Corporate Governance: Lessons from Personal Experience - Part 2

On Board Composition and BoD “Camaraderie”:

Board composition, the interplay and mutual respect of directors qualifications is just as important as the individual qualities of those taking the directorship position. Otherwise, one is destined to fall into numerous traps:?

1.?????????Spend precious time debating nonsensical individual experiences that are not congruent with the definition of singular strategy of an organisation

2.?????????Exhibiting personal vanity vs. respectfully defining common criteria and merits on which the future of the organisation is dependent and providing regular platform to assess them and develop a coherent strategy to execute on them.

3.?????????Inability to delegate matters onto professional management and micro-manage instead - spending precious time to address operational issues that management cannot carry on its own - spending less time on strategy and challenging assumptions about the future of the organisation.

4.?????????Becoming a discussion club on all matters without priority as to how they impact the company: reviewing tons of poorly framed presentations that don’t provide summation of companies matters, but rather push all original data to directors for themselves to digest, analyse and interpret.

First things first:?

Board composition is important. Hiring mature personalities that understand the task not as a podium of personal excellence - but a platform to advise patiently, passionately, and professionally. Develop value not for oneself but for the organisation first and foremost. Highlight even the slightest risk of conflict of interest - derailing pure motivational system that drives common value creation.?

A key lesson I learned the hard way as investor and representative as well as independent: BoD has to become a conductive fabric – passing not just energy of personal experience – but also synergies of the network a professional brings: be that knowledge of partners, collaboration efforts with other businesses that would make the organisation stronger, help it learn and evolve.

One of the experiences I had while being director at a global minerals / commodities player was to address as to how organisation sees and addresses climate risks, no matter that this might work against immediate “value extraction” motivations. Voicing these first principles in unequivocal and direct manner changed the company - and allowed it to address risks that soon followed. Failing to recognise similar challenges render company blind in context of a rapidly changing world.

Board matters are deliberated by well-structured committees, them operating on clear-cut rules of procedure:?

(a) audit committee, presided by an inquisitive independent director with direct control over company internal audit and special rights to organise occasional extraordinary audits manned by external professionals: a different setup is prone to become corrupted, especially during phases of high-growth, or post-reorganisation when rules and views on them are subject to evolution.

(b) strategy committee, sometimes separated into a special unit - shall constantly check upon the defined criteria of value creation - and assessment as to how it is being challenged by the external factors and changing environment. Without such checks talks about growth are just talks.

(c) Remco and Governance, covering management KPIs, HR policies, long-term motivation schemes and hiring of key personnel - this committee governs often lost but crucial element of investment in people as their qualities, qualifications and interplay guarantees the growth that no artificial tool can provide. It also checks as to how the motivational system of the whole organisation achieves the indicated objectives set forward by strategy - and if it withstands the risks of creating a rather adverse culture to what the organisation needs.?

One can recognise a few of their organisation’s fallacies in a book written by OSS (predecessor of CIA) on sabotage in 1944?https://www.gutenberg.org/cache/epub/26184/pg26184-images.html??:?

(a) Organizations and Conferences?

(1) Insist on doing everything through “channels.” Never permit short-cuts to be taken in order to expedite decisions.

(2) Make “speeches.” Talk as frequently as possible and at great length. Illustrate your “points” by long anecdotes and accounts of personal experiences. Never hesitate to make a few appropriate “patriotic” comments.

(3) When possible, refer all matters to committees, for “further study and consideration.” Attempt to make the committees as large as possible—never less than five.

(4) Bring up irrelevant issues as frequently as possible.

(5) Haggle over precise wordings of communications, minutes, resolutions.

(6) Refer back to matters decided upon at the last meeting and attempt to re-open the question of the advisability of that decision.

(7) Advocate “caution.” Be “reasonable” and urge your fellow-conferees to be “reasonable” and avoid haste which might result in embarrassments or difficulties later on.

(8) Be worried about the propriety of any decision—raise the question of whether such action as is contemplated lies within the jurisdiction of the group or whether it might conflict with the policy of some higher echelon.

(b) Managers and Supervisors

(1) Demand written orders.

(2) “Misunderstand” orders. Ask endless questions or engage in long correspondence about such orders. Quibble over them when you can.

(3) Do everything possible to delay the delivery of orders. Even though parts of an order may be ready beforehand, don’t deliver it until it is completely ready.

(6) In making work assignments, always sign out the unimportant jobs first. See that the important jobs are assigned to inefficient workers of poor machines.

(9) When training new workers, give incomplete or misleading instructions.

(10) To lower morale and with it, production, be pleasant to inefficient workers; give them undeserved promotions. Discriminate against efficient workers; complain unjustly about their work.

(11) Hold conferences when there is more critical work to be done.

(12) Multiply paper work in plausible ways.