More positive approaches to corporate governance could add greater value

16 March 2015

Too many boards focus upon compliance rather than business development

Many boards could contribute much more to business growth and development if they adopted a different approach to corporate governance according to Prof. Colin Coulson-Thomas, CMI ambassador and author of Developing Directors. Speaking in Singapore he told Asian directors, board chairs and company secretaries that his recent investigations have identified opportunities for boards to add greater value by shifting the focus of their attention. He finds: “In seeking to avoid interference in operational matters many directors are overlooking areas that are properly the responsibility of the board.”

According to Prof. Coulson-Thomas: “The approaches to corporate governance adopted by some companies are excessively negative and are inhibiting innovation, entrepreneurship and responsible risk taking. Directors need to understand that competitive success can require both prudence and creativity, and practical and cost-effective approaches are available that can reconcile the two. For example, building checks into performance support tools can make it easy for people to comply and difficult for them to act in ways that cause quality, commercial, regulatory and other problems while exploring different solutions, bespoking responses and developing new options. ”

Coulson-Thomas' evidence of what more effective directors do differently reveals how much more value boards could contribute if they shifted their questioning to areas such as ensuring executives focus on better supporting those work-groups that contribute the most to key corporate objectives: “Handing demanding objectives to a CEO and senior executive team and hoping for the best is no longer enough when one can challenge the expensive, time-consuming and disruptive approaches being adopted when quicker and more cost-effective options exist. Boards need to be aware of approaches that avoid traditional trade-offs and allow the simultaneous achievement of multiple objectives. They should champion quicker routes to high performance organisations.”

The Professor mourned the lack of innovation and diversity in board practices: “There are so many options for operating boards today and a variety of different ways in which they can discharge their responsibilities. The prevalence of corporate governance codes, a focus upon compliance and the practice of resorting to advisers and consultants who have climbed aboard the corporate governance bandwagon appears to have produced a dull uniformity of practice. Too many directors are doing just enough to comply rather than thinking through what form of board structure, composition and practice would be best suited for the situation a particular company is in, its stage of development, its priorities, the nature and geographic scope of its operations and the challenges that it faces.”

Coulson-Thomas suggests: “With vested interests and well meaning people calling for ever more detailed reporting and governance requirements we are in danger of loosing sight of their purpose. What happened to relevance, economy, simplicity, proportionality, adaptability, flexibility, diversity, innovation and business development? Human nature is such that shareholders need protection but it is not unreasonable for the owners of companies to expect that the directors they appoint to look after their interests will also be diligent in stimulating, encouraging, enabling and supporting the profitable and sustainable growth of the businesses for which they are responsible.”

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