Restoring power of boards to govern organisations
WHEN operating on unsettled sands, the quality of corporate governance must be enhanced. Boards play a significant role in championing organisational transformation, challenging the organisation’s basic assumptions, and supporting CEOs and managers to foster a culture of exploration, exploitation, and experimentation. Sadly, governance is being reduced to management, and governance roles are slowly becoming mere status symbols. During times of epochal change, the ability of boards, CEOs, and managers to explore, exploit, or experiment determines, not only continuity and stability, but transformational growth and development, profitability, and sustainability. This makes governance complex; hence governance responsibilities are not for any ‘Jack and Jill’. Board actions can either make or break human systems. Our organisations need exceptional boards. Such boards elevate humanity and they bring presence to human systems.
Can we develop exceptional boards through merely defining and training people on corporate governance rules and regulations? Is mere compliance with corporate governance regulations a reliable measure of corporate governance effectiveness? Is there a difference between 20th Century and 21st Century thinking and practice of corporate governance?
There has been a lot of talk around the need for strategic thinking and strategic leadership in boardrooms. Interestingly, corporate strategy discussions are embracing concepts around agility, adaptive leadership, resilience, transformational leadership, leading during crises, visionled leadership, entrepreneurial skills, and more. Corporate governance experts are quick to align their practice with these latest management and leadership fads. These brilliant concepts are gaining traction in board and leadership conversations because of the transformation labels attached to them. From a rules-based viewpoint, we have facilitated numerous discussions around board diversity, board composition, governance codes, shareholder activism,
Environmental Social & Governance (ESG), and separation of CEO and Chairman roles. Without downgrading the significance of these approaches, and the accompanying legislations, are we realising transformational growth and development that characterise sound corporate governance? Beyond adaptation, continuity, and stability, how exceptional are our boards?
Corporate boards must take “new” responsibilities seriously, while complying with the growing corporate governance regulations. We use the word “new” to capture evidence-based, context-specific, culture-aligned, and 21st Century, novel insights. This is based on the realisation that compliance alone will not prevent future corporate governance shortcomings. Unless integrated with the performance dimension, an over-reliance on compliance gives illusionary hope of governance effectiveness.