Andrew
BoardroomTalk
Dr Proctor Nyemba & Dr Justine Chinoperekweyi
When operating on unsettled sands, the quality of corporate governance must be enhanced. Boards play a significant role in championing organisational transformation, challenging the organisation’s basic assumptions, and supporting CEOs and managers to foster a culture of exploration, exploitation, and experimentation. Sadly, governance is being reduced to management, and governance roles are slowly becoming mere status symbols. During times of epochal change, the ability of boards, CEOs, and managers to explore, exploit, or experiment determines, not only continuity and stability, but transformational growth and development, profitability, and sustainability. This makes governance complex; hence governance responsibilities are not for any ‘Jack and Jill’. Board actions can either make or break human systems. Our organisations need exceptional boards. Such boards elevate humanity and they bring presence to human systems.
Can we develop exceptional boards through merely defining and training people on corporate governance rules and regulations? Is mere compliance with corporate governance regulations a reliable measure of corporate governance effectiveness? Is there a difference between 20th Century and 21st Century thinking and practice of corporate governance?
There has been a lot of talk around the need for strategic thinking and strategic leadership in boardrooms. Interestingly, corporate strategy discussions are embracing concepts around agility, adaptive leadership, resilience, transformational leadership, leading during crises, vision-led leadership, entrepreneurial skills, and more. Corporate governance experts are quick to align their practice with these latest management and leadership fads. These brilliant concepts are gaining traction in board and leadership conversations because of the transformation labels attached to them. From a rules-based viewpoint, we have facilitated numerous discussions around board diversity, board composition, governance codes, shareholder activism, Environmental Social & Governance (ESG), and separation of CEO and Chairman roles. Without downgrading the significance of these approaches, and the accompanying legislations, are we realising transformational growth and development that characterise sound corporate governance? Beyond adaptation, continuity, and stability, how exceptional are our boards?
Corporate boards must take “new” responsibilities seriously, while complying with the growing corporate governance regulations. We use the word “new” to capture evidence-based, context-specific, culture-aligned, and 21st Century, novel insights. This is based on the realisation that compliance alone will not prevent future corporate governance shortcomings. Unless integrated with the performance dimension, an over-reliance on compliance gives illusionary hope of governance effectiveness.
To drive transformational growth and development, boards must transform themselves from within, with a dedication to excellent governance. Boards that transform from within are not only adaptive (which is predominantly reactive), but are orchestrators of strategic change. Such boards harness and apply their collective capacities to help management examine the triggers that might propel the organisation and its marketplace beyond the new normal. They are actively involved in exploring for promising adjacencies in their core business. These highly effective boards appreciate that ‘Governance is governance, not management!’. Such boards are not grounded on 20th century thinking, but they are abreast of the demands of the 21st century business environment. Sadly, some boards operate on the premise of stability and continuity, without realising that this is the domain of management. From a strategic change standpoint, exceptional boards are strategic and serve higher organisational purposes.
To lead significant socio-economic transformation, we must restore the power of boards to govern our institutions. What are some structural issues affecting the capacity of boards to explore and exploit market opportunities, facilitate candid board sessions, leapfrog existing strategies, and provide sufficient oversight to management? I offer a few pointers, but there are more:
Dearth of imagination, curiosity, and experimentation among directors. This is evident through boards being always reactive, rather than demonstrating proactive strategic thinking and strategic leadership.
Board members who are afraid to challenge a powerful CEO out of fear of being put down, or even fear that the CEO just might quit if they press too hard.
Rubber-stamping boards that simply enjoy the prestige and perks of being a director.
Having CEOs who treat governance and management as their personal responsibility. Such CEOs look at their boards as a necessary evil.
Over-reliance on a morass of rules and rigid governance prescriptions while ignoring reality.
Overconfidence and illusion of control among board of directors.
Boards that have a myopic appreciation of business growth and transformation. Such boards drive corporate complacency after realizing and celebrating some short-term wins.
How do we restore the power of boards to govern organisations? Without delving into their historical foundations, we must appreciate the value of creating and upholding corporate governance rules and regulations. However, it is equally important to appreciate the inadequacy of legislating governance when building great organizations. ‘It is impossible to legislate good governance and board stewardship.’ To ignite insightful conversations, I offer a few approaches that could help in elevating the performance of our boards:
Restore courage and wisdom of the board members. This enhances directors’ objectivity and willingness to challenge the CEO and management.
Capacitate directors to develop a set of governance principles that delineates the board’s responsibilities and provides the procedures for conducting board business.
Regularly assess the composition of the board and ensure diverse set of opinions around the board table.
Board sessions must be truly meaningful and, most importantly, generative, not just another nice meeting of ‘great minds’.
Boards should ensure that their board members attend professional directors’ education programs. This minimizes chances of directors reaching their levels of incompetence. These professional programs should not be merely off-the-shelf programs, but customized and co-created with the directors, CEO, and management. This safeguard boards from programs that are academically elegant, yet practically useless.
Board meetings must provide adequate time for in-depth discussions. Open dialogue on new ideas, proposals, and strategies should be encouraged. Indeed, knowledge for use exist on a continuum of inquiry. Directors must appreciate that ideas are developed in dialogue with others.
Good chemistry between board members, the CEO, and management is key. Interventions should be put in place to enhance board chemistry. CEOs and boards should have mutual respect and not struggle for power over each other.
Board members must shun social hypocrisy and pretentiousness. Deliberate action must be taken to break ‘the code of silence in boardrooms’.
Board must leverage information technology and information systems as an approach to enhance corporate governance.
Good governance means good long-term results. It is an essential trait of great companies. Let us restore the capacity of boards to nurture great organizations. This is possible if seriousness, commitment, and most importantly, ownership, is restored in boardrooms. Let us peddle conversations that stretch directors beyond mere ‘comply or explain’ to include fostering strategic change and bringing presence to human systems. We need exceptional boards, in fact, as a matter of urgency. Let us build great organisations.
Authors
Dr. Proctor Nyemba is Certified Professional Director®-Pro.Dir specialising upon Governance and Strategy, Governance and Risk, Governance and People, Governance and Board Effectiveness, Governance and Resources, Governance Culture and Behaviour. Proctor helps board members and executives understand their role in governance so they can succeed in the boardroom.
Dr. Justine Chinoperekweyi is an OD scholar-practitioner and gadfly corporate governance practitioner. He is CEO of Centre for Organization Leadership and Development. Justine serves as Board member of International Society for Organisation Development & Change (USA), and other regional organisations. He facilitates OD, leadership, and governance programs globally. He is also Advisor at Global Management and Business Group, Inc.,
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