Download
1 / 44
440 likes | 446 Views
This insightful article by Dr. Nosike Agokei discusses governance challenges within corporate boards, emphasizing the importance of balancing diverse interests to make prudent decisions. It explores tactics such as round-robin discussions, pre-board meetings, and board retreats to foster effective decision-making and promote a cohesive corporate culture.
E N D
Balancing Interests In The Board Room & The Growth Of Corporate Culture By Dr. NosikeAgokei
Introduction • Balancing interests in the Board Room illustrates common governance challenges, especially with regards to Board and Board meetings’ administration. • Often times, Board members take their "representative" status seriously and therefore a narrower view of issues before the board. • Before long, several factions will emerge on the board, complicating the board’s ability to make prudent decisions on the entire organization's behalf and in the interest of its various stakeholders.
Introduction • It is critical for the board to be composed of a broad cross-section of members representing diversity in practice area and setting, geography, race/ethnicity, gender and personal experience, etc. • Designated seats may be appropriate in some situations. In other situations, they can create more problems than they solve. • It is necessary to ensure that new board members in these seats understand their fiduciary responsibility
Introduction • Each director must judge what is in the company's best interest, irrespective of the other entities with which the director is affiliated or sympathetic, or to which the director owes his board appointment. • The law conceives of a board of directors as an entity: each member shares the same rights and the same duties and is accountable to the board. • Even if a director is appointed by a particular group, each director shares the same fiduciary duty to act in the best interest of the entire organization.
Introduction • There are situations in which a board of directors may be explicitly structured to provide for representation of certain interests. • Directors may be confused about how to address situations in which the interests of their constituency and the interests of the company are actually or potentially in conflict. • In bringing to the attention of the board the particular sensitivities and concerns of their constituency, directors may aid the whole board in fulfilling its duty of care, and add wisdom to the whole board's deliberations.
Introduction • It should be noted that the director's duty of loyalty lies with the interests of the company and not to any constituent group; although some may argue that there is an expectation gap here with regards to what happens in practice. • It is necessary for boards to be populated with people who are likely to have diverse opinions and that board processes actively promote the expression of diverse opinions.
Strategies for balancing interests in the Board Room • Traditionally voting on issues is used in reaching decisions in the Board room where it is not possible to reaching a consensus. • However, voting may not balance conflicting and key interests, failure of which may impact negatively on proceedings and, in fact, threaten the smooth running of the business. • Therefore, it is necessary to balance interests of the various stakeholders in the overall interests of the company. • The major objective is to avoid decision failure, ensure effective outcome in boardroom negotiations and achieve the goals and objectives of the organization.
Strategies for balancing interests in the Board Room • ‘Round Robin’ • When the board is grappling with a difficult decision, some Chairmen go beyond simply asking for a vote. • Prior to the vote, the Chairman conducts a round robin, asking each member in turn to take a few minutes to express his or her opinion on the matter. • This activity has two major benefits: the timeframe gives each person equal opportunity; and the format ensures each person has equal responsibility to provide an opinion. • In other words, it forecloses on the opportunity for a few to dominate, and it encourages everyone to state their views openly and bear some responsibility for the final decision.
Strategies for balancing interests in the Board Room • Pre-Board Meeting • An instrument for dealing with critical issues, resolving and balancing interests. • Board Dinners • Relaxed atmosphere; usually an avenue for ventilating opinions and resolving a few issues or getting a feel of what may come • Board evaluation & Appraisal • Committee System • Committee meets before the Board meeting
Strategies for balancing interests in the Board Room • Chairman’s Consultations • A key strategy for balancing interests in the Board room • Short Breaks • To allow for management of tempers and tension • Board Retreats • Board retreats are a powerful way to help all board members think beyond their own affiliations and experiences and focus on the significant issues facing the association. • Retreat participants collectively decide where the organization should focus its efforts and resources, and where it will not. • Coming out of a retreat with a shared sense of purpose provides a framework for all subsequent discussions and decision-making, and helps every board member to take a more expansive view.
Critical Issues to articulate • The role of independent directors, if any, in balancing interests of various groups of stakeholders, including management of the dilemma of independent directors nominated by substantial shareholders. • The influence or intervention of regulators • The role and influence of institutional investors • The influence of watchdog groups • The role of the media in influencing board decisions.
Critical Issues to articulate • Constraints placed by shareholders agreement • The extent of management’s influence in the decision making process. • The role of professional advisers and experts
Corporate Governance & Directors’ Duties • The essence of Corporate Governance is balancing of interests in an ethical and transparent manner. • Corporate Governance affects many different practices since there are managers and directors involved who have to make decisions while balancing interests in the board room • The Board should find a balance among the interests of shareholders, creditors, employees, and other stakeholders, including the broader society. • Who gets to decide – for example, the chairman or the dominant shareholders or employees? The issue of who will decide is a common one and can be challenging.
Corporate Governance & Directors’ Duties • It is important for the directors to know their fiduciary duties in a variety of contexts. • The board of directors should achieve its objectives while protecting the integrity of the business decision reached. • Companies realize the economic value of their reputation and the fact that misconduct and unethical dealings can negatively affect the business. • In balancing interests, they should have regard to corporate governance principles • Directors must be sensitive about conflicts of interest that have to be balanced by the Board.
Corporate Culture • Corporate culture represents the collective values, beliefs and principles of organizational members and is a product of such factors as history, product, market, technology, and strategy, type of employees, management style, etc. • Culture includes the organization's vision, values, norms, systems, symbols, language, assumptions, beliefs, and habits. • Thus, corporate culture affects the way people and groups interact with each other, with clients, and with stakeholders. • In addition, corporate culture may affect how much employees identify with an organization. • Where culture is strong, people do things because they believe it is the right thing to do.
Board Culture - What is it? • “Board culture” covers a number of aspects. • It includes: • the expectations board members have of their board colleagues and of themselves; • the behaviours board members display conducting their duties before, during and after board meetings; • the ways in which the meetings are conducted; • the values on which the board and the organisation operate; • the rules of engagement governing the way in which the board and executives interface.
Board Culture • Board culture can be driven by many different factors, such as the backgrounds and experience of the board members. • Another driver can be the structure of the organisation. • Where board members are appointed to represent particular interest groups, those appointees need to balance the interests of their appointors with the overall best interests of the organisation. • This balancing act is often the source of tensions on the board.
Board Culture • A board will always have a culture. • If there is not an express agreement on how board members are to work together, there will be some kind of default culture operating. • Some boards have an effective and cohesive board dynamic which grows naturally from the individuals around the board table. • This may occur for a number of reasons such as similar backgrounds, the influence of positive role models on the board or experience or training in ‘healthy’ board behaviours.
Board Culture • Openness and respect embedded in the board’s culture promotes effective decision-making and strategy development, and continues to contribute to an organisation’s success. • Default culture may not be so healthy. It can be based on self-protection and survival rather than the good of the organisation. • In this regard, the board’s effectiveness can simply be compromised by inadequate processes which waste board time and contribute to poor decision-making.
What is a positive or healthy culture? • One where the group dynamic facilitates effective decision-making processes. • This in general means a culture which maintains an environment of respect, cohesion and openness, and where hidden agendas, conflicting loyalties or personal issues are not being played out. • Importantly, a healthy culture is also consistent with the organisation’s values and promotes the achievement of its mission. • A positive culture enables the board to role-model positive behaviours to the rest of the organisation.
Developing & Improving Board Culture • Unhealthy board behaviours can derail a board. Look at the scenario below • While a board is considering a crucial topic, the debate is dominated by one or two voices; other board members struggle to get their contributions put forward, let alone considered. One board member criticises another’s understanding of the topic; the debate drags on consuming time slated for discussion of another pressing issue; the meeting concludes without either matter being satisfactorily resolved. • This indicates that there are no agreed behaviours upon which board members can fall back to help them get through challenging issues – absence of a board culture.
Developing & Improving Board Culture • The ways in which board members behave, individually and collectively, inevitably impact on the overall performance of the board, and consequently the organisation. These behaviours form the board’s culture. • A positive culture enables the board to perform better. The atmosphere at work – which we define as “culture” – is 70% driven by leadership and this culture impacts significantly on the performance of the organisation.
Developing & Improving Board Culture • Where the culture is not healthy, it is beneficial for the board to spend time on the issue reflecting on its ways of doing things. • For a board that is not used to looking at itself, the process of discussing, agreeing and codifying culture allows the members to consider the collective and individual ways of doing things – how it goes when they are working well together, what is happening when they are not working well. • The process also allows the board to ensure that the way in which it works, and the principles which guide its execution of its roles, are consistent with the values and the mission of the organisation it is governing.
Developing & Improving Board Culture • A system by which incoming board members can be asked to sign up to that way of working • A readily available, and implicitly acceptable, reference point for a board member to call what they might believe to be inappropriate behaviour: Writing and formally adopting an agreed culture is another powerful tool. A written protocol can provide: • A record of the board’s agreement about behaviours, which carries with it the consent of all board members to behave in those ways • A simple way to explain to prospective candidates for board appointment, or new appointees, how the board works; and a method “Chair, we have agreed that this board works best when all members have an opportunity to contribute to the discussion. It seems like this discussion is being dominated by a couple of voices.”
Developing & Improving Board Culture • A useful tool for the board to review periodically its performance, by asking: How well have we acted in accordance with our agreed protocol, and lived up to the standards we set ourselves? • And considering what if any changes could be made in the light of its experience during the period under review.
Developing & Improving Board Culture • One way to implement this process of improving and developing board culture is through strong leadership from the chair, or a senior board member. • Board members are empowered to highlight behaviours that are contrary to their protocol. • For example, if the protocol provides that: “Once decisions have been made, we do not engage subsequently in re-negotiation around those decisions, but focus on getting them implemented, and support them strenuously.
Developing & Improving Board Culture • Second, the board becomes aware of issues such as: • that the times spent on agenda items were not always proportionate to their importance; • the frequent lack of clearly expressed outcomes on agenda items following discussions; • and the difficulties experienced when issues were discussed at large without a proposal to debate.
Developing & Improving Board Culture • The board could hold a facilitated session to reflect on questions about how the board worked best together, and what the conditions were when things weren’t going so smoothly. As a result, the board could develop a protocol called “The way we do things around here” which sets out the things the board members expect of each other and themselves. • It also deals with the positive behaviours that assist the board’s effectiveness before, during and after the meeting.
Culture is a Business Issue & Should be Promoted • Culture is dynamic, ever-changing, and evolves with time and new experiences. • Many factors help drive and define the culture, and these include leadership styles, policies and procedures, titles, hierarchy, as well as the overall demographics. • Culture exists in every organization, whether it is by design or by default. • An organization’s culture may be one of its strongest assets or it can be its biggest liability. The reason culture is so important is that it has significant influence on the organization’s goals. • Culture can drive or impede the success of an organization.
Culture is a Business Issue & Should be Promoted • For many companies, the elements of their culture originated with the founder or other leaders who were instrumental in the early stages of the organization. • Sometimes that culture developed through default, while in other companies there was intentional execution to drive and promote the culture. • As new leaders come into an organization they often are encouraged to adopt and follow existing practices.
Culture is a Business Issue & Should be Promoted • The organization’s culture is the foundation that can promote growth and hinder complacency. • Company culture is unique and provides arguably the most sustainable competitive advantage an organization can have in the marketplace for distinguishing itself against the competition. • Culture, like the brand, becomes the fabric of an organization. • The stronger the culture and the brand, the more difficult it is for competitors to pose a threat to the organization.
Culture is a Business Issue & Should be Promoted • If you want to create a successful and enduring company then the corporate culture has to be part of the focus. • If it is not, then it will evolve on its own, and that may not always lead to a successful outcome. • If an organization finds that it has not proactively established its culture or that the culture is not aligned with the organization’s values, there is hope, as the discovery draws attention to the absence of an explicit culture. • Culture is deeply rooted and doesn’t change easily, but leaders can manage and influence it.
Culture is a Business Issue & Should be Promoted • If a company wants to focus on creating a strong culture within its organization, the best place to start that journey is with the leadership. • Leaders should personally examine how they can exemplify the importance of building a strong culture that supports the business’s initiatives and personally commit to promoting a workplace that supports growth and development.
Benefits of a Strong Culture • The benefits of a strong culture can be endless. A strong and thriving culture will: • establish a foundation for success • Attract and retain top talent for the organization • Promote the brand of an organization • Increase employee engagement • Drive productivity • Distinguish a company from competitors
Growing Corporate Culture • As I stated earlier, culture starts with the organization’s leaders. • Employees model the behaviors of leaders. • It is important to keep in mind that leadership and management are two different things: • leadership has to do with the character and behavior of the individual and how they influence the behavior of others • Management has more to do with positional authority and job responsibilities. • The way people and teams are managed says a lot about the organization. • When focusing on culture, focus on the company’s leaders as well as managers in order to have the most influence.
Growing Corporate Culture • Companies with successful cultures are clear about their purpose, what they stand for, what they believe in, whom their customers are and whom they want to become. • Additionally, it is critical that the products, policies and behaviors of the organization align with the stated values. • A company’s values should do more than just live inside a PowerPoint. • They should be brought to life in the people, events, products, space and the stories that are told.
Growing Corporate Culture • Alignment between business goals and individual objectives is critical to success. • Business goals should be clearly communicated at every level within the organization. • Regardless of the position, all employees should understand how their own individual goals and expectations align with the company’s strategic goals. • It is important that employees can articulate what the organization is trying to achieve and how they fit into that picture.
Growing Corporate Culture • Heroes and superstars should be encouraged and celebrated as part of the process. • Celebrating and rewarding achievement will drive others to success. • Recognizing heroes isn’t just about having an employee of the month program; it is about making a practice of finding what people are doing right and celebrating those who live out the company’s values even when no one is looking.
Growing Corporate Culture • Focus on learning and development within all levels of the organization. • Learning should be a continuous process for each individual and should demonstrate value over time. • Organizations that foster a learning environment and train their people to properly address those challenges develop a competitive advantage. • Creating a culture where learning is valued can be seen as a strategic advantage for the organization.
Growing Corporate Culture • Incentivize culture alignment. For example, if customer service is a core value, implement mechanisms to measure such service and reward employees for exceptional results. • Likewise, if innovation and creativity are a priority, reward employee contributions to development of new products, improvement to existing processes or other key areas of focus for the organization. • Incentive compensation should drive employee behavior and results that align with the company’s core values and culture. If it doesn’t then the organization is wasting its money.
Growing Corporate Culture • Strive to promote trust by operating with honesty and transparency. • A transparent organization is one where the company takes proactive measures to ensure that employees know what is going on and it welcomes employee feedback. • It does not require that the company act on every recommendation but rather that the company is open to dialogue. • ‘Town hall’ meetings, company newsletters and informal chats are some of the simple ways that small companies can promote transparency and trust.
Growing Corporate Culture • Organizations may derive the following benefits from developing strong and productive cultures: • Better aligning the company towards achieving its vision, mission, and goals • High employee motivation and loyalty • increased team cohesiveness among the company's various departments and divisions • Promoting consistency and encouraging coordination and control within the company • Shaping employee behavior at work, enabling the organization to be more efficient
Conclusion • The major objectives of the Board is to maximise the wealth of the owners of the business and advance the interests of all stakeholders. • In order to achieve these objectives, the Board must make every effort to balance the various interests that exist. • Balancing interests in the board room is very critical to the success of an organisation, as the process must be aligned with the organisation’s goals, values, culture, mission and vision. • The corporate and board cultures must be positive and healthy in order to support the process.
Conclusion balancing interests. • If the Board is not focused, experienced and knowledgeable, achieving the goals, the vision and the mission of the organisation would be a huge challenge • It is therefore, necessary to develop the art of balancing interests in the board room, in order to drive result-oriented decision-making in the overall interest of the organisation and its stakeholders.
