Andrew Kakabadse, top team consultant and Professor of Governance and Leadership at Henley Business School considers the increasing challenges of corporate governance.
Non execs holding multiple seats on company boards were once considered to be the superheroes of the business world, given their lengthy CVs, responsibilities and earning prowess.
However, in the face of Austerity, BREXIT and the recent collapse of BHS, boards are being increasingly pressured to demonstrate the value-add they bring to their respective organisations.
Our research shows growing evidence that directors are holding multiple board positions, chairmanships and even combining these with managing director roles. Some individuals abroad are holding up to 40 positions concurrently.
Around 90 to 95 per cent of boards across the world are seen by management and other stakeholders as not providing significant value, and one of the main reasons is that board directors are holding too many positions.
The maximum number of non-executive board seats held by one individual should be three to four, or two chairmanships at most. But some people hold many more than this – leading to woefully ineffective boards.
These directors turn up to meetings fundamentally and inadvertently to rubber-stamping decisions because they have no way of knowing the value of the data they are supposedly reviewing.
Because they don’t know much about the organisation and its culture, they also don’t know how and what difficult questions to ask? This is because they are largely unaware of the sensitive issues facing the enterprise. As a result you end up with boards which deliver little worth, and the management know it.
There are exceptions, along with many examples of highly effective boards. Some companies require board members to visit different locations and ask staff difficult questions, helping to encourage effective ‘stewardship’ and achieve better organisational guidance.
There are also moves afoot to address the issue of multiple directorships globally. In London especially more scrutiny is being placed on how many board positions are held by individuals.
Placing effective governance at the heart of strategy is a welcome development which is increasingly gaining recognition and drive from forward-thinking organisations. This is not about making ‘correct’ decisions, but instead focussing on the implementation of systems and processes to facilitate them.
Chief amongst calls for improved governance are the key matters of improved accountability and transparency.
- Accountability means employing systems to report, explain and be answerable for decisions made on behalf of stakeholders
- Transparency is the process of ensuring others can clearly understand how and why decisions have been reached, and what consultation or advice has influenced outcomes
A lack of clear rationale and openness to decision-making results in a low likelihood of engagement, support or motivation to achieve. Ultimately the delivery of objectives suffers without buy-in from those who are affected or required to act.
Worldwide we are now beginning to see a growing respect and need for high-performing board directors. The idea that you need some sort of superhuman to deal with these issues is simply not true.
In the boardroom good governance can flourish only if professional behaviour is ingrained into the organisational culture, and directors must have time to pay attention to the finer details of how an organisation operates.
Directors need to think carefully before joining a board and consider existing engagements before taking on any additional posts. They also need to be brutally honest about what value they offer to the board in question. You simply need someone who fundamentally understands the company, and who can step back and say ‘let me think through what all of you are doing and give my opinion so we can take action.’
Find out more about top team solutions at: www.kakabadse.com/consulting