
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
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?
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.
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.
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.
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…
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.
Bullying at the boardroom table
When we experience or learn about bullying around the boardroom table, we’re often taken aback, shocked and disbelieving.
Surely, we rationalise, these are intelligent adults, eminently capable of conducting themselves in a manner that’s well above that of the schoolyard tyrant? And surely they appreciate that bullying is simply not on, that it breaks just about every workplace health and safety regulation?
The harsh reality, though, is that boards and boardrooms, just like everything else in our world, are pretty much a microcosm of life in general, filled with a cross section of people.
Clever Strategies from canny chairs
It’s always refreshing to come across individuals with an ability to view challenges or situations from a different perspective and arrive at altogether inspirational outcomes!
These moments are all too rare and deserve to be celebrated so I thought I’d start the ball rolling by recalling just three examples where I think chairs have been particularly astute and their clever thinking has greatly benefitted their organisations.
Whenever my thoughts drift to adroit accomplishments in the board room, I’m reminded of the approach of one particularly skilful chair to address the issue of a little, shall we say, slovenliness, among some of his board members.
Culture’s at core of best practice risk management
As every organisation knows, when you move in a strategic direction, your travelling companion is invariably risk.
That’s the irrefutable ying and yang of the strategy process.
But what the really successful organisations also know is that planning is but one of the elements required to effectively manage risk. They know only too well – and subscribe to – the truism that even the best laid plans of mice and men can, and often do, go awry.
And they appreciate that the key piece in any organisation’s risk management puzzle is its culture. Get that right and you’re well on your way.
Challengers, Not Critics, Welcome!
You’ll remember my two previous blogs on governance in politics shed some light on pollies failing to live by the very laws they create and their rather flawed approach to board appointments.
Now, in bringing the three-part series to a close, we’ll look at what some serious governance research has to say about the behaviour of those involved in governance and how it impacts – positively or negatively – on the organisations in question.
The ‘Magnificent Seven’ Characteristics Of Highly Effective Boards
As a keen observer of boards over many years, I’ve pretty much seen it all and can assure you of one thing: there are some characteristics that are mandatory if boards are to be successful in protecting an organisation’s culture and steering it on a path to growth and sustainability.
I like to think of these as the ‘Magnificent Seven’ characteristics of highly effective boards – and while magnificent in title, the great news is that they’re all down-to-earth, within our grasp and attainable.