One Minute Governance

149. Great board chairs are like great dinner hosts

Let's let go of comparing board chairs to orchestra conductors. A dinner host is a way better analogy.

 

SCRIPT

Back in episode 91, I made an argument against comparing great board chairs to orchestra conductors. But if an orchestra conductor isn’t a good analogy, what is? I think I have something. It’s not perfect, but to me it’s a much better description of an excellent chair. Imagine you arrive at a dinner party. The lighting is comfortable, the temperature is right. The host takes your coat, puts a drink in your hand, and skillfully introduces you to someone you don’t know with a fun conversation prompt. By the time you’ve had a chance to meet everyone, dinner is served. The food is delicious, and beautifully paired with the wine. The conversation flows. There is disagreement – maybe even tension – but everyone feels comfortable to participate and nobody feels attacked. You learn a lot. More than you expected. And before the conversation loses steam, the evening wraps up. You don’t feel too full, or too drunk, or too tired. It might feel a bit like magic, but to the host it was all just intentional and difficult work – before, during, and after the party. The host, of course, is our board chair analog. I know that if you think about it enough you’ll find lots of flaws with the analogy, but none of them as glaring as the orchestra conductor. The dinner host’s work is in service of creating a vibe, of getting the right combination of people engaging with each other in the right ways, of managing countless intersecting variables that may change without notice, and to do so with grace, humour, and empathy. No standing ovation. No spotlight.

148. Do big companies just run themselves?

Can a company get so big that its leaders barely matter?

 

SCRIPT

Think of a really big company. Like, REALLY big. Especially if it does lots of things in lots of places. Even more if it makes money in lots of different ways. Maybe a big bank, for example. Let’s also imagine that the company is pretty good. Y’know, it’s making money, has good competitive positioning, and solid reputation. Let’s also imagine that there are no current crises or major obstacles. Last assumption here is that there are enough good people in the company to make sure that the stuff that’s supposed to happen actually happens. Under those circumstances, the generic bank-like company in question is pretty likely to keep going, right? Maybe even thrive. I sometimes wonder if, under those very privileged circumstances, senior executives and board members might barely matter at all. Sure, everyone needs to report to someone and someone needs to be at the top of the food chain and all that. And of course crises, or at least unexpected shocks, are always a possibility – and someone needs to be at the ready to guide the company through the storm. But in a company like the one we described, could it be true that senior executives and boards most important role is to basically just exist? To kinda be accountability sponges just because someone’s butt has to be on the line? I realize we probably want some folks in our company to be dreaming about what cool stuff we could do next, just so we don’t get complacent. But for the most part we’re talking about innovation at the margins rather than at the core. I’m not really recommending anything here – just making the observation that I can imagine a scenario where an organization’s top leaders barely matter at all. What do you think?

147. Do boards have any impact on organizational culture

Is it *really* possible for boards to impact organizational culture?

 

SCRIPT

A lot has been said and written about the impact that boards have, or at least might have, over organizational culture. A lot of what’s been written and said happens in the wake of some culture-related meltdown like at Wells Fargo, or Boeing, for example. Where was the board? How could they have been so blind? If only the board had spent more time actually wandering around the organization, they would have seen the signs, right? I mean, yeah, of course it makes sense for boards to have a clue that their organization’s culture is going down the toilet, obvi. But anyone who’s spent time in and around large and/or complex organizations will tell you that there’s often no one monolithic “organizational culture.” There might be doctrines and norms, values and visions, leadership styles and cults of personality. But in an organization with high diversity of roles or geographies, for example, there’s no way for *anyone* to fully understand culture, or to have visibility into every little nook and cranny where a crisis might be festering. Of course we want our boards to be sufficiently aware and curious to notice systemic cultural issues and toxicity, and to have the guts to get rid of the leaders who allow or enable those problems. At the same time, part of a board’s superpower is in what they *don’t* know. They don’t eat, sleep, and breathe the organization. They don’t obsess every minute of every day and night about its tiniest successes and failures. They come into their roles with the benefit of independence. So does an effective board have impact on organizational culture? Sure, I guess. But are they the architects of culture? That one gets a “no” from me.

146. Can good governance overcome ”bad” people?

Could it be possible for governance to be *so* good that the quality of the people don't even matter?

 

SCRIPT

One of the most common reactions so far to my definition of good governance as “the act of intentionally creating effective conditions for making decisions” is that I might be discounting the importance excellent people. In other words, I might be implying that if we create the right conditions then it doesn’t matter who’s in the room. First off, it’s not my intention to imply that at all. I think the people in the room are some of the most important conditions that we need to intentionally work on in our good governance journey. But let’s explore this for a moment. Could it be the case that somehow good governance is possible even with bad people? I mean, every person has *some* kind of strength, right? Maybe we could create conditions where everyone is *only* able to express their strengths and not their weaknesses. Maybe we could supplement our organizational leaders’ lack of care or interest or aptitude with external support? Maybe still, a truly optimized set of conditions could transform a group of duds into a group of stars? I honestly don’t know, and suspect the answers are deeply circumstantial. But one thing I *do* believe is that if you’re a leader in an organization and feel like you’re surrounded by duds, then it really is worth exploring ways to unlock their potential. Sure, some people might just be a lost cause. But why just sit there resigned to the fact that you’re surrounded by scrubs without putting in the effort to turn them into superstars?

145. What is excellent leadership worth?

Or maybe the better question is "what *isn't* good leadership worth?"

 

SCRIPT

Way back in episode 54 I wondered about how we could possibly know how much to pay a CEO if we don’t know their compensation floor. In other words, if we don’t know how low a CEO’s pay can go before they will quit, or at least start to under-perform, then we are missing a critical variable to understanding the range of executive compensation that we have to work with. Well, there’s another equally important question: what is excellent leadership worth? Or maybe an even better question would be what ISN’T excellent leadership worth? Sure, senior executives – CEOs especially – tend to make an eye-watering amount of money. And obviously there are a tonne of philosophical, social, economic and moral questions that are important to examine in terms of whether extremely high compensation is good or bad for the world overall. But in the context of a specific organization, and taken in isolation from other intersecting factors, let’s ask the question: what ISN’T excellent leadership worth? Whether you’re a tiny, cash-starved local organization or a massive multinational, what wouldn’t you pay to get the *perfect* leader? Not that you should irrationally pay more than you need to, of course, but I meet organizations that are, in my opinion, unnecessarily anxious about paying too much for great leadership. In my experience, though, it’s a lot easier to find more money than it is to find an excellent leader, regardless of the organization.

144. Is your boardROOM an impediment to good governance?

I'm kinda obsessed with re-thinking the layout of boardrooms. Here's why.

 

SCRIPT

If you’re super attentive, you might have noticed me referring a few times this season to the impact of boardroom layout on good governance. This episode is where I admit that I’m kinda OBSESSED with the idea of re-thinking boardrooms. You remember last episode when I said 1000% improvement can come from 1% change? I think this is a good example of where a small change can have a HUGE impact. Over the past few decades, you’ve probably noticed a whole bunch of experiments in workspace optimization. Cubicles, open concept, private offices, hoteling, space for play, remote work, and more. Smart managers are interested in exploring and better understanding how the work environment affects morale, productivity, culture, innovation, and ultimately organizational success. Absolutely *none* of that curiosity has broken through the impenetrable barrier of the boardroom door. But let’s be honest: why is your boardroom laid out the way it is? Other than it being the way every boardroom is laid out, that is. What is your current layout good for? How is it serving good governance? What other layouts might contribute to effective conditions for making decisions? What if a “typical” boardroom layout with a single oval or rectangle or square or circle or horseshoe with chairs around the outside and a screen at one end, etc., became illegal? What other options would you consider, and why?

143. So much about boards hasn’t changed

Despite the emergence of a sizeable corporate governance "industry," so much about boards hasn't changed at all.

 

SCRIPT

The main thing that’s evolved around corporate governance during my 20+ years in the space is that there’s now an “industry” around it. What I mean is that there’s a big system of people – including me – who have found ways to make money by hanging around in the orbit of corporate governance. Think of all the money boards and executives spend on consultants, technology, education, conferences, and more. Just about all of that industry is new in the past 20 years. And honestly, that’s all good to me. The thing is, though, that if we zoom out to a system level of corporate governance, there’s so much that *hasn’t* changed despite all that investment. If we took a cross section of organizations across the Western world, a typical board meeting still looks and feels 99% the same today as it did 20 years ago. The same rooms, the same agendas, the same presentations, the same results. Just with a bit more time spent consuming governance products and services in between. Yes, maybe we print fewer documents, and our vocabulary has evolved a bit. Maybe we ask slightly more provocative questions, and maybe the people around the table look a bit less male, pale, and stale. All that is sincerely wonderful. But it’s a bit amazing to me how much things haven’t changed. Maybe it’s because everything is optimized exactly the way it is. But I personally don’t believe that’s true. I think the biggest problem is that boards, managers, and the governance industry still lack the imagination and courage to break the gravity of the status quo and imagine what it would look like to be 1000% better tomorrow than we are today. And sometimes 1000% improvement can come from a 1% change.

142. Can we PLEASE stop burdening boards with compliance obligations?

Compliance is important, but more emphasis on compliance means less emphasis on good governance.

 

SCRIPT

Earlier this season in episode 104 I confessed that the 20 years of work I did on board ratings was maybe not optimally spent. The heart of the problem is that I was one of many who were perpetuating a false equivalence between good governance and compliance, or in my case good governance and the disclosure of specific information in specific ways. Obviously, complying with rules and communicating truthfully and transparently with stakeholders matter a *lot* but they’re not at all the same as good governance. And what happens when people like me put pressure on boards and executives to invest their scarce time into compliance with external expectations that are unrelated to good governance is, well, good governance is less likely to happen. If you buy in, even a little, to my definition of good governance as the act of intentionally creating effective conditions for decision-making, then you already know what I’m talking about. A compliance-oriented agenda clearly doesn’t describe effective decision-making conditions. Honestly, the fact that real-world boards of large, sophisticated listed companies spent time worrying about the board ratings that I ran kinda feels embarrassing to me now. If there’s a message here it’s this: to all you regulators, institutional investors, activist investors, researchers, journalists, and anyone else who has the platform and wherewithal to compel directors to comply with more rules and expectations, before you open your mouth please ask yourself if that compliance is really in service of good governance.

141. Why do boards like Robert’s Rules so much?

Are a set of 150-year-old parliamentary rules really applicable in a typical boardroom?

 

SCRIPT

I was with a board recently, engaged in a conversation about what “good governance” is (surprise, surprise!). One of the board members asked me where Robert’s Rules of Order fit into good governance. If you don’t know about Roberts’s Rules, take a second to Google them. Anyway, it’s a perfectly fair question. After all, basically every board deploys Robert’s Rules occasionally or frequently, especially when a vote is at hand. It’s a handy process to make sure we know that, in fact, a decision happened, which is good! The reason why I found the question so interesting is that it never would have occurred to me that Robert’s Rules were anything more than a potentially convenient tool, and certainly not a critical component of corporate governance generally or even board effectiveness specifically. Did you Google them? If you did, you probably saw the Wikipedia page which describes Robert’s Rules as “a manual of parliamentary procedure” from 1876. It goes on to explain that the rules “govern the meetings of a diverse range of organizations – including church groups, county commissions, homeowners associations, nonprofit associations, professional societies, school boards, and trade unions.” There’s something a bit startling about parliamentary rules being adopted by all these other types of organizations, and especially by boards, to be honest. Have you ever spent time watching a parliament try to make decisions? If you have, you probably noticed that rules matter a lot because, well, there are constantly arguments between groups of people with misaligned interests, pushing and pulling against each other. If that sounds like your board, then maybe you should hang on to Robert’s Rules for dear life. If not, you might want to consider a less structured approach once in a while.

140. I’ve already changed my mind about good governance

It was only a few months ago that I proposed my definition of "good governance," and I've already changed my mind.

 

SCRIPT

I know it’s only been, like, three months since episode 102 where I offered a definition of “good governance.” Well, I’m excited to say that I already think I got it wrong. I’ve had a slight, yet significant, shift in perspective thanks to reactions that I’ve received from clients, classrooms, and listeners. Let’s begin with the definition from episode 102: Good corporate governance means creating conditions that maximize the likelihood that effective decisions will get made. The most important part I got wrong was emphasizing the effectiveness of *decisions* which isn’t really what I meant to do in the first place. We all know that one of the things about decisions is that you can’t know what the result will be until you make the decision in the first place, and talking about an “effective decision” implies that the result will be good. So that needed to change. I also don’t really like the “maximizing the likelihood” part because that implies that good governance is really a game of chance. On top of that, some people have told me I should add the word “intentional” somewhere, while others prefer “active.” I think I’ll use both. Ultimately, what I really want to convey is that the heart of good governance is an interest and curiosity in the conditions for making decisions throughout an organization. So here’s where all this wordsmithing has gotten me as of November 2022: “Good corporate governance is the act of intentionally creating effective conditions for decision-making in an incorporated entity.” Let me know what you think. Clearly, I’m in a pretty impressionable place right now, so you might just change my mind.

139. Shamelessly Promoting OMG

I'm HUGELY grateful to all of you for listening and caring about OMG. So grateful, in fact, that I'm asking you for something more: please consider "liking," following, subscribing, reviewing, and spreading the word. 

 

SCRIPT

It’s sincerely amazing to me that we’re so close to 150 episodes of OMG. Any of you who know what it’s like to put literally anything out into the world – a product or service, artwork, thought leadership, or whatever – you all know that feeling of uncertainty. No matter how confident you are that you’re on to something, there’s always that looming doubt: will *anyone* care? And let’s be real here, OMG is where I – a solitary and opinionated human being – put my own personal thoughts and opinions about an esoteric and unsexy topic out into the world. There was no guarantee that it would find an audience of any kind, let alone one so thoughtful and engaged as you. So I’ve arbitrarily decided, in episode 139, to ask you for something. Whether you’re a dedicated follower or a recent convert or a first time listener, please consider following or subscribing to OMG on your favourite podcast platform. Please also take a moment and leave a rating or review. Most importantly, the most powerful way to build an audience for a podcast is to simply tell your friends, family, and colleagues what you like about OMG and recommend that they tune in. It probably hasn’t occurred to you that OMG basically *can’t* be ad-supported without ruining the vibe. Imagine adding a 60-second advertisement at the beginning of a 90-second podcast episode? It would be AWFUL. So, no, sadly spreading the word won’t make OMG any money, but I knew that from the start. No, spreading the word just, well, spreads the word. I believe in what we’re doing, and I hope you do too. Thank you, sincerely, because knowing that you’re listening is what makes creating OMG such a fulfilling experience.

138. Plain vanilla skills matrices are basically useless

In stark disagreement with my past self from episode 92, I don't think a regular old skills matrix is good for anything. Here's what I think we can do better.

 

SCRIPT

Less than a year ago, back in December 2021, in episode 92 of this podcast I said the words “I actually really like the standard skills matrix, as long as it’s well-defined and regularly updated.” And I proposed adding a new feature in the form of laying out the bare minimum expectations that EVERY director needs to bring to the table. Just to, y’know, make sure that everyone actually brings at least the bare minimum in addition to their CV. Anyway, I’m here to say that I completely disagree with the December 2021 version of myself. Not only do I not ‘really like the standard skills matrix’ anymore, but I also don’t think that my proposed feature is sufficient to take a plain vanilla skills matrix from trash to treasure. If your skills matrix is going to actually help you to recruit a good group of directors, here’s the information I think it needs – at the very least – to be substantially useful. First, it needs skills – measurable stuff like “basic financial literacy” or “types at least 80wpm,” or “can hit a 95mph fastball”. Second, it needs professional expectations, like “has managed an organization with a $50m budget” or “has taught at least 1000 people how to surf.” Third, it needs those bare minimum things I mentioned before, like “is available to attend 24 meetings per year,” or “is fully caught up on OMG.” Fourth, it needs some indication of interpersonal aptitude, like “demonstrates willingness to change mind when presented with new information,” which can be tested in an interview.” Finally, it needs an indication of how many people on the board need each of those things. With those bare minimum things, for instance, EVERYONE needs those. But how many experienced surf instructors do you need? Is it one? Five? How many fast typists? How many seasoned executives? Put ALL of it in your skills matrix! Otherwise, how can you *really* assess your recruitment needs?

137. Is the world really more VUCA than ever?

I keep hearing leaders talk about the increasing volatility, uncertainty, complexity, and ambiguity in the world. I think we might be missing something...maybe even an important opportunity.

 

SCRIPT

Volatile, Uncertain, Complex, Ambiguous. VUCA. It resonates, doesn’t it? Whether you’re talking about just some schmo like you or me, or a complex organization, things just *feel* VUCA, right? And it’s becoming such a cliché to say that VUCA is the “new” normal. As in, things are more volatile, uncertain, complex, and ambiguous than ever before and we better get used to it. Personally, I don’t like either part of that statement: the “more than ever” part or the “we better get used to it” part. First off, for everyone but the most fortunate among us, the world has always been VUCA. When you don’t have enough of what you need, whether it’s money, food, shelter, opportunity, that’s VUCA. Maybe what’s new is that those of us who ARE among the most fortunate now have to think way beyond our own wealth or our quarterly results or the interests of our shareholders. Maybe – as individuals and organizations – we need to stop simply, y’know, extracting from the world and instead spend some time thinking about how to make things sustainably better? Maybe the fact that we may need to thing bigger, longer-term, and with more empathy FEELS like things have become VUCA, but what if…stay with me here…what if it’s just no longer possible to entirely outsource VUCA to those more vulnerable? Political instability? Climate change? Economic uncertainty? Your organization has roles to play – big or small – to de-VUCA-fy the lives of those you’re able to affect. Think about it. I’m pretty sure you instinctively already know it’s true.

136. Are we accidentally keeping all the best people out of boardrooms?

Boards often don't look for the best directors, and so the people who could be the best directors don't ever consider being on boards. A vicious circle!

 

SCRIPT

Since I started studying corporate governance back in 2001, a lot has changed in the way that most boards approach the identification and recruitment of new board members. Some of this has been driven by new regulations requiring greater independence and specific expertise. In theory, that should have really affected the composition of boards, especially those of listed companies that are most directly impacted by the new rules. But aside from some cosmetic changes on the independence front, the complexion (literally and metaphorically) of boards really didn’t change at all – for more about how I feel about director independence scroll all the way back to episode 6. Since then, most boards I interact with use some kind of skills matrix to illustrate the capabilities that they’re looking for and measure the actual board’s aptitude against. There’s nothing wrong with that, but my experience that that boards typically use skills matrices to reinforce the status quo. To be fair, there are a LOT of amazing corporate directors out there, but they’re often amazing in addition to (or even despite) their skills and professional experience rather than because of it. And the fact is that boards continue to emphasize measurable professional backgrounds instead of asking “what would a truly excellent new director look like? What would they bring to the table?” This leads to two problems. The obvious first one is that most boards fail to even look for excellent directors in the first place. The second one is equally, or maybe more important. People who could be excellent directors don’t even know that they could be, because they assume – correctly – that they’re not what boards are looking for.

135. Is everyone in an organization ”doing” corporate governance?

A friend recently suggested to me that literally everyone in an organization is part of corporate governance, and I *love* the idea!

 

SCRIPT

I had an amazing conversation with a young person who, despite his age, is a legitimately experienced corporate director and a bit of a provocateur. You can already imagine how much I like him. If you’re interested in learning more, head over to the latest episode of the Sound-Up Governance podcast at www.groundupgovernance.com. Anyway, his name is Andrew Escobar and one of the truth bombs he dropped was something I wholeheartedly believe but had never really thought about before: Everyone in an organization plays a role in corporate governance. Every single person. Thinking of corporate governance as something that begins and ends in the boardroom clearly doesn’t align with my concept of corporate governance, so that’s not new. But this is taking it further. Imagine a massive company with countless employees in hugely varied roles, some of whom probably don’t even know that there IS a board, let alone what a board does or what corporate governance is. Still, those people have positions in the organization only because of a decision that was made at some place in the hierarchy, so we’re already talking about corporate governance. But it goes the other way, too. The experiences of those employees, and their performance, their productivity, no matter how seemingly insignificant, DOES have influence over decisions that happen throughout the organization, and possibly all the way to the top. Not to mention, those employees make decisions themselves. Think about that: EVERY SINGLE PERSON IN AN ORGANIZATION is “doing” corporate governance, whether they know it or not. It’s so cool.