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Corporate governance

The Board’s Role In Corporate Strategy

Earlier this year I wrote Corporate Governance Trends 2009. I thought it appropriate to expand on some of the trends discussed. For this post I will review Corporate Strategy and the importance of the Board in not just reviewing the strategy but becoming active participants in its formulation. At its essence Corporate Strategy is rigorously defining “where we are, where are going and how we will get there”.

In the past, the CEO and the strategy team would develop the corporate strategy, send it to the Board members and meet at an offsite location. The C-Suite would present the plan and the Board would usually accept it. Well the world has changed dramatically and has become far more complex. This static strategy process does not work in this new corporate world.

A McKinsey survey indicates that Boards want to spend more time on Corporate Strategy matters–

What is causing this increased attention?

According to Frost and Sullivan—

Factors in current business environment shaping Corporate Strategy and Corporate Development plans in 2009

Respondents identified the following as the top five environmental factors:

  1. Global economic downturn (51%)
  2. Increasing need for product/service innovation (32%)
  3. Intensifying competition (26%)
  4. Emerging global markets (22%)
  5. Corporate restructuring (21%)

So what should be the roles the Board should play in Corporate Strategy?

An excellent report “Engaging the Board in Corporate Strategy” from Oliver Wyman – Delta Organization & Leadership provides an overview —

The key role and the one missing most in the past is Strategic Thinking.

Boards cannot leave this vital role to management. Their independent insights and viewpoints ensure that development of the strategy will not become a product of group think. Boards in companies such as UBS and United Technologies are already engaged in Corporate Strategy development.

More on this in a future post.

Using social media to promote your conference

You may remember that I posted a while back about the Ethical Corporation’s Corporate Governance conference, which is next week (16-17 June, in London – if you haven’t booked your tickets, it’s not too late…)

Apart from encouraging you to go, because I do think that this will be an interesting and very timely conference, I thought I’d point out how they’re using social media to promote the conference.

Ethical Corporation have set up a LinkedIn group where people can raise topics they want to discuss, and get to know each other a little before the conference begins. This has been up for a while now, so there’s been plenty of time to get involved. And – obviously a best practice here – the group is linked to from the main Ethical Corporation site, which both authenticates and promotes the group.

ethical-corp-tweetEthical Corporation have a well established Twitter account, with Nick Johnson (head of conferences) tweeting. The account is independent of this conference, so Nick already has a following of over 1000 people (including me) to communicate with.

One of the many things he’s using this account for is to advertise the conference, and to offer a discount to those people following him on Twitter. This is a great concept, though not unique to @ethical_corp, as it targets exactly those people likely to be interested in attending the conference – his followers. @communicatemag used Twitter last week to promote their conference by retweeting to win tickets, and since theirs was a social media conference, this was an ideal mechanism for promotion.

Based on observing Nick’s tweets, he’ll be setting up a hashtag (#) for the Corporate Governance summit, as he did for the Responsible Business Summit (#rbs09) – this means that all the tweets about the Corporate Governance summit can be collated and followed by Twitter users. This way interested people can find out what people make of the conference – the backchannel – whether they are attending or not. And @ethical_corp live-tweeted the last conference themselves, so I’m sure they’ll be doing that too. Again, there’s a link to the Twitter account from the main site and back again – authenticating the Twitter account.

Ethical Corporation also have a Facebook page, which they’ve used in the past to promote their conferences.

Clearly they will have used offline promotion techniques too, but these seem like good ways of finding those of us who are online and interested in corporate governance. This blog post, too, is discussing their conference … it all helps.

Anything else? What other social media techniques have you seen companies use to promote their events?

Tone At The Top Drives Innovation Governance

tone-from-the-topIn a previous post about tone at the top I discussed this subject… The post appeared when the economic crisis of 2008/2009 was about to start. Now tone at the top and innovation governance are more important than ever.

Simply put, ‘tone at the top’ is the sum of the Board’s and the C-Level manager’s values, actions and communications. How these responsibilities are executed will influence the success of the enterprise through the near future and will set the base for the longer term. These responsibilities include:

  • Strategy
  • Culture
  • Governance
  • Financial
  • Innovation

While most Boards and C-level managers know in at least some manner the importance of the first four responsibilities, too many are unaware of their responsibilities for innovation governance. As an HBR Network Blog indicates,

It’s time for leadership to step up. Match innovation rhetoric with personal involvement and investment. Move beyond narrow solutions to more systemic approaches. Raise aspirations from being the most innovative company among a tightly defined peer group to approaching innovation like Amazon, Pixar, 3M, or IBM. Actions that feel like luxuries today will be imperatives tomorrow, so get started.

Some companies heed this advice. For example here is a short sampling of what “the top” says about innovation governance:

Amy Radin, Chief Innovation officer at E*Trade Financial

Within this ever-changing landscape, strong leadership and a well-defined culture will determine a business’ success as a continuous innovator. But innovation has to be more than simply a groundbreaking idea – it has to be about viable new business concepts that meet real consumer needs better than what’s already in the marketplace.

Darlene Solomon, Agilent Senior VP and Chief Technology Officer

There’s a very strong innovation culture throughout the company, and a culture of teamwork. Agilent really encourages that. Innovation is not just R&D in Agilent. We’ve really tried to make clear that it’s about everybody questioning the status quo and looking to do something better than what’s been done before.

Fabrice Brégier, CEO Airbus

Innovation is at the heart of Airbus, it is part of our DNA and a fundamental ingredient in ensuring our long term growth and profitability. “This new network will instil and spread a more open innovation mindset across Airbus also taking on board the numerous ideas generated outside. I am convinced that this will enable us to respond to and anticipate future trends quicker for the overall benefit of our customers

While these exhibit a positive tone at the top, too many Boards and C-levels are risk averse and many lack a good or even a basic understanding of the technologies that drive innovation. More about this in a future post…

Without Warning: on leadership, whistleblowers, corporate culture and silence

Without Warning

Do you have an uncomfortable suspicion that your business has a problem lurking in its depths? Is there an issue that you keep catching a glimpse of out of the corner of your eye, but can’t quite get hold of?

This is what Rodney N Johnson’s book, ‘Without Warning’ is about, and he calls these ‘silent problems’, as opposed to simple, complex or wicked problems.

  • A simple problem is one in which everyone agrees on the problem and on the solution. If not solved correctly, this could become a complex problem.
  • A complex problem: one in which everyone agrees on the problem, but disagrees on the solution.
  • A wicked problem: a problem (or nest of problems), in which people disagree over what the problem is, so a solution can’t be identified, and without agreement on the problem or a defined solution, you won’t know when the problem has been solved. Different groups of stakeholders understand the problem differently; any proposed solutions can’t be tested or evaluated other than subjectively.

Nasty.

But a silent problem is different, and Rodney Johnson (RJ) defines it like this:

A problem that is being avoided, neglected, or going unnoticed… A problem that is intentionally being silenced.

This is perhaps the worst kind of problem of all. At least a wicked problem can be acknowledged and struggled with. But one that you’re not aware of? How are you supposed to deal with that?

Whose problem is it?

One of the many silent problems RJ uses as case-studies is the sub-prime financial fallout which we’re all too familiar with now – warnings were given, but disregarded.

Question: if someone able to impose a solution had been willing to say ‘here’s a problem’, would it then have become a complex or wicked problem? That is, is it a silent problem only as long as no-one with enough authority to deal with it has spotted it or taken responsibility for it?

If there were warnings, then someone was aware of the problem, so it wasn’t silent for them – but presumably they didn’t have the clout to tackle the issue. A silent problem, then, is a leadership issue: it is a problem that is being ignored by management.

You’re the manager: how do you know if there is a silent problem?

The identification of silent problems is a key leadership skill: a good leader will be constantly looking out for them. RJ offers 7 symptoms and 5 areas where the problems are likely to be lurking. (No, I’m not going to give them away – you’ll need to get hold of the book!)

Without giving away the list, I can tell you that some of the symptoms could be easily missed in the hurry and scurry of actually doing business. This is why a silent problem is a leadership problem: someone needs to be working at enough of a strategic level that they are working ‘on’ the business not ‘in’ the business – that way they have a chance of spotting the problem.

I’d have liked a bit more on how to find and identify the problems, as this seems to me to be the key to silent problems. And some of the symptom-spotting is going to come down to gut feel that something is wrong – but how does one develop that, other than by experience? (Luckily, RJ provides a few tips on his blog for how C-level executives can use Management by Walking Around to help with this).

The book offers a structure for resolving these problems, and this, together with the case studies, is very thought-provoking (as well as entertaining), but it seems to me that the most important element here is identification of the problem. And that, of course, is the nub: the very thing that makes these silent…

I found two of the types of silent problems he identifies most interesting, one because the problem becomes part of the corporate culture, and the other because the problem is deliberately contained and ignored.

The latter sounds distinctly risky, even potentially verging on the unethical, and the kind of issue likely to cause major problems when it is eventually unearthed, requiring full-on crisis communications and significant business action. The former, in which the problem becomes encapsulated, pearl-like, by layers of corporate culture, I find intriguing. At what point does the problem become embedded in the culture? And it requires a particularly objective viewpoint to be able to see part of the corporate culture as a problem…

Don’t kill the messenger

In the Corporate Eye list of best practices, whistle-blowing is usually related to an ethics issue, but the principles are relevant here too. RJ says “we must encourage and empower those around us who might unearth and identify the silent problems”. These, he points out, could be employees or associates, but could also be clients or customers. And perhaps those outside the organisation – or new hires – are best placed to spot problems, because of the need to have an objective view of the situation.

So: what are you doing today to check for problems – or how are you enabling people to raise the alarm?

RJ seems almost to anthropomorphise problems, referring to them as living, growing, breathing and consuming resources (the latter is almost certainly true!), undisciplined, unruly and disobedient. This, together with the many fascinating examples, makes for a lively read.

It is all too easy to skim this slim volume the first time, but it definitely repays a second reading.

Why Sustainable Businesses Need To Fight Corruption

The crowning of Lewis Hamilton as Formula One’s Youngest World Champion has some parallels for businesses keen to show they’re not corrupt.

I cannot have been the only one thrilled by excitement of last weekend’s Brazilian Grand Prix and Lewis Hamilton’s crowning as the youngest ever Formula One World Champion.

However, you must feel sorry for Filipe Massa. When he crossed the finish line HE was World Champion. Seconds later, Hamilton passed a suddenly slower Timo Glock, wresting the crown away from Massa by one point.

There have been the inevitable accusations that Glock was bribed to let Hamilton through. This has been a season of dubious decisions and, whether the allegation is true or not, it’s difficult not to wonder if there is some truth in at least some of the whispers.

Transparency International and Dow Jones Unite Against Corruption

Corruption is as much an issue for ordinary businesses as it is for Formula One. While the CSR facet of sustainability is about restoring corporate trust, corruption is all the betrayal of all trust for personal gain.

Thankfully there has been an organisation fighting against corporate corruption for over fifteen years: Transparency International (TI).

TI doesn’t conduct investigations into individual cases, although it will lend assistance in special circumstances. It’s focus is upon advocating transparency in the business arena as the means to stamp out corrupt practices once and for all.

Now it has entered into a two year partnership with Dow Jones, publisher of the Dow Jones Sustainability Index. The deal will considerably strengthen the efforts of both organisations to promote transparency and eradicate corruption among the business community.

As part of the deal, Dow Jones will give TI free access to two of its products. The first is Factiva, a news service which amalgamates various sources including the Financial Times, the Wall Street Journal, Associated Press, Dun & Bradstreet and Reuters.

The second is their Watchlist product. This tracks Politically Exposed Persons (PEPs); people from all over the world who could use their current or recent position in public office for private gain. There are nearly half a million PEPs worldwide: many have the same opportunity for corruption, though only a few take it.

World Map
Corruption Perception Index 2008

Bribery and Corruption In Your Western Country

But what, you may be asking yourself, has all this to do with enlightened Western democracies? Surely there’s no corruption in the UK, EU or USA?

Just over a month ago, the UK was described by TI as “a place where corrupt business is done”. It went on to call upon the Government to “stop procrastinating and address the fundamental weaknesses” in its approach to bribery and corruption.

This criticism was prompted by a stinging assessment of the UK’s anti-corruption framework by the Organisation for Economic Co-operation and Development (OECD).

This included four sweeping recommendations and the requirement that the country produce quarterly written reports to the OECD’s Working Group on Bribery.

However, according to TI’s 2008 Corruption Perception Index, the UK is seen as the sixteenth least corrupt country, with the USA ranked eighteenth.

If leading countries such as these are finding it difficult to meet their international obligations then you have to wonder about the businesses they are charged with regulating.

The Suspicion of Corruption

There are persistent rumours in Formula One about backroom deals and bias towards certain teams and drivers. No matter the veracity of these rumours, it’s the perception of a fixed championship which will stick more than any denial.

So it is with business. One or two questionable decisions (such as the UK-Saudi Al Yamamah Defence Programme) can lead to a wholesale collapse in trust and leave many companies unfairly tarnished with the same brush.

It therefore seems sensible to recommend that all businesses should include in their sustainability reporting a statement on transparency, preferably from the Global Reporting Initiative or another internationally accepted standard.

After all, everyone knows that if you’re not transparent you must be hiding something. Or at least, that’s what we all suspect …

Picture Credit: “World Map Index of perception of corruption” from Wikimedia Commons under GNU Free Documentation License.

Visualization and Corporate Governance

I wrote a post about Business Visualization regarding how companies are using images, graphics and unique visuals to convey complex issues and to solve problems. Since I also write about Corporate Governance, it seems obvious to combine the two subjects.

I found some companies that are using creative visuals to explain their Corporate Governance systems. Perhaps the most elaborate is used by the Sharp Corporation, a technology and electronics company based in Japan. Sharp uses this visual to explain their Governance system (see right).

You can access the full visual and a brief overview on Sharp’s site. Even with this smaller version, you can observe that Sharp does a remarkable job in describing the relationships among the Governance components. Note also, that they indicate the date the chart was updated. 

Another noteworthy feature of Sharp’s website is the About Us section. Seldom have I seen such a comprehensive display of Corporate Governance, Investor Relations and Social responsibility all on one page.

TD Bank Financial Group takes an acknowledged simpler approach —

This visual is easy to grasp and TD also provides a brief narrative summary to accompany the visual.

TD also does a great job explaining their business units. The Corporate Profile section provides visitors and investors with a clear explanation of what the company does. This is another example of a company that enhances communications with their stakeholders.

Grupo Nueva a private holding company in Chile, uses a conceptual approach to their Governance visual —

This is a creative method and is effective. Grupo Nueva simply and effectively explains the components and their relationships.

I also like the minimalist “look and feel” of their website design. It enhances the communication ability of the site.

Visuals done well help to communicate and clarify processes, ideas and more. They are very effective in Corporate Governance.