Chapter 1 – The emergence of board dynamics in governance Flashcards
According to the Cadbury Code, what are the four responsibilities of the board? ALSS
- Setting strategic aims
- Using leadership to implement these aims
- Supervising management
- Reporting to shareholders
Due to increased sophistication corporate codes around the world have outlined what boards are supposed to do, what outcomes they should focus on and what structures they should take to achieve this. We now also need to pay attention to what behavioural factors?
- How boards function
- The group processes that underpin them
- Individual and team behaviours
Cadbury responsibilities is not sufficient.
In addition to a thorough understanding in all aspects of corporate governance, what should a modern company secretary expect to have?
A good grasp of evidenced-based psychological knowledge (part 2) combined with a mature armoury of emotionally intelligent influencing skills (part 3)
Give some examples of organisational failures
- RBS - board compliance box ticking - BUT - poor decision making, poor culture, deficiencies in management and CEO dominance
- ENRON - Board held back large debts from their balance sheets – led to shareholders losing $74 billion, redundancies and employees and investors losing their retirement account
- WorldCom - CEO inflated revenues by $11 billion, leading to 30,000 lost jobs and $80 billion in losses for investors
- Tyco – CEO and CFO stole $150 million and inflated company income by $500 million
- Kids Company (not for profit) - collapse in not for profit due to dominant CEO and financial mismanagement
- Volkswagen - diesel emission scandal
What is Gross National Happiness?
The Kingdom of Bhutan - introduced this measurement. It represents the measurement of happiness in a population - perhaps its something that could be measured on a board
What is talent management?
This simply refers to the bench strength of an organisation’s most strategically important roles.
Deloitte found that the biggest business issue faced by senior executives is attracting and retaining talent
What is culture and what are the three layers?
Handy: Culture is how things just get done around here
Schein (2004) suggests that there are three distinct levels of organisational culture:
* Values – promoted with an organisation, to epitomise what the organisation stands for
* Underlying assumptions – held unconsciously by people working within the organisation. These assumptions implicitly guide the behaviour and opinions of employees for the majority of day-to-day operational activities
* Artefacts – visible and tangible evidence of organisational culture. This includes everything from the structure and layout of the workspace, to the written and spoken language within the organisation.
Name some other examples of human factors
- Stress-related illnesses are now the biggest cause of sickness and absence in the workplace
- Increase in presenteeism > chronic lack of engagement, productivity and performance
- As a response to increasing level of stress, organisations have come up with concepts such as ‘personal resilience’
What is the shift in approach to leadership?
Historically: ‘Great Man’ theory: leaders were born and not made (and were mostly male), or at the very least required a privileged education and fast-tracked organisational trajectory > heroic leader
Departure to original theory: Jim Collins: we are moving from level 4 type leadership to level 5 type leadership i.e. ‘good to sustainably great’.
Level 4 leader is the heroic type leader who swoops down to rescue organisations single-handedly and inspire people to spur an organisation on. Level 5 leaders are what we should aspire to have – guide organisations from being good to sustainably great, characterised by both their extreme tenacity and their excessive humility.
What has Bob Tricker said about ethics and what can you say about the corporate reputation rankings?
Bob Tricker: ethics is inherent to the work of boards and that trust in businesses would only be built through boards handling ethical risks
Corporate reputation rankings: Apple and Samsung (2017) – Samsung improved by 44 points through responding to media controversy by significant efforts to increase transparency and fairness. Conversely, Apple dropped 38 places due to a range of incidents such as tax evasion and long-rumoured battery tampering.
Name some pieces from the UK Code and relevant guidance on how psychological aspects of governance are now being considered.
- The word culture is used seven times (one in 2010 code)
- Principle J - cognitive and personal strengths when considering appointments and succession
- Guidance on Board Effectiveness (2018) - FRC has implemented more rigorous and practical advice on culture, behaviours and even dynamics
Outline Cross’ research on governance experts opinions on what factors influence board performance
Dr Jeremy Cross;
- 112 answers and only 9 answers on governance structures
- 48 answers on individual director competency
- 42 on board dynamics
Cross came up with a broader model of corporate governance. What is it called and what are the four layers?
11Cs model:
- Board structures
- Board demographics
- Board attributes
- Board dynamics
How can board dynamics be defined?
- The interactions between board members individually and collectively, and how these influence, and are influenced by stakeholders
- How boards behave, and indeed about how they misbehave, rather than about what tasks they do. It is about how they discuss issues rather than what issues they discuss.
- Opens the black box of the boardroom behaviour to see how things actually play out rather than what is supposed to happen
What C’s make up the board structures quadrant of the 11C’s model?
- Compliance
- Configuration
