On the slope of Long’s Peak in Colorado lies the ruin of a gigantic tree. Nature experts tell us that it stood for some four hundred years. It was a seedling when Columbus landed at San Salvador, and half grown when the pilgrims settled at Plymouth.
During the course of its long life, this giant tree was struck by lightning fourteen times and the innumerable storms of four hundred years thundered past it. The tree survived them all.
In the end, an army of dangerous beetles attacked the tree. The insects ate their way through the bark and gradually destroyed the inner strength of the tree by their tiny but incessant attacks. A forest giant which had weathered all kinds of weather and storms, fell at last before beetles so small that a man could crush them between his forefinger and his thumb.
There is a parallel in this story which should serve as a warning to us. Most of us can survive times of crisis. We summon the strength of faith or resolve for almost any battle that we face head on. Whether it is in our professional or personal lives, we often overcome great obstacles.
Yet, it is the small and petty things like jealousy, anger, resentment, hatred, pettiness, negativity, and above all, insecurity that eat a person from the inside, thereby causing them to lash out irrationally, and bring about the downfall of others, and soon, perhaps their own.
Unlike a giant tree, as humans we can identify and fight those moral or ethical “beetles.” If we choose to. If we wish to.
And it is with this concept, this idea that ethics and governance came into being. Be it in our own private lives, in the outside world, in the world of politics, and also in the corporate world. If we were to focus only on the corporate world for now, the idea of having independent directors in corporate governance has been to ensure transparency, accountability and responsible decision making.
Longevity is the best index of the success of an organization, and good governance is one of the most critical conditions for ensuring longevity and growth. Tom Tierney, former managing partner of Bain Consultancy has very correctly remarked, “Corporate Culture is what determines how people behave when they are not being watched.”
Many companies have created corporate governance cultures that talk of truly great value systems, while their processes, structures and incentives may reflect an entirely different value system in practice. Clearly, good governance requires that companies must learn to move more and more from the “reactive and compliance mode” of corporate ethics to the “integrity mode” where the functions of the entire organization and its leaders are completely aligned with its value systems.
In today’s fast-paced, ever-evolving business environment, boards of directors play a crucial role as custodians of ethical corporate governance. Market dynamics are shifting as fast and frequently as natural calamities. Boards will therefore need to embrace their responsibilities and prioritize periodic board composition and effective succession planning.
It is no more adequate to focus only on short term financial performance. Good company boards are realizing the urgent need to extend their oversight to cover the holistic development and sustainability of organizations. We talk about all other kinds of sustainability. Create better ethical sustainability of organizations, and other forms of sustainability will only improve faster.
By adopting a proactive approach to succession planning, boards have the major role of avoiding leadership vacuums that could arise due to unforeseen circumstances.
One of the most basic corporate governance mechanisms is to share the boardroom with a professional, well-diversified, balanced, non-family board of directors. Having a well-structured board of directors not only ensures better accountability, it limits the risk of managerial opportunism, and prevents any conflict of interests which senior management may have with their own businesses, which many seem to be running nowadays. It also helps in preventing family disputes, and yet is also useful for navigating the socioeconomic consequences.
In the ultimate analysis, we are all temporary custodians of the wealth we generate, be it financial, intellectual or emotional. We have all, at some time, eaten the fruit from trees we did not plant. In the fullness of time, when it is our turn to give, we must in turn plant trees that we may never eat the fruit of. Trees which will and should benefit future generations. This should be our sacred responsibility. And good, honest corporate governance only helps better in fulfilling this responsibility.
Sadly, lack of adequate, ethical, balanced governance structures is causing immense amount of global bleeding at the bottom line, while owners are being convinced to focus on the top line.
One of the biggest dangers in investing in a good corporate governance structure is when we fall in love with our own story and the story of the few around us. In which case, we may refuse to look at the ground level realities simply because the realities might contradict our story.
Every organization or political system or institution could be having its own share of dangerous beetles. Having a good corporate governance board and structure helps in periodic pest control. Our region has an urgent need to have more such ethical boards to avoid the mistakes being made by the West.