One Minute Governance

233. How might we empower our quietest directors to make an impact?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #31: how might we empower our quietest directors to make an impact? There’s a surprisingly common and patently absurd notion in the world of boards and corporate governance. It goes something like this: when we recruit a new director, we don’t really expect them to contribute much in the first year – mostly we want them to listen and learn. Most of you OMG listeners will be familiar with this position, and already know that it’s kinda dumb. Because here’s the thing: board seats are scarce. Precious, even. Why the heck would you be OK with one of those seats being filled with someone who’s not empowered to engage, participate and contribute on equal footing with the rest of the board? A much less dumb approach to a new director would be to ask yourself, “what would it take for this new director to participate at 100% from day 1, and how are we going to do our best to make sure that it’ll happen?” Now think about the quietest director at the table, whether they’re new or not. Most of the boards I meet are sitting there wishing that director would say more and participate more willingly. Well, what would it take for that director to participate more, and how are you going to do your best to make it happen. Spoiler alert: just pointing your finger at them and asking them to participate isn’t going to get it done. Don’t be lazy. Do the work.

232. How many of us wish our work were more spontaneous?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #30: How many of us wish our work were more spontaneous? I admitted in the last episode – to nobody’s surprise, I imagine – that I generally prefer the unpredictable over the predictable. That doesn’t – and shouldn’t – mean that anyone else should feel the same way. But it does mean that in a generally super-structured environment like a board meeting, one of two things is happening. One, I am trying my best to be useful, but am never really able to give my best. Two, I am subtly or unsubtly pushing for cool stuff to happen, thereby annoying the structure-preferring people in the room. And they’re right to be annoyed! If the meeting were in a spontaneous and experimental mode, our positions would be reversed. They’d be less useful than they could be and probably subtly struggling to rein in the chaos. But this is actually a good explanation for why we generally struggle to get the best out of everyone at the same time. The fact is that no one approach or model will be well-suited to the wide range of personalities and preferences in the room. And for what it’s worth I can *guarantee* that there is a wide range of personalities and preferences among your board members and executives. Do I have a brilliant suggestion to address this challenge? No. But again, you can’t solve a problem that you can’t describe. So ask the question!

231. How many of us wish our work were more structured?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #29: how many of us wish our work were more structured? Ever notice how lots of people get uncomfortable the moment things get unpredictable? It’s both normal and understandable. And thankfully, most boards and executives approach their work together in a pretty structured and predictable way. But that can make it even more jarring when something unexpected happens, or when someone in the room starts suggesting (or insisting) that we try something new. Even though I personally feel more comfortable in situations that lean toward the unpredictable – at least most of the time – I think it’s obvious that there’s nothing right or wrong about preferring structure. And I bet you can picture how someone’s preference for structure and predictability might affect the way that they engage in discussions at a board meeting. As long as we’re sticking pretty close to the scheduled topics and not introducing any significant new information, they’re right at home. But instead of making an assumption that anyone – or everyone – is happy with the balance we have, why not ask? What if it turns out all of us would prefer to increase the predictability of our meetings? Wouldn’t that be an important bit of information?

230. How many of us would benefit from an occasional change in scenery?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #28: How many of us would benefit from an occasional change in scenery? In episodes 192 and 193 of OMG I talked about the importance of breaks and physical movement. These are not trivial nice to haves – they are critical to making sure that people are cognitively engaged and comfortable – both of which we can all agree are important to board effectiveness. Speaking of trivial, it’s maybe a bit too easy to trivialize breaks and think of them just in terms of gaps in our agendas for people to do with what they please. Mostly to grab a coffee and get caught up on email for 15 minutes. But we all know that that’s no break at all. It’s like if I giftwrapped your overflowing work phone and presented it to you like the greatest gift in the world. No, breaks are different from simple agenda items. If you could design the ideal break – one with no constraints, anything is on the table – what would it look like? We might all come up with something different, but I suspect almost everyone’s dream break would include a change in scenery. Maybe you’re out on a walk or sitting on the beach or up on a roof or on your bike or whatever. And the thing about a change in scenery is that you don’t even need a break to get it done. You could hold different parts of your board meeting in different rooms or have a quick walk and talk or even just play musical chairs. So, how many of us would benefit from an occasional change in scenery?

229. How many of us would like our board meetings to be more creative?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #27: How many of us would like our board meetings to feel more “creative”? As any casual OMG listener will already know, I spend a lot of time encouraging corporate directors and senior executives to do things that are outside of the range of normal behaviours in boardrooms. First off, I’d like to argue that the range of normal behaviours in boardrooms is way too narrow and doesn’t work very well. But second, I am compelled to admit that it can be hard to find the confidence to try things that literally nobody else has ever tried, even when everything that everyone *has* tried doesn’t work. To that end, I often get challenged by my clients and students on that exact point, usually in the form of “that all sounds fine, Matt, but how do you expect me to go into my boardroom and actually do this stuff?” My initial response often involves the subject of today’s episode. I will look around the room and say, “OK, raise your hand if, in general, you would like your board meetings to feel more creative, whatever that means to you?” Every time I’ve asked this question, more than three quarters of the people in the room raise their hand. And what I’m try: first, that we are all open to trying new things and as a result you probably won’t face as much resistance as you think. Second, just asking a show of hands question requires basically no permission, gets you immediate and valuable information, and in itself injects a bit of active and creative engagement into the flow of a meeting. Creativity doesn’t have to be difficult or complicated or transformative. But it does have to push you outside the range of normal behaviour.

228. How might subtraction help to solve our stickiest problems?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #26: How might subtraction help to solve our stickiest issues? Back in episode 189, I talked about the amazing work by Leidy Klotz and others on a cognitive bias called “subtraction neglect”. Basically, subtraction neglect describes that our brains find it really easy to consider solutions to problems that involve adding stuff and really hard to think of solutions that involve taking things away. Unlike most cognitive biases, we can short circuit subtraction neglect just by asking “how might we solve this problem through subtraction?” So that’s what I’m urging you to do in today’s episode. Think of a typical board meeting – and I don’t care if your meetings are one hour long or three days long – I think it’s safe to assume that you discuss approximately two important problems per hour. Maybe more, maybe less, but two-ish on average. Every single one of those problems will be compromised by subtraction neglect. Even more important are the problems that you’ve put up with forever – maybe you even assume they *can’t* be solved. Things like information overload or getting stuck in the weeds or whatever. Instinctively, we can see that trying to solve those problems through addition could sorta work, but will probably unintentionally make things a bit worse. But if we get into the habit of asking “how might we solve this problem through subtraction?” We’re opening ourselves to a whole new world of ideas.

227. Is our pain really necessary?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #25: Is our pain really necessary? In the previous episode, I admitted that work sometimes sucks, and the work of a board is no different. Despite the fact that we can never completely avoid or alleviate the pain of board work, that doesn’t mean we shouldn’t try. So now that you’ve identified and described your pain points, the next question is whether we really have to suffer, or if there might be a different path. The fact is that almost everything that boards do is optional. In other words, the list of specific activities that a board *must* perform is short. Now, there’s tonnes of optional stuff that boards *should* do to make sure that their butts are covered and that they feel confident they’ve discharged their duties. But even here, the range of approaches that boards take to discharging their duties is strangely narrow. Making matters worse, boards have a tendency to want to model themselves after each other. Whenever they need to do something new or different, the first question is “well, what are other boards doing?” The answer, I’m afraid, is “nothing very interesting.” What I’m getting at is that a lot of your pain might be unnecessary, but you’ll never find out if you’re not open to ditching some of the optional stuff and resisting the urge to seek validation from other boards. As long as you’re complying with laws and regulations, I think it’s worth experimenting with novel approaches to pain relief.

BONUS: Matt's Australia/New Zealand Roadshow

Check out Matt's tour schedule here: https://ffm.live/MattinOz

 

TRANSCRIPT:

Hi everyone. Matt Fullbrook here. This is a quick bonus episode of OMG to spread the word to everyone who follows the show that I’m going to be in Australia and New Zealand next month on a bit of a roadshow. Over the course of the month, I have stops in Brisbane, Auckland, Melbourne and Sydney (in that order) with events tailored for everyone from students to board chairs to CEOs to generally curious nerds. There are breakfast events, cocktail events and casual dinners. If you’re going to be in any of those places in October, or if you know anyone who is, check out the link in the show notes for an evolving list of dates, including links to get tickets or submit RSVPs. If you’re hearing this, I assume it means you’re a fan of the show, and if you like OMG you’ll really enjoy all these sessions. Thanks for checking it out and spreading the word. Hope to see you down under.

226. What are the most painful elements of our meetings?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #24: What are the most painful elements of our meetings? The work of a board is, well, work. And for almost all of us, work sometimes sucks. The fact that work sometimes sucks is not an indication that something is wrong. It’s just often a fact of life. As long as it also doesn’t suck – preferably most of the time. So, with that out of the way, board meetings are sometimes painful. Different parts of board meetings might be painful to different participants. For example, what’s painful for the board is often less painful for management and vice versa. But in almost all of the cases I’ve encountered, there are parts of board meetings that are painful for everyone. Maybe it’s the times when we pull something out of consent agenda. Maybe it’s the presentations by that one executive who’s just kinda boring. Maybe it’s every time that jerk – let’s call him Matt – opens his mouth and goes on and on about some nonsense. Maybe it’s the sheer quantity and weight of the compliance burden we face. Again, I’m not saying that the pain is necessarily bad, and I’m certainly not trying to imply that I know how to relieve all your pain. But if pain relief is to be found, we need to start by naming it.

225. What might *I* do to make things a bit better?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #23: What might I do to make things a bit better? Conventional definitions of corporate governance frame it as something that exists: a system of processes and structures that promote transparency and accountability or some other such nonsense. Nonsense because it leaves us with the impression that corporate governance isn’t something that actual people actually do. There’s a similar problem with thinking of corporate governance only as a thing that belongs to the board, as a whole. As in, nobody other than the whole board collectively might have any impact on corporate governance. A weird implication of that framing is that it obscures the fact that individual directors matter. Personally, I believe that an individual director or senior executive can cause good governance to happen. This won’t surprise anyone who’s followed this show for a long time, but when a single person is intentional about the conditions that affect our decisions, that person is literally doing good governance. Just them, on their own, doing good governance. So, what might *you* do to make things a bit better?

224. Is benchmarking a sensible way to set CEO pay?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #22: Is benchmarking a sensible way to set CEO pay? If you haven’t listened to the previous episode about knowing whether your CEO is doing an awesome job or not, you might want to take a sec and do that. A very large proportion of organizations I meet, and probably 99% of listed companies in the Western world all set their CEO’s compensation amount and structure in large part based on comparisons to their peers, also known as “benchmarking”. This makes sense if you believe that the most important part of CEO compensation is to avoid having your CEO quit and leave for another organization that pays better. The thing is, we have no idea how low a CEO’s pay would have to go before they might quit. And if we combine that with the stuff from the previous episode about how hard it is to know whether a CEO is any good or not, then we’re left with an important question. The one that’s the subject of today’s episode. One of the main problems with basing CEO pay on benchmarking is that it causes CEO pay to increase rapidly from a starting point that was already unjustifiably high. But even if we don’t care too much about the amount, benchmarking also lets boards off the hook of thinking too hard about what truly effective compensation really looks like. I promise you the answer to that question is not “effective compensation for our CEO looks like whatever everyone else is doing.” So, is benchmarking really a sensible way to set CEO pay?

223. How do we really know if our CEO is doing an awesome job?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #21: How do we really know if our CEO is doing an awesome job? Did you know that there’s no evidence that the market for CEOs is efficient? An efficient market is one where supply and demand are basically equal. When a job market is efficient it means that both sides of a potential transaction have lots of information about each other and they are able to confidently assess the talent of the candidates, the appropriateness of the compensation, etc. We don’t have any of that for CEOs. There’s a great summary of this in Larcker and Tayan’s amazing paper Seven Gaping Holes in our Knowledge of Corporate Governance, which I’ve referenced a few times on this show. Anyway, since we have no objective way of knowing whether our CEO is the most qualified person for the job, or whether we’re paying them appropriately, it raises an even more urgent question of how good they might be at their job. You can’t just say, “well the company is really profitable and shareholders are happy, therefore the CEO must be amazing.” Why? Partly because to confidently prove that the CEO is the cause of that success would require you to get rid of the CEO and see what happens. Or to have a multiverse with an infinite number of different CEOs so you can compare them against each other. And how many stories can we think of where a CEO had great performance at the time, but once they were gone we realized that they’d done lots of damage in the process. But answering this question should start, in my opinion, with an open-ended and open-minded conversation about what doing an awesome job really means. In terms of actions AND results.

222. What *really* motivates our CEO?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #20:  What *really* motivates our CEO? If you have the patience to follow me on LinkedIn, you may have noticed me complaining loudly about executive compensation a couple of times in the past year. I think it’s totally broken, and nobody seems to have any interest in fixing it. The fact is, we have no idea what a CEO is actually worth to a firm and we have no idea how different compensation approaches and amounts cause CEOs to behave. And in the meantime, the obsession with benchmarking CEO pay against other CEOs is designed specifically to cause pay to go up forever, thus exacerbating the wealth gap…which we actually DO know is provably bad for everybody. And part of the reason why I find this so infuriating is that the core of the solution to these problems starts with a really simple question, which happens to be the subject of today’s episode. Let’s imagine that it turns out that our CEO likes money. Likes it A LOT! And that’s convenient, because we happen to be paying them in money and not, say, salamanders. So that’s great. Except what if there’s something that might motivate our CEO even more than money (or salamanders). What if it turns out that if we gave them Friday afternoons off they would jump out of bed every morning and work 10x harder, even if we paid them half as much money? Or what if they would literally give up EVERYTHING to dance the Macarena with Taylor Swift? We could craft some huge and ambitious 5-year operational goals and spend that time convincing Tay Tay to get to work on jumping and turning 90 degrees to her left. People are complicated, and so are their interests and motivations. What could you learn by exploring this question?

221. How, specifically, do our board evaluations make us better?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT:

Question #19: How, specifically, do our board evaluations make us better? I’ve had the amazing privilege of working with many, many boards on board evaluations over the years. I would guess that the first one I ever worked on was 20-ish years ago and the most recent one was within the past couple of months. Most board evaluations take tonnes of time and money to conduct. They involve some combination of interviews and/or surveys and analysis and reporting and facilitation. If you’re really unlucky as a board, your board evaluation tells you that everything is perfect. It might feel good, but deep down you know you might be pretty good, but definitely not perfect. But even the lucky ones basically never get their money’s worth. Let me put it this way: a great board evaluation should make give you fuel to be tangibly better tomorrow than you were yesterday. Right? Otherwise, what’s the point? Hence today’s question: how do our evaluations make us better? When exploring this question, try to have high standards. As in, try not to settle for “well, we added one more item to consent agenda and that saved us 46 seconds at the last meeting!” And don’t confuse NEW behaviour with BETTER behaviour. Just because something might have changed doesn’t mean it has improved. My hope is that exploring this question will increase your expectations of your board evaluations overall, and of the consultants you hire to conduct them.

220. How do we hope to spend our time?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

 

TRANSCRIPT

Question #18: How do we hope to spend our time? Today and in general. Time scarcity is probably the thing that makes board work most complicated. I guess that’s kind of like saying that time scarcity is what makes life most complicated. Still, my point stands. One of the most remarkable things about my work with boards over the years is how similarly different boards tend to spend their time. This is especially true considering that boards really have tonnes of control over what they do and how they do it. Boards could choose to spend an entire year composing a rock opera about a tarantula and an aardvark who become best friends and travel the world, as long as they do the bare minimum of compliance. It wouldn’t be a particularly smart or savvy way to approach their work, but still…it’s up to them. And that’s really my point: if boards can basically do whatever they want with their time, why do they mostly all do the same things? And funny enough, the pile of standard board stuff seems to expand to fill exactly as much time as we have allocated for meetings – or maybe a bit more, but never less. This means boards have a convenient excuse not to try anything new: we don’t have time! But what if we permitted ourselves one conversation – maybe during a strategic retreat so as not to intrude on precious board meeting time – where we pretended that none of what we tend to spend our time on were mandatory. What WOULD we spend our time on. What topics, what conversations, what presentations, what meals and breaks, how much time on which things? Maybe we could take one tiny step toward that dream at every meeting.