Oxfam chair Karen Brown points out some of the dangers of complacency on the board.
At a recent governance training session, Prof Andrew Kakabadse from Henley Business School highlighted research findings about boardroom effectiveness. Just before the catastrophe in Enron-type corporate failures, governance has often been assessed as ‘excellent’. And there is usually significant knowledge at senior level of the issue that brings down the organisation. Complacency in governance is evidently a very dangerous thing.
This set me wondering: what are the characteristics and practice of governance that might enable boards to face up to and avert crises before they bite?
Strong, honest governance is vital – if any of us were in any doubt – built on best governance practices including opportunity and risk assessment, audit and accountability and regular review and renewal of the board, chair and members. Here are some additional thoughts.
In the board environment, there are cultural expectations, even pressures, to display trust, to act supportively and not to break ranks. A thought can go unexpressed. Lone voices can go unheard, be reassured too readily or be suppressed. Taking pride in trust and encouragement can lead to a fall if the space for challenge isn’t also nurtured.
Challenge is more likely to be effective when there is a concerted voice so collective consideration of an issue in a working group or committees is helpful. Individual meetings between the chair and trustees are also an opportunity to encourage frankness.
Diversity at board level is important including a good mix of expert and non-expert insight. A non-expert ignorant of industry norms may be the one person to spot where the organisation’s actions contradict its values. Induction for trustees about their legal and fiduciary duties is common practice. New members of the executive team, however, may miss out and this is an avoidable weakness.
A regular compliance check in relation to the organisation’s governance document, law and codes can usefully show up gaps. One example that may get overlooked is where trustees delegate authority for implementation, you must still ensure that implementation meets policies and codes.
To help see through any executive blind-spots, trustees’ feet need to be sufficiently grounded in reality. One way for trustees to build their knowledge is for each to have to an area of special interest. Seeing the work of the organisation is essential.
Prof Kakabadse’s research shows that the company secretary or clerk to the board can be even more crucial than the chair or chief executive in drawing attention to serious problems.
The reasons might be their tendency to stay in the job longer and the dual vantage point they have, matched with their skillset. The lesson here is to ensure the company secretary is sufficiently included in executive and board leadership, to keep them close to you and to listen to what they have to say.
A crisis in governance, while sickening and difficult to deal with, can have a bracing and ultimately beneficial effect. In my experience it can encourage trustees and executive to become even more vigilant. It may also produce healthy adjustments in the relationship between board and executive.
Recognising there are limitations to a ‘softly, softly’ approach, trustees become more direct and therefore clearer. Crisis management builds teamwork, an essential element of strong board performance. And the post-crisis reflection can usefully draw out the lessons and embed them.
In summary – every board should benefit from a crisis but much better to learn from others and avoid them.
Karen Brown is chair at Oxfam.
