No matter how advanced our technology or AI becomes, no matter how much data is collected, churned and analyzed, it is difficult to determine what makes one group of individuals a superbly effective team. And why another, equally talented group of people become a dysfunctional, politically- plotting lot.
Well-functioning, close-knit, successful teams always seem to have some form of intangible chemistry. Such team members develop mutual respect because they inherently respect one another. They develop trust because they inherently trust one another. They are willing to share difficult truths because they all have the same bonafide intentions about the long-term success of their institutions.
The levers to measure execution of strategic imperatives in a fast-changing world are becoming critically important. In today’s times, as more and more younger managers and CXOs are aspiring to become a part of boards, globally there is a fair amount of churn and re-think about issues of board governance and board stewardship. All resources, including the talent resources a company needs to develop, are being continuously assessed. It is becoming even more imperative for key personnel and board members to stand by developed value systems and to defend the company when there are conflicts of interest, minimize leakage risks, and ensure that individual egos do not end up damaging a company’s soul.
When the newer generation of board directors start stepping in to board roles, they need to walk the tight rope between creating lasting value versus immediate capital extraction. The age-old philosophy of doing well by doing good towards all stakeholders (and not just shareholders) still holds immense value. Instead of just ticking all boxes, feeling satisfied that all process documents are in place in terms of compliance, boards will need to ensure truly effective audits and transparent governance systems in the name of building institutions of lasting value. Louis Brandeis, famously said in his collection of essays: “sunlight is the best disinfectant”. In essence, by referring to sunlight, what he talked about was a sense of transparency. Bringing to light the hidden motives that often ruin investors’ hopes and also bankrupt companies.
One of the most frequent breakdowns occurs when key managers and heads lack sufficient trust and do not wish to share honest information with the board. How often have we experienced that just one night before a board meeting, a large, book-sized report is sent to the directors to read and analyze. What kind of trust and candor would that signify. Especially if that report includes, buried in a large volume of information, the news that earnings have declined. It is impossible for a board to monitor performance and supervise a company without complete and authentic information shared well in time.
If a board is robust, all key executives provide timely information and have confidence that the board will not interfere with day-to-day operations. Additionally, the operational heads are open to providing board members with access to individuals who can answer their inquiries, eliminating the need for back channels.
The capacity to challenge one another’s assumptions and beliefs is arguably the most essential component of the long-term success of a good organization. Culturally, some companies and some regions are not open and comfortable with this way. Yet, respect and trust do not mandate that there should always be agreeability or the absence of conflict. Rather, they suggest that the connections between board members are robust enough to withstand divergent viewpoints and difficult concerns.
Bernie Marcus, who was chairman of Home Depot, would never serve on a board that discouraged dissent for one straightforward reason: his reputation and wealth were at stake when he served on a board. If he did not receive answers to his queries, he would persist.
This is the breed that new directors should aspire to be. We all believe we are intelligent. Yet, none of us can walk around believing we are the most intelligent and therefore do not need any guidance.
Effective boards require members to play a variety of roles, including delving deeply into the particulars of a business and frequently playing the role of the devil’s advocate. Playing a variety of roles will provide the newer generation of directors with a broader perspective of the business and its available alternatives.
it is evident that the failures of previously esteemed corporations highlight a significant revelation: the existing conventional criteria and practices used to assess and manage corporate boards are insufficient in averting disastrous collapses. In order to ensure the integrity of businesses and maintain the trust of stakeholders, it is crucial to undertake a transformative reimagining of board dynamics. The approach needs to address the core challenges that corporations face in the rapidly evolving business landscape.
Companies are turning to digital systems to effectively manage and monitor their operations. This enables real-time tracking of corporate decision-making, providing greater transparency and accountability.
Another aspect that has already dominated the field of corporate governance is environmental, social, and governance (ESG) compliance. ESG compliance refers to companies adhering to environmental, social, and governance standards and regulations.
Every board is unique and so is every different director that may join a board. It follows, as a logical progression, that boards need to have induction programs that should also be unique. Build the program based on the specific needs and desires of a board, company and new inductees.
Finally, it is only a matter of time when accountability and compliance, including legal compliance will keep increasing. Good corporate governance creates a great brand. Good corporate governance and good boards teach how to deal with adversity, temptation and arrogance, what it feels like to choose well, or poorly. And where to go to get the courage to choose well. Good boards upskill the learning process of how to make mindful choices in the face of uncertainty.
Real Corporate Governance and board stewardship is making serious inroads and is here to stay. The flip side of the coin will also always co-exist in the world of duality. Which is why, despite the best of intentions, corporate fraud continues to rise.
The ultimate choice will be ours to make.