Corporate governance is not the sexiest of topics for board meetings.
For many directors, it seems an abstract concept enjoyed by the academics. At best a distraction from the real world of maximising revenue, profits and impact. At worst, a ball and chain, holding companies back from real progress
Now, directors must understand the role and importance of corporate governance. The chiseled company cheekbones, jawline and shapely physique are not sufficient, however alluring. Instead, directors must find beauty in the inner workings of the corporate body.
A different relationship between boards and management
Boards should be the pinnacle of corporate governance in organisations. Setting and then overseeing the system by which companies are directed and controlled. Key to this is the relationship between boards and management.
The standard model is that Boards set company direction, then delegate to management to deliver whilst scrutinising progress. In principle, this relationship hasn’t changed.
However, the sudden and unprecedented nature of the Covid-19 pandemic has forced many boards to work more closely with their managers. Pooling skills, knowledge and expertise to deal with the crisis enriches the response. To do this well, the non-executive directors (or Trustees/governors in non-commercial settings) need to be better informed about the inner organisational workings.
This approach poses risks of over-involvement, micro-management and excessive company time spent on information sharing. These risks can be mitigated through expectation setting at the outset and ongoing dialogue about priorities led by the chair.
With the right balance, this deeper understanding leads to better decision making. It also strengthens the corporate governance system.
In the future, boards and management teams should regularly pose the question of how does the organisation need to be governed? Taking this flexible approach according to the context will serve an organisation better.
Directors should know their seven legal duties. Covid-19 ought to have etched them on every director’s mind. They’re all important, but at this time one stands out: the duty to promote the success of the company.
For some organisations, success might mean surviving in the short term. For others, the priority may be operating safely with greater demand. Whatever the situation, all must take account of the likely long-term consequences of decisions. That could be challenging in the midst of a deep financial crisis with so much uncertainty. Nevertheless, the long view must be considered.
Hence, directors need to balance the short term with the long term. Some boards have set up a future scanning group whose task is to consider a range of near and long-term scenarios and generate options for navigating through each. The group shares their thinking with the board to enable better decision making. That’s a model worth holding onto.
The duty also states directors must consider the interests of employees, suppliers, customers, communities and the environment.
Whereas previously, shareholders or charity beneficiaries were front and foremost, Covid-19 has increased the prominence of the wider stakeholder group in board decision making. The reputation of the company in this period will be forged through their relationships with their stakeholders. How a company made them feel will underpin the reputation.
The focus on wider stakeholders has to be a good thing, and if as seems likely the virus will be with us for some time, its prominence is not going to diminish.
Hiding in plain sight
Some business leaders have observed that a sudden, catastrophic viral pandemic bringing much of the world to a standstill was nothing any of us in the business world could have predicted, never mind prepare for.
In fact, health policy makers have been warning of a pandemic with this impact for years. It’s just that in our strategic risk assessments, most of us have chosen to discount this risk as being in the highly improbable end of unlikely even though its impact could be devastating. Once bitten, twice shy? Surely, yes but some will no doubt see it as a one off.
But what other potentially catastrophic events are currently discounted by boards in their strategic risk analysis? Global warming is one obvious candidate. A crippling national or international cyber-attack is another. Those national and international external risks previously discounted need to be back on the table.
Cash is still Queen and like banks after the 2008 crash, financial and other forms of stress testing (reputational?) for these mega risks should be part of board planning.
For sure, we live in uncertain times and only the reckless will claim accuracy in their predictions for the present and post Covid-19 world. However, uncertainty has always been with us. Right now, it’s just more sharply in focus and its importance magnified.
A different view of change
One of the most remarkable features of the response to the pandemic was the speed at which organisations moved to remote working. For many, a major IT project that would have taken months, was completed in a few days.
Of course, a pandemic and lockdown created an urgency and need that is not normal. However, the necessity forced quick action, making the near impossible possible and not just with remote working.
Boards should reflect on this and understand what made this possible versus what makes change difficult before. Sure, some short cuts and risks were taken but the need for the end point justified the means and for most the result was good enough.
In the future, the expectation of the pace and degree of change will be greater with a stronger challenge from boards when programmes don’t have ambitious goals and timescales slip. “We did it then, why not now”, will be a common refrain.
As with remote working, the rapid move to online board meetings has forced directors into a way of working that many would have been otherwise reluctant to do. But have the concerns about online meetings been realised? Probably not to the extent expected.
There are many advantages of online meetings. No travel time, more focused discussions and more scope for capable chairs to progress and manage discussions and decision making are some. Generally, online meetings can be more efficient than in person.
However, meetings have a purpose beyond discussion and decision making. Social time is important as is the opportunity for side discussions and to deal with other non-board matters. These all contribute to building stronger, trusting relationships which are important for board dynamics.
Most boards will have dropped the social, softer elements in the move to online. Given their importance, a wise chair will create time and opportunities for them to continue.
There is a risk that in the crisis context and faster pace of online meetings, crucial decisions are rushed and not given the normal scrutiny and debate. That risk must be mitigated by the chair ensuring this does not happen through modelling the scrutiny and encouraging dissenting or alternative views to be heard.
It seems likely that virtual board meetings are here for the duration of the pandemic. The longer that continues, the more comfortable and capable directors will be with the format.
Beyond the pandemic and as with remote working, board meetings of the future will quite probably be a mixed economy of online and in person meetings.
All about the people
In the end and as with most aspects of work, it’s almost always about people. A board’s ability to lead effectively through this crisis is down to the behaviours and ability of the directors and how well led they are by the chair.
Some directors will have stepped up whilst others will have found the experience overwhelming and out of their depth. The qualities of the chair will be there for all to see.
Once the immediate crisis subsides, boards would be wise to think again about their composition. A great board will have a rich and relevant diversity of experience and knowledge who are able to work as a team in good times and bad.
Cast the net wider and into new places to uncover your new stand-out directors.
About the author
Norman Blissett is Managing Director of Gallanach, a consulting and advisory firm working with SME, not for profit and public sector organisations on leadership, organisational and people development. Norman is also Chair of Cyclopark, Europe’s largest and leading cycle sport facility, a Chartered Director and IoD Kent Ambassador.
You can get in touch with Norman using any of the platforms below, he’d love to hear from you.
➡️ LinkedIn – https://www.linkedin.com/in/normanblissett/
➡️ Website – http://www.gallanach.com
➡️ Email – firstname.lastname@example.org
➡️ Twitter – https://twitter.com/gallanach_eltd
Sign up to HR rewired (the newsletter)
Know what’s going on in Business, Tech and HR
Weekly news, analysis and original articles (just like the one you’re reading now) straight to your inbox.