This question is being asked in the context of Boards being able to decide what is best for the business.
The reason for addressing this question is based on behaviour and processes we witness in companies.
A company is faced with an opportunity to expand a product offering into an international market. This will be discussed in a meeting that is likely to include, product development, IT, finance, sales and operations as a minimum. Picture the scenario –
• Product development will have reasons why the product cannot easily be made available in the time frame required
• IT will act as gatekeeper on reporting and information outputs required in the immediate short term
• Finance will have budget concerns
• Sales will need extra resources
• Operations will have logistical concerns
The team will debate and come to the conclusion to meet again.
Over time, depending on the champion these issues will or will not be resolved and business will grow or not.
The champion is the Company Secretary who has determined that, given changes in the UK Corporate Governance Code, that the company is required to have Board Evaluations that are rigorous and transparent and add value to the organisation.
This is posed by the Company Secretary at a board meeting. He is given the mandate to get further information.
The Company Secretary evaluates the market and determines there are a number of suitable solutions and providers. These are presented at a future board meeting.
The Chairman is dubious as he feels that the issues around leadership, challenge and independence are personally uncomfortable.
The Executive Directors feel that this is
• a waste of time and energy
• nothing will change anyway
• what value could possibly be added
• a personal witch hunt
The Senior Independent Director, who is newly appointed, feels that this would be a very good idea, particularly the option that allows for unattributed contributions.
The NED who has been on the board for the last 10 years feels that this exercise may highlight some gaps in his own behaviour of lack of challenge and involvement in risk decision making and company strategy.
The newer NED who is a NED on a number of boards supports the idea and espouses the value of annual reviews, understanding the Code and value of an effective board.
The result of a short discussion, is that whatever needs to be done can be done internally – well at least for the next two years.
This amounts to a non decision.
Our question –
How competent is the Board of making the correct decisions strategically for the business if they cannot make the right decision to evaluate themselves in a rigorous and independent manner?
Where is the ability to challenge?
This is a example of how group think often renders each participant incapable of voicing an opinion and allowing the most neutral and easy decision to carry.
We, as directors, should all be concerned and make it our personal mission to speak up and have our voice heard. This includes Chairmen who do not like to rock the boat either and go with the decision of no change or the most vocal contribution.