Debacles and Duty of Care
Independent directors should be introspective and humble at the recent spike in corporate humiliations. We have learned of failures of China strategy, failures from reckless ambition, failures of contractual prudence or risk management, failures to secure a suitably competent board, failures in monitoring and managing the CEO. There has been spectacular destruction of value and reputation. Some of these companies are century-old, dominant in their sector and fundamental to New Zealand Inc, our common wealth. This phenomenon is not new, being a reprise of the 1980s, where numerous corporate icons and their shareholders incurred huge losses.
As professional directors, we are obligated to reflect on the warning signals, base causes and effects of these catastrophes, gleaning what data we can from the public record and using them as case studies for our own professional improvement. Outgoing chairs and commentators have publicly detailed numerous boardroom shortcomings. It is useful to benchmark these cited behaviours against the “Four Pillars of Governance Best Practice” (IODNZ 2017) to gain insight into their governance processes.
Then, under the mantra of “There but for the grace of God go I”, we must critically self-assess our own governance approach and performance. Focusing particularly on the Third Pillar “Holding to Account”, how do I as a professional director stack up in:
- Holding to account early – recognizing the danger signals in under-performance, strategic drift and poor risk management;
- Leading strategic development commensurate with competitive pressure, the stakeholders’ risk appetite and the organization’s capacity for cultural change; then closely monitoring the risky passage of strategy implementation;
- Recognizing where and in whom the company’s Intellectual Property and knowhow resides and ensuring its protection;
- Insisting on the right board reports (suitable, accurate, timely) while remaining a professional skeptic;
- Recognizing when the CEO is overbearing or the Chair-CEO relationship is over-cosy;
- Calling out a “kitchen cabinet” where an inner group precludes debate and information from the full board;
- Courageously pursuing questioning that challenges group-think;
- In essence, my fundamental Duty of Care?
To make us feel really humble, we should test ourselves against the New Zealand Director Competency Framework!
https://www.iod.org.nz/Portals/0/MembershipAccreditation/Documents/2015_10_28%20NZDCF%202015.pdf.
Undoubtedly we directors need to
keep lifting our game –
for the good of enterprise, value creation,
sound investment and society.
