240. How well do we really know and trust each other?

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 #38: How well do we really know and trust each other? You know what governance myth I find super nonsense? That it’s somehow bad for directors to know and like each other. I remember way back in my early days as a researcher on governance projects at the University of Toronto we used to scan through public filings in granular detail looking for the tiniest shred of evidence that directors might have connections to each other outside the boardroom. Like, if it turned out that two directors were members of the same country club or something we would kinda feel like we’d found some sinister smoking gun. There’s no *way* they could possibly demonstrate independent thought in the boardroom if they’ve both eaten the cobb salad at the same clubhouse or shot a 103 on the same golf course. And this type of cynicism still lingers everywhere in the governance narrative. You see elements of it baked into regulations and proxy advisor guidelines. You see it in the way that certain media frame their coverage of boards. You see it in the gripes of activist investors. But, like, let’s think about this for a second. Boards need to make huge decisions under intense time and information constraints. We want them to consider diverse perspectives as quickly and thoroughly as possible. There’s only one condition I know of that can cause a group of smart people to do that effectively: trust. It’s hard to trust people you don’t know. So, in my opinion, directors really *should* know each other and like each other and maybe even do stuff together. Yeah, maybe there are fine lines that we should be careful about, but I think the downside of boards NOT trusting each other is the greater risk.