The new challenge for Boards - Developing the Organisation’s DNA?
Achieving the true spirit behind governance is more that talking about it. We all know that a strong and knowledgeable board can make a significant difference to the performance of any organisation, but how many boards can truly say that they work hard to ensure that the board comprises of individuals with not only the right abilities but who are passionate about developing the right organisational culture and ethics.
In recent times we have seen many failures, negligence and corruption across a wide category of principals and gatekeepers: directors, chief executives, managers, shareholders, bankers, securities analysts, and many members of various professions and consultants. In 1999, when Ken Lay was the chief executive of Enron, he advocated that he had built a team of principle-centred directors around him with the right mix of skills, experience and expertise. In his mind they were the smartest directors around. There were certainly some prominent business leaders on the board and in management. As a corporation, Enron also developed a code of ethics. Although the governance team and some governance practices looked good on paper, history has shown us that true governance is more deep seated. Like Enron any organisations are still reporting that they have the right people, procedures and processes in place. Then how come an organisation with such strong values and governance practices can fail so spectacularly. I believe that a board can become blinded by its own rhetoric and so called "success". Enron believed that it was above scrutiny and it also believed it could do no wrong and therefore stop looking for any signs that pointed to the opposite point of view. As the words sung by Simon and Garfunkel say "a man sees what he wants to see and disregards the rest". This refl ects the Enron situation. However if we are not careful we are all vulnerable to such behaviour. It's easy to tick boxes and announce that you are sound but unless there is a true driving spirit ensuring the whole of organisation is working from the same ethical basis an organisation can easily and, in the case of Enron, quickly come undone.
While knowledge, skill sets, expertise and experience are important, more critical is having individuals at the helm who display:
Strength of character
You want people who start with what is right, who are not working to hidden agendas and who strive to make judgement about what is best for the organisation.
An inquiring and independent mind
You want people who seek out facts, are prepared to ask questions and prepared to challenge or be challenged in regard to matters raised.
You want people who think about the business of the organisation and see the practical application of any decision made.
Individuals who are thoughtful yet rigorous in what they say and what they decide is the right thing to do.
Why - Because governance is about making sure the right questions get asked, testing assumptions and propositions and ensuring the right checks and balances are in place – it's that simple.
However, to strengthen governance practices and obligations we need individuals who do even more, who will work collectively to establish and exhibit the organisation's DNA – the unique gene that runs throughout the organisation. Therefore for a board to fully and properly exercise its power
it needs to defi ne and create an ethical culture; one that it expects the organisation to embrace – starting with the board and including all aspects of the organisation. Such a philosophy must be embraced and articulated by all if it is to become the organisation's DNA – and it must glue all aspects of the
business together from top to bottom and bottom to top.
Smart boards in the 21st Century will have already added the organisation's DNA to their agenda – has yours?
12 March 2010