This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT

Question #18: How do we hope to spend our time? Today and in general. Time scarcity is probably the thing that makes board work most complicated. I guess that’s kind of like saying that time scarcity is what makes life most complicated. Still, my point stands. One of the most remarkable things about my work with boards over the years is how similarly different boards tend to spend their time. This is especially true considering that boards really have tonnes of control over what they do and how they do it. Boards could choose to spend an entire year composing a rock opera about a tarantula and an aardvark who become best friends and travel the world, as long as they do the bare minimum of compliance. It wouldn’t be a particularly smart or savvy way to approach their work, but still…it’s up to them. And that’s really my point: if boards can basically do whatever they want with their time, why do they mostly all do the same things? And funny enough, the pile of standard board stuff seems to expand to fill exactly as much time as we have allocated for meetings – or maybe a bit more, but never less. This means boards have a convenient excuse not to try anything new: we don’t have time! But what if we permitted ourselves one conversation – maybe during a strategic retreat so as not to intrude on precious board meeting time – where we pretended that none of what we tend to spend our time on were mandatory. What WOULD we spend our time on. What topics, what conversations, what presentations, what meals and breaks, how much time on which things? Maybe we could take one tiny step toward that dream at every meeting.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT

Question #17: What information do we hope to receive? Building on the last episode about what conversations we hope to have, it’s hard to have a useful conversation without useful information. Now think about all the things that go into making information useful. When it comes to boards, we put a lot of energy into making sure the information we get is comprehensive, relevant and clear. All of that helps a lot. But the challenge of informing a board is obviously waaay more complicated than that. You’ve got a group of people who are guaranteed to have different personalities, preferences and lifestyles. In other words, if they could all design their own ideal pre-reads, each of them would want something different. Now layer on top of that the fact that most boards are made up of people with different skills and technical expertise, so they’d all want and need different levels of explanation and complexity or simplicity for different topics. Given all that, it’s probably impossible to hit the bullseye. But information doesn’t have to come as pre-READS, right? Sometimes using various media to convey information is like a hack to unlock the needs of different people in the room. It’s why most books now come in physical, digital and audio formats. And if you add video, images and illustrations, tables and graphs to the mix. Heck, I bet someone out there could even imagine how to inform boards through taste and smell. So ask yourselves, what information do we hope to receive, and when and how much and what medium, and every other question that might help.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #8: What do we even mean when we talk about “duty?” As in how the word “duty” applies to the work of the board and directors. In the previous episode, I suggested in passing that you might want to ask this question, and now I’m making it a bit more explicit. I can say with reasonable confidence – from my experience, at least – that directors and executives refer frequently to a board’s duties without taking a moment to make sure everyone knows what they’re talking about. Fiduciary duty? Moral duty? Ethical duty? Regulatory compliance? And even once you get that part clear, there’s no guarantee that you agree on what your duties are, or even that your own understanding is rooted in fact. Let me give an example. Here in Canada, if you ask “to whom do you owe your primary fiduciary duty?” most directors will confidently answer “to the corporation.” This is a technically correct, but altogether incomplete answer. Many of the directors who provide this answer are unable to confidently answer the simple follow-up question: “OK, what does it mean to have a duty to the corporation?” The legal answer to this question is simultaneously specific and complex. I won’t give away the punchline, because in addition to being specific and complex, it’s also boring and not useful outside of Canada. In any case, I hope my point is clear. If you’re going to bring up board and director duties, take a second to make sure that everyone knows what you’re talking about, and try to make sure that you, yourself, can explain exactly what discharging those duties might entail. Duty is a loaded word. Let’s make sure we’re walking the walk.

A friend recently suggested to me that literally everyone in an organization is part of corporate governance, and I *love* the idea!

SCRIPT

I had an amazing conversation with a young person who, despite his age, is a legitimately experienced corporate director and a bit of a provocateur. You can already imagine how much I like him. If you’re interested in learning more, head over to the latest episode of the Sound-Up Governance podcast at www.groundupgovernance.com. Anyway, his name is Andrew Escobar and one of the truth bombs he dropped was something I wholeheartedly believe but had never really thought about before: Everyone in an organization plays a role in corporate governance. Every single person. Thinking of corporate governance as something that begins and ends in the boardroom clearly doesn’t align with my concept of corporate governance, so that’s not new. But this is taking it further. Imagine a massive company with countless employees in hugely varied roles, some of whom probably don’t even know that there IS a board, let alone what a board does or what corporate governance is. Still, those people have positions in the organization only because of a decision that was made at some place in the hierarchy, so we’re already talking about corporate governance. But it goes the other way, too. The experiences of those employees, and their performance, their productivity, no matter how seemingly insignificant, DOES have influence over decisions that happen throughout the organization, and possibly all the way to the top. Not to mention, those employees make decisions themselves. Think about that: EVERY SINGLE PERSON IN AN ORGANIZATION is “doing” corporate governance, whether they know it or not. It’s so cool.

I'm only just now getting to Adam Grant's Think Again and omg its such a useful governance book.

SCRIPT

OK so all you governance nerds out there are probably *way* ahead of me on this one, but I’m only just now getting to Adam Grant’s Think Again: The Power of Knowing What You Don’t Know. It’s an amazing synthesis of all the great work out there on why thinking is only really great when accompanied by RE-thinking. All presented through engaging storytelling and accessible explanations of complex stuff. In short, it explains how important it is for us to change our minds, frequently, because it means that we’re learning. Finding out you’re wrong about something important to you can feel painful – especially if you were wrong about something that you feel was part of your identity – but ultimately it’s unequivocally GOOD to find out you’re wrong because you now have a chance to be right, or at least more right than you were before. It took about 10 years of studying corporate governance before I started to see the pattern that a willingness to change one’s mind was one of the most common traits that corporate directors valued in their peers. Boards are frequently expected to collectively digest and understand massive amounts of information into clear decisions within infuriating time constraints. One way to manage that is to enter the room with clear and stubborn preconceptions and confidently follow a path without questioning. Another way is to practice letting go of our preconceptions when we get new information, and accept that being wrong isn’t a personal flaw, but not wanting to be right might just cause us to walk off the cliff at the end of our preconceived path.

Rule nerds are the best. They make me feel like I have a superpower, and you should take really good care of the rule nerds in your organization.

SCRIPT

I frequently have the privilege of working with groups of incredibly smart and experienced people on interesting projects, engaging conversations, and fun exercises. The luckiest organizations, in my opinion, have at least one person in the room who is obsessed with the rules: knowing what they are, understanding what they mean, knowing when we’re close to breaking them, anxious when we do in fact break them, and hoping others will take the rules as seriously as they do. Let’s call them rule nerds. I’m admittedly at the other end of the spectrum. I have a great deal of respect for the rules, but mostly ignore them and trust the others around me to help to keep me in line. You can already see why being rule nerds kinda feels like having a superpower. I can go around being creative, or pushing boundaries, or being generally annoying and aimless, and if there’s a rule nerd in the room they will warn me way before I do anything destructive. It’s especially great if the rule nerds also like to have fun. Sometimes, OK frequently, I will ask boards to do exercises with rules that are obnoxiously ambiguous – where part of the exercise is to creatively interpret the rules in a way that will lead to the best or most useful result for your team. The fun-loving rule nerds help their teams to make sure they’re actually, you know, doing the right work, but then also get a kick out of taking ambiguity and making it more precise, more practical, and ultimately creating order out of chaos. Take good care of the rule nerds in your life. If you’re like me, they might just keep you from stepping on some rakes.

Trigger Warning: Sexual Assault

Background Resources:

Hockey Canada Mission & Mandate https://www.hockeycanada.ca/en-ca/corporate/about/mandate-mission

Wikipedia "Hockey Canada Sexual Assault Scandal": https://en.wikipedia.org/wiki/Hockey_Canada_sexual_assault_scandal

Globe & Mail "Hockey Canada used player fees to build a second fund for sexual assault claims": https://www.theglobeandmail.com/canada/article-hockey-canada-created-a-fund-for-sexual-assault-claims-documents/

Globe & Mail "Hockey Canada’s interim chair Andrea Skinner resigns": https://www.theglobeandmail.com/canada/article-hockey-canada-andrea-skinner-resigns/

SCRIPT:

OK so this episode isn’t going to have vibe, the audio quality, or the polish that you’re used to by now. It’s Thanksgiving Sunday in 2022 here in Canada and I’ve got covid, feeling pretty sh**ty and am isolated from family and, y’know, not my usual accommodating open-minded self. Any of my fellow Canadians will be intimately familiar with what’s going on with Hockey Canada right now. If you’re listening and you don’t know, go to the “Hockey Canada sexual assault scandal” Wikipedia page. It’s even worse than it sounds. This is a podcast about corporate governance, so let’s acknowledge the vile, unforgivable behaviour of the players involved, and the immeasurable harm and trauma they’ve caused for their victims, but then let’s bring it back to the boardroom. And honestly, the only conceivable reaction is “what the f*ck???” Bad enough that your organization is sufficiently aware of the sexual assault perpetrated by your members that you secretly created at least one, and possibly two funds using public and membership money to settle sexual misconduct cases – 21 of them over the past 33 years. Let me read you Hockey Canada’s mission statement: “To Lead, Develop and Promote Positive Hockey Experiences.” Seriously, go look at the mission and mandate page on their website filled with words like “fair,” and “respect,” and “hockey opportunities for all people regardless of age, gender, colour, race, ethnic origin, religion, sexual orientation, or socio-economic status.” Not one statement from the board or management has acknowledged that THEY, as leaders of this organization, deliberately created an environment that enables, covers up, and perpetuates sexual violence. If you don’t agree… Well, take 2 minutes to write down other paths Hockey Canada could have taken than setting aside stakeholder money to pay to conceal these crimes. See what you just did in 2 minutes. Hockey Canada failed to do that in 33 years. They can f*ck right off.

One valid criticism of my positions on corporate governance is that I don't really pay much attention to the rules. Or to ethics or morality, to be honest. Does that matter?

SCRIPT

My positions regarding corporate governance, and especially GOOD governance leave me vulnerable to a great deal of valid criticism. If you’re not familiar with those positions, have a listen to episodes 2 and 102 respectively. The main criticism goes something like this: corporate governance is itself governed by important rules, like laws and regulations, that are there to try to keep organizational leaders from doing bad and unethical things – either on purpose or by accident. Furthermore, those rules will never be sufficient on their own to completely eliminate bad or unethical behaviour. Since my definitions of corporate governance generally and good governance specifically don’t address legal, moral, or ethical judgment, am I not failing to acknowledge or address the most fundamental objective of organizational decision making: not to do objectively bad stuff? There’s a less philosophical version of this same argument that I encounter frequently, which is “how can I expect individual leaders or groups like boards of directors to figure out how to create the conditions for effective decision-making on their own?” In other words, isn’t it important to establish rules for organizations to follow on their way to good governance? I have repeatedly said on OMG that I reject a box-ticking approach to corporate governance, and I don’t like the concept of “best” practice, but…I dunno, what do you think? Am I missing something here?

People need power to get things done, but even having a LOT of authority doesn't mean you'll have any power. This is a critical thing to understand if we want to understand corporate governance.

SCRIPT

A few episodes ago I cross-posted the first episode of the Sound-Up Governance podcast featuring Professor Tiziana Casciaro from the Rotman School of Management, where I worked for 20ish years. It was no accident that Tiziana was the first guest – she’s an expert on what power is, how people get it, how people lose it. Even more interestingly, she’s got really cool insights into why people with lots of authority – maybe CEOs or corporate directors, for example – sometimes don’t really have much power, meaning they can’t really get anyone to do the things they want. Tiziana describes power as controlling access to something that other people want. That something could be really tangible, like money or a promotion. It can also be more abstract, like comfort or happiness or just feeling cool. I’m sure you can already see where I’m going. What could possibly be more critical to corporate governance than power? Sure, every board technically has a huge amount of authority in their organization. In a way, they have *all* the authority in their organization. Any authority others have has been delegated to them – on purpose or by accident – by the board. And the board is ultimately accountable for what those others do with their authority. But who cares about authority without power? What difference does it make for corporate governance to happen, for decisions to be made, if nobody actually y’know does anything in response to those decisions? It raises a cool question: “what resources does a board control access to, and why would anyone in an organization care?”

I think the lessons in Randall Munroe's "Thing Explainer" are more important to effective management than any other book I've read.

SCRIPT

To be honest, I *much* prefer reading fiction to reading management or leadership books. I’m leaning even further in that direction the more I disagree with my past self. Like, I have written – or caused other people to write – so much stuff about corporate governance over the years that I now believe completely misses the point. I sometimes wonder how authors who contribute to the archives of management literature feel when they look back at their publications even like 2 years later. Do they disagree with themselves as much as I do? Anyway, I’m here to make a book recommendation – one I can’t believe I haven’t made yet on OMG. Please have a look at Thing Explainer by Randall Munroe. He’s got a few other books since then including a brand new one that I’m sure he’d much rather a plug for, but I stand by my position. Each page of Thing Explainer has a detailed illustration kinda like a blueprint or patent drawing of some super complex or interesting thing like a nuclear reactor or a submarine and explanations of how every part of that thing works using only the 1000 most common words in the English language. And in a couple of minutes, you’ve learned how some crazy complicated thing works without learning any new language, and while having lots of fun. It’s probably already obvious why I think Thing Explainer is an amazing management book, but just in case: presenting complex ideas in simple words, while also having some fun, is both possible and a better way to communicate than most managers do. Think of this book as an illustration of what managers COULD be doing.

I really *do* think that corporate governance is fundamentally broken. But I'm not too worried about it. All we need to do is shift our focus a bit.

SCRIPT

When I launched Ground-Up Governance a couple of weeks back, I wrote an intro piece that began by stating, “Corporate governance is broken.” And I sincerely meant it – and still do! Funny thing is that despite being a dramatic thing to say, I don’t think it's a huge deal... because, honestly, it's not that hard to fix! I’ve really learned a lot in the process of writing this season of OMG in terms of refining what I really think corporate governance is, and what GOOD governance is, and what they’re not. So, the part that’s broken, in my opinion, is that a huge amount of what corporate leaders – executives and boards – actually DO has very little to do with corporate governance, but they don’t seem to be aware of it. Every minute spent on compliance, oversight, presentations, crafting and consuming pre-reads, and so on, only matters to the extent that it is in service of making effective decisions. In other words, unless we DELIBERATELY do compliance, oversight, presentations, and crafting and consuming pre-reads in a way that enhances our decision conditions, we’re basically not doing good governance at all. That’s what’s broken: we spend an unimaginable amount of time on stuff that barely matters to good governance. And very little time on the stuff that does matter. It’s not because we’re ineffective, or because we’re negligent, but because every resource, course, regulation, and recommendation seems to be pushing us AWAY from good governance. My single most important piece of governance advice? Consume all the traditional governance resources you want, understand them, take the salient bits, and then tune the rest of it out!

This is the last crossover episode between OMG and Sound-Up Governance, a new podcast on the Ground-Up Governance platform (www.groundupgovernance.com). In this one, Matt Fullbrook speaks with Lisa Oldridge, a Performance Strategist in Calgary with expertise in governance, ESG, and investment in startups. Lisa helps us to explore the differences between what makes a good company good and what makes a good business good, and shows us that the people are what matter most.

Matt

Welcome back to Sound-Up Governance. Today's episode is the companion to the third edition of the Ground-Up Governance newsletter, which provides definitions for business, company and customer. I know I frequently use the words business and company as if they're interchangeable, even though they're often pretty different. That's fine. Of course, if I say business when I mean company, it doesn't hurt anybody or even confuse anyone too much. But still, I thought it'd be fun to talk to someone who could really help me to understand what makes a good business good, and how that's different from what makes a good company good. And of course, all of this is tied up with the needs, wants, hopes and fears of the customer. So I called my friend Lisa Oldridge, who describes herself as a performance strategist. She works with companies and boards of directors on governance, strategy, ESG performance, and more. Oh, and ESG stands for environmental, social, and governance and refers in general to stuff that's not directly related to money. Not only that, but she's the investment director at The 51 Ventures, which invests money in disruptive female-founded enterprises. Plus, in addition to being a corporate director, and a bonafide a governance nerd, she has also spent a big chunk of her life in institutional equity sales, portfolio management and research. So in other words, Lisa's spent a lot of time and energy being curious about what a good company or a good business looks like, and whether those companies or businesses are worth putting money into. And that's exactly where we'll start. When Lisa is on the outside, looking in, what gets her excited about a business, or maybe a small company that only sells a single product or service.

Lisa 

So there's tons of problems out there. Whether or not it needs to be solved is another question. And often you see with founders, if you're talking about really teeny companies, you know, you've seen the typical entrepreneur, they're like, "Oh, my God, we got to solve this problem!" But it's really actually not a problem for that for many people, you want to see that there's a problem that exists, and they've come up with something that will solve this problem. It doesn't have to be like the optimized version of it. You've probably also heard about MVP,

Matt 

MVP, or minimum viable product, or, as Lisa puts it,

Lisa 

We also call it the shitty first draft of whatever it is, but you probably have a bit of traction there. IP is a big one IP or thought capital or moat

Matt 

“Moat",” you know, just like a moat around the castle. It's something special about a business that makes it tricky for someone else to intrude on your territory by making it expensive or difficult to copy your technology, for example.

Lisa 

And then competition, and actually it's a bad sign when you see that there's no competition, because it's usually especially if you come in and you see a founder or group that are pitching and they're like, "oh, yeah, no, we kind of, we've come up with the thing, but nobody else has!" A, it's probably not true. And B it just gives you a sense of their capacity for understanding future pivots and the market etc. Anyway, so that's more maybe a commentary on their character or their abilities or behaviors.

Matt 

There's so much interesting stuff in what Lisa just said that it might be worth rewinding, 10 or 15 seconds just to hear it again. It made a huge lightbulb go off for me. To Lisa, an entrepreneur's understanding of their business can provide an important glimpse inside their character. We'll get back to that in a sec. I wanted a better understanding about this idea that creating something new with no competition might not be all it's cracked up to be. I mean, we've all heard the term first mover's advantage. Isn't that a thing? Shouldn't it be a good thing to be the first one to come up with an idea? I even said to her, "Lisa, I'm trying to do something new and fresh in governance. Am I messing up somehow?"

Lisa 

Let me ask you this. Why is first mover advantage? The answer to everything? It's not! I think there's a presumption sometimes "Oh, I've seen somebody else with that. Therefore, it's not going to work. Right?" I think value proposition is the thing that you're selling or bending or creating or innovating on, it's as much where and how it lands as what it is. I had a mentor that that told me, a guy that I worked with, he was awesome. He was like, "Oldridge, the difference between being early and wrong is nothing!" Right? Even ideas that are completely original, still do have competition. And so I guess it's not a red flag to me if someone hasn't figured out who the person who's also doing... I don't know. lavender striped pogo sticks, but who's doing pogo sticks and who's painting toys, lavender. And so what does that look like? Because it also tells you about the customer! One thing that we one thing that I do see is novelty, almost taking precedence over will this actually be used by more than a few people, right? I would rather see a concept or like somebody innovating on a proven thing or direction or widget, but doing it in such a way that's original in the sense that it's adding more value to the end customer.

Matt 

So even for someone like Lisa, who studies companies at their earliest stages, looking for the coolest new ideas, the biggest opportunities for innovation and investment, there might not be a difference between being first and being wrong? It made me think of the songs or books or art that I love the most. Sure, there's something fresh and original about them, but they also, you know, give a sense of familiarity. Building on what came before them. Sorry, I'm getting a bit abstract here. But the insight for new businesses is pretty profound. Before we go too much further, Lisa use the term "value proposition." It's one of those terms most of us have heard before, but what does it mean exactly?

Lisa 

And value proposition it's business canvas, it's like the middle of it, like the jelly in the donut! It's what your product or service or widget or thing does for your customers to make things better, or to make them feel like things are better.

Matt 

And this is how the customer ties into all this. A good business doesn't have to be completely new, it just needs to make the customer feel like things are better than they were without whatever product or service the business offers them. But let's get back to what Lisa said earlier about the character of the leaders involved. We know she looks at the competitive landscape, the value proposition and so on. But what else is she looking for

Lisa 

The leadership and the team attributes. You know, are they dedicated? Do they have the horsepower and the grit and all that good stuff? And then I would probably single out the CEO or the founder, like the person who's in charge, as almost like a separate thing, because the earlier the stage of the company, the less actual crunchy information you have. And you're looking for leadership attributes, but then also just you know, the whole humility and brains.

Matt 

All of this started to make so much sense. Sometimes from the outside, we can't really see the nuts and bolts that show us the potential of the business itself. So we need to rely on what we really can judge: character, humility, brains. So I wondered if the potential of a person matters so much, could a great leader maybe offset concerns about a bad business or a bad company? In other words, to someone like Lisa, what matters more the person or the business?

Lisa 

Could you have, you know, like a superstar person with a not so great company? And what's better that or the inverse? And definitely the former. And that works all the way up with a you know, with with large organizations, I think probably even moreso. A great business with someone at the helm, that's not great, will eventually run out of momentum. You could still make money. In the meantime, though.

Matt 

Whoa! We'll take on A founder with a B business over the inverse. In fact, a great business with bad leadership is at best a way for an investor to make a quick buck before the business dies. And you know, what's extra cool? In some cases, emphasizing the people side can create special superpowers for the company and the business.

Lisa 

If you're talking about a business inside that company, or a vertical inside a company, or product line, or some kind of an offering. More often than not these days, you're talking about a bunch of people in a company that do a thing. And it's maybe different to the rest of the things that the company does, right? One of the organizations that I sit on the board of has had the situation where, you know, they did a raise, and then they acquired this business unit. And it's really cool hearing about the first couple of days about where it was like, "Okay, you're here because we want you not the thing, but we want YOU!" And over and above that being a good acquisition on paper, can you imagine what that did to the sense of, you know, engagement, and therefore performance, of the company, etc, etc. So it's like, and it doesn't require a lot of investment. It's not like somebody had to write a big check after the fact sort of have these people come on and be super excited about coming into work the next day.

Matt 

And there you have it, right from someone who's in the middle of it, studying, assessing, developing and buying businesses and companies and thinking about customers and value proposition, competition and all the other things that can influence whether an idea will succeed or fail. What excites Lisa the most? Character, humility, brains, the people who run these businesses and companies. And emphasizing the importance of those people can further supercharge the organization's performance. In the next episode of Sound-Up Governance, I'll speak with Nick Chambers about communities and stakeholders. He’s an executive search professional and governance expert who specializes in purpose-driven organizations. Thanks for listening.

Today's episode is the second of three crossover episodes with Sound-Up Governance, a new podcast that's part of the Ground-Up Governance platform (www.groundupgovernance.com). In this one, Matt Fullbrook speaks with Lieutenant Colonel Jamahl Evans of the United States Marine Corps about what duty and accountability mean in his world. 

TRANSCRIPT:

Matt 

Welcome back to Sound-Up Governance. One of the most common conversations I have with boards of directors and senior executives is about to whom they owe a duty. On the surface, it seems like a simple question, but most of the time, everyone in the room has a different idea of what "duty" even means. So the question of where your duty lies takes a lot more work to explore than most people expect. And when you add in the difference between duty and accountability, plus when and to whom you can delegate duties and accountability. Let's just say it gets tricky, fast. This week's guest is Lieutenant Colonel Jamahl Evans of the United States Marine Corps. In addition to his extraordinary military career, Jamahl is also a corporate governance enthusiast. As you might imagine, duty and accountability are baked pretty deep into everything that goes on in the Marines. But before we dive into that, I'll let Jamahl explain exactly what his job is because it's pretty neat.

Jamahl 

I am currently a Lieutenant Colonel in the United States Marine Corps. And what I do in the Marine Corps is financial management. I'm a financial management officer. That's what we call a Military Occupational Specialty, or MOS for short. In that capacity, I'm responsible for the planning and execution and oversight of my command's budget. Now, that's just the MOS piece. As I like to tell my Marines, your MOS is your job. Marine is your profession. So for me, my profession, and my first duty is being a Marine. And that means ensuring that my Marines and I are deployment ready and combat capable at all times. The section that I manage - my full title would be Assistant Chief of Staff, G-8 Comptroller - so that's a section and we've got about 14 Marines in there. So those are the Marines who are directly responsible and accountable to me to make sure that we're doing our financial management functions properly. Outside of that, external to us, are adjacent staff sections, and subordinate commands within the organization with whom we have to work to manage resources: make sure that we're that we've got enough resources and that we're using the resources we have properly.

Matt 

Now, I'm going to assume that many of you listening are as ignorant about the hierarchy of the Marines as I am, where exactly does the rank of Lieutenant Colonel fit in the organizational chart?

Jamahl 

So as a Lieutenant Colonel, I'm what's called a field grade officer, and there are three levels to that. So it's Major, which is what I was before, Lieutenant Colonel, what I am now, and Colonel, what I aspire to be promoted to in future. Beyond the field grade ranks, are the General or the flag officer ranks, so Brigadier General, Major General, Lieutenant General and Four Star General. So right now I am, what you would consider - although I'm senior to several other ranks - I'm still right smack in the middle of the of the officer and organizational hierarchy. So every promotion, you're getting greater responsibility. And they are also greater opportunities to which you can be assigned. So as what's called a company grade officer - those are junior officers: lieutenants, and captains - you're going to have significant responsibility already. When you become a field grade officer. What's interesting is, now you are a little further away from the junior Marines, and a little more responsible for organizational management. Beyond just making sure your Marines are trained, making sure they're taken care of making sure they're showing up on time and doing their job, now you are responsible for really understanding organizational policies, regulations, understanding what the what the mission of the organization is, and how your unit relates to that and ensuring that happens in the best way.

Matt 

Before our interview, Jamahl already knew that we were going to talk about duty and accountability. You'll notice that so far, he's being pretty careful not to use those words, instead referring to "responsibility." I nudged him a bit on that and asked him to tell me to whom he's accountable in his job and whether that's different from his duty. This is where things start getting really interesting.

Jamahl 

So to whom I am accountable in the immediate, that would be my commanding general. That is the senior officer who runs the organization. It's a Major General who runs Second Marine Division. So that is the first officer to whom I immediately accountable because it really is his budget that I'm managing. It's not me making solo decisions. It's not Lieutenant Colonel Evans going "I feel like buying this!" No, it is based on the mission of the organization and the intent of my senior leader, which would be my commanding General. So that's the immediate accountability portion of it. Broader, or writ large, when I think about to whom I'm accountable, personally, there is, first of all, the Constitution of the United States. We actually take an oath as officers, and our enlisted Marines take an oath as well. But we take an oath and in our oath is the Constitution of the United States. To support and defend against all enemies, foreign and domestic. So that wraps up the nation, and accountability towards the nation. My authority and my mission come directly from the President of the United States, so I'm accountable to the President of the United States, as well. Then you have United States citizens: the American people are truly the shareholders because it's their tax dollars I'm managing. It's their tax dollars, for whom my senior officers, President, Congress, we're responsible for that. So we do have to take into account and I've done it on several occasions where there were decisions that I had to make when working with partner nations. And I had to make tough determinations because I am managing taxpayer dollars.

Matt 

Okay, whoa. We're still only talking about accountability here and already for what's essentially a middle manager in a huge organization, Jamahl is accountable to his boss, and the President of the United States, and every taxpayer? Seriously? And if you thought the complexity would stop there, you were wrong. Let's add duty into the mix.

Jamahl 

You would think 20 years in the Marine Corps, I've got a good solid understanding of duty. And I did I had a good personal understanding. Then I got curious about well, what is the actual definition of duty? And the definition I came across was "a legal or a moral obligation." And I didn't, while that's true, I didn't feel that was the full story. And think when when it comes to duty, there is an intangible step of building a sense of duty. We can understand what duty is, but there is a step of building that within an individual. Some individuals just come to the organization with it. Some individuals don't. And I would say that the short answer to your question: Duty is having the knowledge, feeling, belief that you should do what you're supposed to do to the best of your ability, because that's the requirement. Accountability is a bit more on the reactive side. It's how do you explain what you've done? How do you take responsibility for what you've done? Who else shares in that responsibility? So that's where I would see the difference. I would see duty as being a bit more on the front end of actions and accountability on the back end.

Matt 

Okay, wait, pause. This is amazing stuff. If you're anything like me, you think of the Marines as being the definition of tangible structure, discipline, order. I mean, if you ask me for the first word that comes to my mind, when you say the word "Marines," it would probably be "duty." But now I'm hearing that duty is something almost soft and squishy, something that comes from the inside, rather than being imposed on you from the outside. Am I hearing that right?

Jamahl 

And that was the second thought that I had, after I considered how I would define duty. The second thought being, well, how do you instill it? How do you ensure it? How do you develop it? How does it come about? Like you said, there's some external factor that plays upon you to help build a sense of duty. And the thing I thought about was, okay, well, if I were in an organization, what would help drive my own sense of duty? Because I came to the Marine Corps with a sense of duty. And I thought of one thing or a multitude of things, but I keyed in on one thing that I think helps build that. I think the principles of an organization can drive a sense of duty, and that's your external thing that comes into play. And how it works is when when people see your principles, and I don't care if it's in a slogan or motto anything, there's got to be a connection. And the connection that has to be established is: I either possess the characteristics of those principles already, or those are principles that I want to possess, I want to display those.

Matt 

So cool! It's like duty, this thing that the dictionary defines as a legal or moral obligation, might actually be more of a special sauce, where the ingredients are a person's internal drive character and beliefs, plus the purpose and values of their organization. So I wondered: if accountability is basically a set of responsibilities imposed on a person by an external or organizational structure. And duty is something that comes more from inside you, there must be lots of ways that duty and accountability could come into conflict. Like if your moral duty and beliefs make it hard to carry out an order from your boss, for example. In a case like that, what is Jamahl hope his Marines will do to address the conflict?

Jamahl 

In my office, I have established with my Marines, we do not use the word "hope". And they find it interesting they find it, you know, they find it funny. But we all know that it's a common theme in the Marine Corps, that hope is not a course of action. So when you talk about anybody who's having kind of a dilemma, or a conundrum, I don't have a hope for them. What I do is engage to see what kind of actions we can take to improve the situation. So to answer your direct question, the first thing is, there historically can be dilemmas between what the organization needs to do and how they need to do it, and what the individual thinks about it. So the first thing, which is one of the foundations, is that a Marine does not have to follow an unlawful order. So if you, as a Marine or as any service person, believe that an order you've received is unlawful or illegal, you do not have to do it. However, if an order is lawful, you might not agree with it, you might have a personal feeling, but you're still going to do it, you have a job to do. And if you've been given given a lawful order, then you execute! Now here's where the development comes into play, to minimize the dilemma that you hypothesized. As we grow within our organizations, it's on the mid-level and senior leaders to ensure that there's quality understanding, quality training, quality conversation, quality voice, making that time for your junior personnel to ask you those tough questions. And I tried to get my Marines to ask tough questions early on. That way they can experience and understand a glimpse that what your perspective is, at your level doesn't encompass the entire picture. And you have to understand that there are threads between what you functionally do and what we organizationally decide.

Matt 

Like most important things in life, this is a complex problem. When duty and accountability collide, or when your personal beliefs are in conflict with what your organization asks of you, sometimes you have to, you know, just trust your boss and do the work. But Jamahl is also telling us that it's important for organizational leaders to give their team a voice, a platform, and an opportunity to better understand how they fit into the bigger picture. But again, we're hearing something that kind of doesn't match my own perception of a military organization where everything is super structured, and everyone has to do the same things at the same time. You know, predictable and repeatable. How can you have both that and an environment where everyone has a voice and some influence and problem solving?

Jamahl 

Senior leaders have to create space for that to happen. If you're running a completely robotic organization where people just do a thing, and there's no room to either question, consult, understand, develop, grow, then you're going to have people doing robotic things. No military can be at its best when it's just "do the exact thing that I tell you and that's it," because you will have a group of people who will do one thing and will stop. So just like any other organization, we do need to increase the bandwidth for creative thinking, innovative thinking, especially when it comes to problem solving. So those types of behaviors that we want everybody doing the same way in the Marine Corps, we want everyone to be in shape. We don't even want it, we need it. That's a requirement. You're required to be in shape. Two months ago, I ran three miles. I don't like distance running, though I do it as well as I can...I do pretty good. But we want our Marines staying in shape. We want our people healthy, and not just physically healthy, mentally, and emotionally healthy. So it's on again, senior leadership to engage and be aware that that's happening. Shifting over to the behaviors where we want to expand and have that bandwidth to learn and to grow. That's where your innovation piece comes in. Where we want Marines thinking about developed solutions to problems, branch scenarios. "What would you do?" is a great question. "What would you do?" It's a very easy thing to sit down with your personnel and go over a scenario, something that happened in your career, "Hey, this, this happened. What do you think you would do in this situation?" You have that conversation. The next step, in that is the daily activities, daily tasks, daily operations, giving your people that space to make decisions at their level.

Matt 

It surprised me a bit to hear Jamahl talk about the importance of not just physical health, but also mental well-being in the Marines. But now that I think about it, it really shouldn't have surprised me at all. It can be an extraordinary, stressful and dangerous job. And it made an impact on me to hear him talk about it as part of the duty of being a Marine. The duty to care for your own physical and mental well being, but also that of the people around you. How does that actually play out in the real world of the Marine Corps?

Jamahl 

When you place a focus on engagement, treatment, development, recovery, and then success, you establish a continuum that's understandable by your junior leaders. One of the things I think the Department of Defense is great at is messaging the need to be aware. Messaging the need to be aware and see signs. And we've had a lot of messaging over the years. But it's something that is important, because we're talking about the health of the organization. So what gets a message down to mid-level and junior leaders is "here are different signs, things that you should be looking for. If you've never had to deal with this before. Here's something that could trigger in your mind a something might be wrong." I have had the experience of walking past a Marine and getting a greeting, they say "Good morning, sir." I'll say "Good morning." And sometimes I'll say "how are you?" A lot of people don't like that greeting because you really just say it and you pass the person and you go. But about three times in my career I've said good morning to a Marine and I've looked and I said "how are you?" And they will respond with "fine" or "okay". And it's just something in the eyes. And three times I've had to pull the Marine aside and say, "seriously, I know I'm not your commanding officer, you don't even know me. But are you good?"And then those three instances I've hadn't read, say "no." So then I would stop what I was doing, call whomever I was going to meet whatever meeting I was going to say, "Look, I can't make it, I have a situation." And I'll take that Marine into the office. Now sometimes that results in one hour, two hour conversations. But so long as that Marine leaves with something functional to get them to the next step. I'm not going to cure everything. I'm not trained to cure everything. And I don't have the time to cure everything. But what I can do is show you where the door is, and open it and say, "Look, you can step through that door. If you can do nothing else, you can step through that door, because we may be side by side, fighting against an enemy. And I gotta know that you're good." And it's not just for junior members either. It goes for our senior members, and I'll share one more story when I've worked... I was a Major and I worked with a Lieutenant Colonel. He was he was my Commanding Officer and I was his Executive Officer. And I noticed the level of stress that he was fighting. He wasn't losing it or anything like that - he was completely capable. But you can see fatigue in people. One day I heard him come on deck. And he was walking his office was after my office. That way I catch all the people that want to try to go and see him. So I hear him walk into his office, and about three or four different Marines approached him with a with an issue, something they had, "Sir, this or that." So they walked by my office. I said, "Sir, do you have a moment?" And the way he normally did it he would just say "yes." But you could see the fatigue in his eyes. So he came in, I said "Sir, do you mind if I close the hatch?" And he said, "not at all". So you close the hatch - for your listeners a hatch is a door. Naval terminology -  and he sat down on the couch in my office, and he said, "What do you have?" And I said "nothing, sir, you just looked like you needed to have a time when nobody's asking you to do something." And he smiled and looked at me, he goes, "You up for tacos?" I said, "Yes, sir." So we went and had lunch. So sometimes we have to look out for senior leaders in the same way to look out for junior people. So it just, it just takes compassion, awareness and engagement.

Matt 

There it is! Even in an organization as structured, complex and disciplined as the United States Marine Corps., Sometimes it's important to just go and have tacos with your boss. I learned so much from my conversation with Lieutenant Colonel Jamahl Evans and we covered a lot more ground than what you heard in this episode, so you'll hear more from him in the future. If you have a question, story, or insight you’d like to share, please send a note or a voice memo to soundup@groundupgovernance.com, and we may feature you in a future episode. On the next episode of Sound-Up Governance. I talk with performance strategist, investment guru and corporate governance enthusiast Lisa Oldridge about businesses, companies, customers, and how they all fit together. Until next time.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #7: To what extent do we agree on to whom we owe a duty? I’ve been blabbing on about this in some form or another for more than 10 years. It’s been the subject – directly and indirectly – of a bunch of OMG episodes going back to episode 4. Still, I’ve never been disappointed by a boardroom discussion about who stands to be affected by our decisions and, among those who are affected, to whom do we owe the greatest duty. Notice that I’m talking about who is affected rather than just talking about who benefits. There’s no decision a board will ever make that is universally good for every affected party. Life is trade offs. When I wrote that sentence it seemed so obvious that it must have been said or written by someone famous somewhere. Turns out it’s seemingly been said or written by everybody ever, because it’s so true. Anyway, whenever your board needs to engage in a decision of any consequence, taking a few minutes to think about the individuals and groups – both inside and outside the corporation – that stand to be affected, and then taking another few minutes to ask “among these affected parties, to whom do we owe the greatest duty?” You can even take the whole list and rank them. You might even take a few minutes to decide what, exactly, you mean by the word “duty.” Anyway, that 15ish minute conversation is likely to be your best use of time in the whole meeting.

Today's episode of OMG is actually a crossover with a new podcast, Sound-Up Governance, which is part of the new Ground-Up Governance platform. Episode 1 features an interview with Tiziana Casciaro, author of Power, for All: How it Really Works, and Why it's Everyone's Business. If you like what you hear, please consider heading over to groundupgovernance.com and subscribing.

SCRIPT

The next three episodes of OMG are gonna be REALLY different. Well, actually, they’re not episodes of OMG at all, but episodes of a brand new podcast called Sound-Up Governance, which is part of my new Ground-Up Governance platform. Sound-Up Governance features interviews with experts who don’t necessarily come from the regular pool of corporate governance “gurus” so to speak. Instead, they are experts in stuff that’s really important to doing corporate governance well, and can help us to understand what’s really going on in our organizations. First up is Professor Tiziana Casciaro, who literally wrote the book on power and authority. If you like what you hear, head over to groundupgovernance.com to learn more and consider subscribing.

Matt 

Welcome to Sound-Up Governance, part of the ground up governance network. My name is Matt Fullbrook. And in today's episode I speak with my friend Tiziana Casciaro, Professor of Organizational Behavior at the Rotman School of Management at the University of Toronto. We launched the Ground-Up Governance newsletter this week with the most fundamental concepts in corporate governance: authority and power. I mean, what could be more essential to corporate governance then trying to understand who's allowed to do what and what it takes for one person to influence another person? Luckily for us, Professor Casciaro, recently co authored a book with Harvard's Julie Battilana called Power for All: How it Really Works, and Why it's Everyone's Business. And just so I don't mess anything up, why don't we let her tell us a bit more?

Tiziana 

It's a book intended for all in this world, not only in Canada, not only the US, but really, truly everywhere, who have contended with power, have struggled with it been frustrated by it, while understanding that it's important for them to have it, and know how to use it. And we have tried to give tools and understandings that allow people to grow in their influence, but also learn how to deploy it for good.

Matt 

It never much occurred to me to think very hard about what power really is, or how, if at all, it's different from authority, or why, for example, people in really visible or influential positions sometimes fail to make a difference, am I missing somethingZ

Tiziana 

Power is often very much confused with authority, or or I should say, authority is often confused with power. They are different, however. Authority is the formal right to issue orders and directives and make decisions. And it comes from the position you occupy in a formal structure. So your role puts you in a place where you get to make certain decisions. Power is different, however. Power is the ability to influence the behavior of other people. And you can influence them sometimes through your formal authority. If I have the right to decide whether you're going to be promoted or not, that gives me power over you. It's not just authority, but it's actual power. Why? Because you want something from me: a promotion. I have control over your access to this thing you want because I have the right to decide whether you will be promoted or not. And therefore I exercise influence over you. That's what power is made of. It's made of controlling your access to something you desire.  But you see, already in the definition of power, that I may control, access to something you want without having formal authority.

Matt  

So can a person create power? Does that even make sense?

Tiziana 

Absolutely makes sense. A person can increase their power, if they understand this simple principle of where power comes from. If I know that power comes from controlling access to resources you want, all I need to accrue more power is understand what is it that you want. And that's where people become very confused between the notion of formal authority and the power broadly conceived, formal authority has to do with something very specific. I have certain decision rights in a certain context over certain things. But that covers only a small part of what you might want, you might not just want a promotion, you might want for instance, to be managed by somebody who understands you, that understands your gifts, your talents, your complexity as a human being, values it and makes you feel good by giving you a platform where you can be your best self every day at work. Those are much more psychological resources, that are not written down in any formal organizational structure. They are much more subtle, and yet they are extremely important to people, they drive who they want to associate themselves with, whether they I want to be led by you or not, whether I will trust the decision you make. And even if you make a decision through your formal authority, and the decision comes at me, your actual underlying power - so,  your ability to influence my behavior - will come down to how willing am I to execute on that decision?

Matt  

Okay, now we're really getting somewhere. No wonder some people have authority, but still can't get anyone to do anything. Power isn't only about controlling access to tangible resources, in some cases is way more important to just make someone feel good, feel valued and motivated. Since Ground-Up Governance is ultimately about corporations, how does all this apply in a typical corporate structure with a board, a CEO...in other words, a model that's got a well defined, built in leadership hierarchy. Once again, here's Professor Tiziana Casciaro.

Tiziana  

The problem of the hierarchical structure you're describing is that it tends to concentrate power in the hands of very few people. And what we know from research in all kinds of disciplines is that power concentration tends to be bad in the long run, not only for the majority of people who don't have power, and therefore are just on the receiving end of the decisions of the few. But it can also be detrimental to the few in power, to the extent that having that much control can lead them to abuse their power. They lose sight of their unilateral capacity to shape the life of others and the other people who are receiving these decisions. Sometimes they become resentful of this asymmetry. And for good reason, if they're not unreasonable in becoming resentful. And when you have resentful people that you're leading, it's not good. Because they might push back, they do push back, the moment they have a little bit of room to show you that you're abusing your power. And I don't like it.

Matt 

Uh oh So, concentrating power at the top of an organization sounds risky. What about a board of directors? How do power and authority work there?

Tiziana 

So, you are a director on a board. And and because of that role, you will have certain rights to issue directives for the company and its leadership, and jointly with the other board members, you can come up with certain decisions that then presumably get implemented. So imagine one of these board members that in addition to the formal authority that accrues to them, by virtue of occupying that position on the board, they have something else going on for them. Maybe they have extra good connections to a stakeholder that the management of the company cares about, or that the board cares about. And they have to go through me to get to those guys in that stakeholder groups. In that case, I will end up having more influence over the decisions of the board and the behavior of the executives that leave the company, because I've got something that they want. And I control it in the sense that there aren't many alternative ways for them to get to those stakeholders, they kind of have to go through me.

Matt  

It almost seems like part of the problem is the way that boards are structured, I asked Professor Casciaro if we should be trying to build boards so that every director somehow has an equal amount of power. I mean, maybe that would be the ideal condition for making good decisions and balancing everyone's interests.

Tiziana 

The reality is that resources are unequally distributed across each and every one of us. And it's unavoidable that you will not have the quality you're describing on the board. But what you can do is to create decision making processes that make it harder for people to go off and establish relationships of influence that are disconnected from the goal that the board is presumably pursuing. So you can have decision making structures where it's one board member, one vote, that you have a way to express your preferences that does not allow easily for you to be swayed by others, which could protect you from their influence when it stems from things that have nothing to do with a decision at hand.

Matt 

All right, so maybe it isn't possible to distribute power equally, but we can just use processes that balance things out a little. That's what we should be working on right? 

Tiziana  

But then you lose something when you do that. When you create a structure in which the decision is made almost independently by each board member, what you lose is the learning and the ability to engage with ideas other than your own that can actually and actually do oftentimes improve decision making. I can come in with my own independent judgment, which is all fine and dandy because it becomes not subject to your undue influence as my fellow board member. But I don't get to hear your argument, I don't get to really make my own decision better, because I don't get your input. So that's what what you're the tension, you're juggling here, you're navigating this pull toward independence, but also want to secure the beauty of multiple minds, struggling with a complex decision, where each and every one of us individually, cannot really understand every component.

Matt  

We've learned how authority and power are different, and that people can in fact, take steps to generate power. We've all heard about the potential corrupting effects of power socially - morally, even - can we take steps to, you know, use our power for good?

Tiziana

Ultimately, you're going to have to contend with what you have done with your life. What have you impacted? What are you leaving behind? And this is a level of insight into yourself that sometimes escapes us when we are in the middle of the action. We are the CEO of a company, complex stuff coming at us from every which way, and we kind of forget that actually, we want to accomplish something here. In addition to being rich and famous. We want to accomplish something other than that. So it's very important for people to understand that there are many goals you can accomplish. And power is essential to accomplishing all of them. You cannot get anything done without power. It's a form of energy in many ways that allows you to change the world around you, and move it in a direction you think is worthwhile. So you have to empower, for lack of a better word, people to acquire the power they need to pursue those objectives. And sometimes the people that have formal authority are not the right people. They're not pursuing the right objectives anymore. Maybe they started out with dreams and ambitions that were perfectly good and constructive, but along the way they lost sight of them. So the book tries to give everybody an opportunity to understand how power works so that they can acquire it, and then set up their power - and this is something that boards actually are very important contributors to - set up their power so that they don't get lost along the way. Because power does go to our head. It does. It does contaminate our purpose. It does distract us from our limitations and our need for other people to help us along the way. It makes us hubristic, it makes us self focused. So you need to not only give people tools to acquire power, but also give them tools to keep it in check.

Matt  

Thank you for listening to episode number one of Sound-Up Governance. The fact that you're listening means you're a Ground-Up Governance subscriber. So thank you sincerely for your support and engagement. Next week, I'll speak with Lieutenant Colonel Jamahl Evans, Sr. of the US Marines as we work through our next batch of words: accountability, delegate and duty. If you want to reach out with a question or insight or an interesting story, send an email or voice memo to soundup@groundupgovernance.com. And we may feature you in a future episode. Thank you for tuning in. See you next week.

Today I launched my new platform, Ground-Up Governance. If you ever wished there were corporate governance resources that were less complicated, expensive, and...well, boring, then please have a look. I'm super excited about it and hope you like it!

SCRIPT

Today, September 12, 2022, marks the launch of my new project, Ground-Up Governance. On the surface, it may look like just a newsletter, but once you dive in it’s more like a hilarious graphic novel meets encyclopedia with tonnes of illustrations, audio, video, storytelling, and, well, you get the picture. Or you probably don’t, actually. Just head to groundupgovernance.com to start poking around! The whole point of Ground-Up Governance is to strip away the unnecessary complexity that makes corporate governance seem so difficult, inaccessible, and…boring. Not just that, but it took me like 20 years before it occurred to me that I couldn’t explain what “good governance” is, and most board members and executives I know can’t explain it either. I don’t want to harp too much on definitions here, but if we don’t know the meaning of the words we’re using, I think that’s a big problem. Check it out now – most of the content is completely free – and join me and a super cool cast of other characters on a journey to make corporate governance simpler, more accessible, and way more fun.

Special OMG guest Jeff de Cagna explains the importance of fit-for-purpose boards. Although his specialty is associations, the message applies universally!

SCRIPT

Hi, I’m Jeff De Cagna, executive advisor for Foresight First LLC, located in Reston, Virginia. My sincere thanks to Matt for inviting me to be the guest host for this episode of the One Minute Governance Podcast.

The focus of my work is on helping professional, trade, and other association boards become fit-for-purpose by setting a higher standard of stewardship, governing, and foresight, or SGF. The crucial question I pose to boards is one we should all ask as we consider our personal responsibility for addressing this decade’s intensifying challenges: what will our successors say about us? The purpose of this question is to push association boards to focus their attention on how their actions, rather than their words, will help shape a different and better future for the people who will follow them in the years and decades ahead, with a specific emphasis on future humans they will never know personally.

At the heart of SGF is the board’s duty of foresight, a term I originally coined in 2014 and recently redefined to integrate both more than two years of painful pandemic lessons and a clear-eyed recognition of the serious struggles still ahead: the duty of foresight requires association boards to stand up for their successors’ futures through intentional learning, short-term sacrifice, and long-term action. In contrast to the legal mandate that underpins boards’ fiduciary duties, the duty of foresight is a choice—a profoundly ethical and moral choice—that fit-for-purpose association boards must make every day.

A few months ago I promised/threatened to write a book. My thinking has changed a bit, but I still believe there are a lot of issues in corporate governance that we can solve together. More news very soon!

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT

Back in January I released an episode of OMG – episode 99 – called “I think I might write a book.” All the reasons I thought about writing a book are just as relevant now, and I haven’t conclusively banished writing a book from my to-do list, but I’m not as excited about writing a book as I was. Partly because I feel like the time it takes to get from idea to actual physical book is so long that I probably won’t even agree with myself anymore by the time the book is out. But there are still problems I’d like to try to HELP to solve. Corporate governance is still, in my opinion, deeply misunderstood – even by the people who run the “corporate governance machine” so to speak. Few people, even those who are rightfully considered experts, can articulate what good governance is in a way that anyone could understand and take steps to implement. Maybe most importantly, for anyone who wants to play a role in corporate governance in the future, there’s just about nowhere to go that will empower you to walk into a role as an executive or corporate director for the first time with the confidence that you’ve “got this.” Because everyone seems to have a different understanding of what “this” really is, and very few are taking steps to make it easier to grasp, let alone taking steps to encourage or enable new and better people to enter the space tomorrow than those who were there yesterday. So instead of a book, I’m trying something else. Something a bit less conventional. Two episodes from now, I’ll tell you everything. For now, to the extent that you see the same problems as I do, get in touch with me with some words of encouragement. I’ll really appreciate the support.

Ever feel like you're "stuck" with the wrong people on your board? Things are *probably* aren't as bad as they seem.

Background Music is Of the Stars by KC Roberts & the Live Revolution.

SCRIPT

OK so the title of this episode might not seem correct to some of you, but it’s *technically* correct, which is the best kind of correct. The truth is, there are no circumstances in which you are unconditionally entitled to a seat on a board. Even in my one-owner, zero-employees corporation where I’m the only board member, I’m only entitled to a board seat as long as I fulfill any legal and regulatory duties. But let’s talk about some more useful situations that go beyond simple legal compliance. I meet a lot of organizations where the board and/or management seem resigned to the fact that they have to live with one or more bad board members, or with a board that, as a whole, just…doesn’t have the right people. In most corporate models, there are specific democratic processes for the election and removal of directors, but using democratic constraints as an excuse for living with bad directors is just taking a complex human issue and boiling it down to compliance again. A seat on a board is a privilege, not a right. There’s no specific person who is entitled to a seat if they are not willing, prepared, and committed to contribute to effective decision-making in the ways we’ve discussed already this season. Yes, your organization might have board seats set aside for representatives of an ownership or stakeholder group – and you should be working with those groups to make sure their representatives are, y’know, good directors! Or maybe you have an ineffective director that has several years left in their term. How about helping them to improve instead of just waiting for their time to come. And if improvement doesn’t come? Thank them for their service, and start the conversation about it maybe being time to make space for the next, more effective director. Directors are, or at least should be, more than seat fillers. They are the gatekeepers of good governance.

When it comes to good governance, the conditions for great decision-making will never be perfect. But the journey is what counts.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT

One thing I noticed when I first read chapter 1 of the Heath Brothers’ Decisive is that I fall victim to the four villains of decision making basically every time I make any decision. I bet you felt the same. And it gets even worse when you’re trying to make decisions as a group. Everyone brings their own “flavour” of the four villains to the table, making it super difficult to manage everything perfectly. Decisive offers some cool ideas, which you should review and test out yourself. I want to suggest that the status quo of boards of directors specifically, and corporate governance in general, create basically the perfect conditions for the four villains to thrive: time scarcity + information asymmetry + expertise asymmetry + rule-driven norms and so on, so on, so on. So here’s the thing: if you buy into my definition of good governance even a little bit, the definition being actively creating conditions that maximize the likelihood that effective decisions will get made, then the status quo of boards – from the rules of order, to the structure of meetings, to the layout of the boardroom to the flow of conversations – all of it has the significant potential to work AGAINST good governance. So, to the extent that you see a bit of the four villains of decision-making in yourself, your organization, and your boardroom…what you’re seeing is NORMAL, but it’s also bad governance. The next time you craft an agenda, prepare a board presentation, frame a key decision, kick off a conversation, read your pre-read materials, etc. Keep the four villains in mind and ask how you can set yourself, your board, your management team up to create the conditions for effective decisions. It won’t be perfect, but the effort itself is, in my opinion, the key to good governance.

Overconfidence is my "favourite" of the Heath Brothers' four villains of decision making. It's simultaneously super obnoxious and super universal. And boardrooms provide the perfect environment for overconfidence to thrive and get in the way of your decisions.

Background music is Of the Stars by KC Roberts & the Live Revolution

ADDITIONAL RESOURCES:

Freakonomics Radio Season 9, Episode 46

Gender Differences in Overconfidence and Decision-Making in High-Stakes Competitions

Gender Differences in Performance Predictions: Evidence from the Cognitive Reflection Test

The Power of Precise Predictions

SCRIPT

Maybe “favourite” isn’t the perfect word here, but I’ll say it anyway: overconfidence is my favourite of the Heath Brothers’ four villains of decision-making. It’s so complex, insidious, unconscious, and nearly ubiquitous. Overconfidence even FEELS good, so…well, it’s pretty hard to steer completely around it in group decision environments like boardrooms. Take some time to scan the academic literature on overconfidence, including awesome recent stuff by Philip Tetlock from University of Pennsylvania, and the amazing book “Range” by David Epstein. Basically, it turns out that the more expertise you have in a specific field, the worse you get at making predictions about that field…and the more confident are at making those bad predictions. Another messed up thing about overconfidence? It’s deeply gendered. Men, unsurprisingly, fall victim to overconfidence far more readily than women – hence the tendency to “mansplain.” Women, on the other hand, are more likely to be victims of UNDERconfidence, which as you can imagine also impedes effective decision-making. I’ve put some interesting links in the episode description for you to check out if you want to see more of the research in this area. People usually become corporate directors specifically because they have deep expertise in some area or another. So, as experts, how can we be useful in the boardroom without inviting the villains into the mix? My best advice is to lean on your expertise to ask big questions, tell cool stories, start interesting conversations…instead of just telling people what you think the future holds. No matter how confident you feel.

Boardrooms might seem like emotionless environments, but they *really* aren't. Even though we can't stop ourselves from feeling emotions, we can definitely acknowledge and manage the influence our emotions have on our decisions.

In this episode, I refer to a recent episode of the No Stupid Questions podcast. Listen to it here: 

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT

Another of the Heath Brothers’ villains of decision-making is short-term emotion. Many of us think of corporate decisions, especially those that happen in boardrooms, as being predictable, regulated, structured, even somber. In my experience, that tends to be a pretty accurate description, but that absolutely does not mean that the process is devoid of emotion. Is embarrassment an emotion? According to the recent episode 109 of the awesome podcast “No Stupid Questions,” it definitely is. I talk to *a lot* of corporate directors…like a lot a lot…and there are as many as not who’ve confided in me that they’ve found themselves at one point or another unwilling to ask a question or raise a concern because they were for all intents and purposes EMBARRASSED. To admit they don’t know, to disagree with a respected colleague, to push against the status quo, or whatever. And if someone – likely several someones – in your boardroom are too embarrassed to express themselves, then that somber boardroom vibe is clearly working at cross purposes to good governance. And that’s not even addressing the times that directors might spontaneously feel anger, frustration, pride, elation…all in ways that could negatively impact their ability to be impartial participants in making decisions. In your homework, the Heath Brothers offer some good advice here. I think I would boil my own advice down to something pretty simple: sllllooowwww doowwwwnnn. Good decisions take time. Most decisions aren’t emergencies, and if they are, you’re even more likely to get tripped up by short-term emotion!

Next up on the list of the "villains" of decision-making is narrow framing. It's basically what we do to make decisions look and feel simpler than they are. And it's a major problem!

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

Another one of the Heath Brothers’ villains of decision making is what they call “narrow framing.” Here’s my take. I always felt like the expression “don’t bring me problems; bring me solutions” was just about the stupidest thing a leader could say. First off, isn’t it a leader’s job to help to, y’know…lead people through solutions to difficult problems? Maybe more importantly, it feels like an attempt to force people to expedite a decision. What’s the easiest and most defensible way to expedite a decision? Probably to artificially frame it as a go/no-go scenario. “Are we gonna do X or not do X?” Or maybe if we’re lucky it’s a slightly more creative “are we gonna do X, or are we gonna do Y?” And in my experience, the conditions for decision-making in boardrooms are so bad that to a senior manager the idea of bringing multiple options to the board – as opposed to a done-deal ready for approval – is like a living nightmare. But what’s the point of a board? For my take, listen back to episodes 3 and 51. I don’t think any of us would answer that the point of a board is just to be an approving machine. In fact, even when managers bring go/no-go decisions to the board, they’re usually only doing it because it’s really hard to figure out how to engage the board in an efficient AND useful discussion about multiple paths or options. But the fact is that virtually every decision truly does have multiple paths or options beyond “yes” and “no”. The best way to start building better habits is to just rip off the band-aid and TRY bringing a decision to the board earlier, before management has digested it into a go/no-go binary. Give them a chance to help you narrow it down and provide varied perspectives. Whatever part of the discussion goes well, say out loud that it was good, and try to recreate those conditions again in the future. Whatever goes poorly, say THAT out loud and try to avoid those conditions in the future. Whatever you do, don’t just relapse back into your old, narrow framing habits.

By now, we've all heard about confirmation bias, and if you did your homework from the last episode, it'll be really clear to you how it gets in the way of effective decision-making. So, what are we supposed to do about it?

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

Now that you’ve read chapter 1 of Decisive by the Heath Brothers, let’s take some time to talk through what they call the four villains of decision making, starting with confirmation bias. Since you’re interested in corporate governance, chances are this isn’t the first time you’ve heard or read about confirmation bias. The unconscious compulsion to embrace information that supports what you already believe to be true, and to reject information that contradicts what you already believe to be true. Let’s be super, extra, ultra clear here: YOU, no matter who you are or what your perception of yourself might be, DO THOSE THINGS! *YOU* embrace information that supports what you already believe – regardless of whether you are correct – while rejecting information that contradicts what you believe. You aren’t broken. It’s just how people work. And you can already picture how this messes things up when groups – like boards of directors, for example – are trying to make decisions on short timelines and with incomplete information. Add on the fact that even that incomplete information sometimes gets delivered to boards in vast quantities – maybe hundreds and hundreds of pages. How else can we expect directors to synthesize all of it in the process of preparing for a meeting or decision? Confirmation bias gives us a shortcut – pay attention only to the stuff that tells us we’re probably right. If you want advice on managing confirmation bias beyond what you learned in Decisive, a google rabbit hole awaits you. For now, try just re-framing board meetings as an opportunity to try to prove yourself WRONG. It’s way more fun than loudly trying to convince people you’re right, and you’re WAY more likely to learn something from your peers.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #6: Have we empowered our directors to do a great job? It’s one thing to define what doing a great job means, like we did in the last episode. It’s a whole nother thing to figure out what it takes to empower every individual in the room to feel like they can do a good job without too many obstacles. Obstacles come in countless shapes and sizes, so let’s use an example to illustrate. Let’s say we’ve decided that one of the things that makes a director great is their willingness and ability to change their mind when presented with new and relevant information. Some obstacles here are nearly invisible, like confirmation bias, which is a quirk of human cognition that causes us to overvalue information that tells us we’re right…even if that information isn’t reliable or accurate. So, you can see how confirmation bias might make it hard for someone to change their minds based on new information. Other obstacles might be social, like the fear of looking or feeling like a hypocrite or seeming indecisive or doubtful. You can also imagine the time constraints of a board meeting might make people less likely to even want to consider new information in the first place, let alone to take the time to question their beliefs. In other words, empowering directors to be great might require us to be intentional about information, time allocation, social dynamics, personality management, and more. But we won’t know exactly what to be intentional about, or how, if we don’t take the time to learn about each other’s preferences and expectations. Hence this week’s question. Another way to put it is: what would it take for *you* - and each of the other people in the room – to feel comfortable, and even excited to do the things that make a director great?

Since we've established good governance as actively creating conditions to maximize the likelihood that effective decisions will get made, let's start exploring what it means to make good decisions. Over the next five episodes, we'll use the first chapter of Decisive by the Heath Brothers as our textbook. Download a free copy here: https://heathbrothers.com/member-content/decisive-chapter-1/

As always, the background music is Of the Stars by KC Roberts & the Live Revolution.

SCRIPT:

I’ve spent the last 114 episodes talking about corporate governance as the way decisions get made in a corporation, and the first chunk of this season talking about good governance as creating the conditions for effective decisions to get made, but what does that even mean? Well, this is one question where we – meaning YOU – have access a rich trove of scientific research and real-world evidence, so you won’t have to just trust me and OMG to get you there. And lots of organizations apply what we’ve learned from all those insights to empower MANAGERS to make good decisions. Think of all the cool ways that meetings have changed over the years, or workspaces, or onboarding, or offsites. The thing is, no matter how well these new approaches work, they basically never find their way into boardrooms. Board processes, structures, rules of order, agendas, boardroom layouts…they all just basically stay the same, or close enough to the same that the impact on decisions is essentially nothing. And you know what? The moment you start paying attention, I bet you’ll basically see and feel boardroom decisions suffering as a result. Over the next few episodes, we’ll go over a few important elements of good – and bad – decision conditions. Our textbook, so to speak, will be the first chapter of the book Decisive by Chip and Dan Heath. Your homework is to read it before the next episode comes out in a few days. You can download a free copy by following the link in the episode description. I’ll also put some links to some other cool articles on decision making in case you’re interested. Have fun!

Now that we've established some definitions and busted some myths, who's actually responsible for "doing" good governance?

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

At this point, I think we’ve done enough mythbusting and detective work that we’ve got a reasonably good idea of what good corporate governance is and isn’t. And even if you’re not convinced by my perspectives, you at least have a good sense of where I stand. So, if we stick with the conditions we’ve set so far in this season it leaves us with the important question of who is responsible for good governance. For establishing it. For measuring and monitoring it. For redefining it when needed. For being curious about new ways to achieve it. I believe the questions and answers apply at two different scales. First, inside an organization – your organization, maybe. The way your board and your managers create the conditions to integrate and synthesize the interests of your stakeholders, your owners, your employees, and more, so you can generate decisions that generate value and minimize harm, all guided by a clarity of purpose. But there is also a system-wide responsibility influenced, for sure, by organizations, and also by governments, regulators, academics, consultants, customers, communities, and more. An easy example would be that regulators can – and sometimes do – create conditions for listed companies that make it more difficult for them to have good governance – requiring them to spend time on box-ticking that could be spent on value-added decision-making. All in the name of systemic risk management. Not that that’s an inherently bad thing. It’s just a clear example of the impact – positive or negative – that outsiders can have on the governance effectiveness of corporations. My hope is that the system and the organizations within it can establish greater clarity and alignment around what good governance is in the first place, so that we’re all pushing in the same general direction.

This episode was originally called "ED&I is not the same as good governance," but now I'm not so sure...

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

I’ve talked a lot about Equity, Diversity & Inclusion on OMG before – have a listen to episodes 19 through 21 and 59 through 62 if you want a refresher. I believe *super* strongly that diversity of perspectives, lived experience, personalities, cultures, expertise, etc. etc. is a critical factor for making good decisions. Without it, we fail to challenge each other, we miss important information, we fail to consider essential risks and opportunities. And inclusion is the superpower that activates diversity. I like to think of inclusion as the act of creating conditions for everyone in the room to engage, participate, and thrive. It’s super difficult, and it’s probably impossible to optimize inclusion for everyone at the same time all the time, but the journey itself is central to activating diversity. Equity can be a bit more abstract, but I think of it as the result of doing D and I really well, where everyone has equal access to authority, power, resources, and influence. Well, it’s time for me to confess something: I started writing this episode’s script with the title “ED&I is not the same as good governance” and I think I may be kinda sorta proving myself wrong. If good corporate governance is the act of creating conditions in an organization for effective decisions to happen. And if ED&I is getting a broad range of perspectives to the table, making sure everyone participating has the opportunity to engage, participate, and thrive, and ensuring equal influence in the process…I dunno. Maybe it’s not a *perfect* description of ideal decision-making conditions, but it’s pretty frickin close!

Boards are an important part of corporate governance in most organizations, but an effective board is not the same as good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

I said earlier this season that board effectiveness and good governance aren’t the same. When I say “board effectiveness” what does it mean to you? I even struggle with this one, which is troubling given that my company is called “Fullbrook Board Effectiveness.” My URL is even boardeffectiveness.ca. If anyone would have a pithy, inspiring definition of board effectiveness it would be me, right? Let’s put that aside for a second and ask another question: “If your board is effective, whatever that means, do you automatically have good governance?” Thinking through the previous episodes from this season, we already know that good governance isn’t box ticking compliance, it’s not good operational performance, it’s not succession planning, etc. I don’t even think it's all of those things mushed together. On top of that, I think we’ll all instinctively feel like having a great board is somehow also not enough to have good governance. Even amazing boards are still reliant on great managers to help them to access the right information at the right time, facilitate great meetings, generate exciting strategic options, and so on. So already we know that great boards are only POTENTIALLY great unless they have great management. But a great board would always hire great managers, right? That one gets a “lol” from me. Anyone who’s ever had responsibility for hiring and promoting people knows that no matter how perfect your processes, you can never guarantee you’ll get it right. There are other ways we could explore this question, but I think I’m already convinced that board effectiveness and good governance aren’t the same thing. But what is board effectiveness? I’m open to suggestions, but for now let’s steal from our definition of good governance a few episodes back. Board effectiveness is when a board is working to create conditions  in the organization that maximize the likelihood that effective decisions will get made.

Organizations that survive for a long time - generations, even - are really impressive, but it doesn't mean they have good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

I contributed to a paper a few years back that found over a 50 year period that family-controlled listed companies were significantly more likely to survive for the entire stretch than non-family firms. Cool finding, right! The problem is that it’s not all that clear to me that survival is always a good thing. I can imagine myself being a founder or business owner who, for example, resists an offer to buy my company – one that might be in the best interests of my organization and its stakeholders – just because I want to stay in control or keep my name on the door. There’s nothing wrong with that – as the owner, it’s my prerogative. I can kinda do what I want. But in this case surviving – aka not getting absorbed by another company – is clearly not the same as good governance. Of course there may be cases where survival *is* indicative of good governance. A company that survives and thrives over a long time probably didn’t succeed in spite of bad decisions. I think the point here is similar to a couple of episodes back where I argued that good financial performance isn’t the same as good governance. It can be pretty tempting to look at a company that has survived for a long time – generations, even – and think that just because it continues to exist it must have great leaders and effective governance. But if we take a moment, we can all imagine how an organization might survive despite awful governance, maybe on the fumes of what was once a great idea. Sure, it’s surviving, but is it “living”? Is it “thriving”?

I don't care how good your return to shareholders is...it doesn't mean you have good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

I’ve already talked about stakeholder capitalism vs shareholder capitalism a bunch of times on OMG – have a listen to episodes 5, 31, 48, 52, 56, etc. So I’ve already established pretty clearly that I believe organizations can and should make decisions that take into consideration the interests of a broad range of stakeholders – not just shareholders. So in the assessment of whether shareholder value and good governance are the same thing, that’s my stance. If you make decisions that generate value for shareholders without taking the interests of other stakeholders into account, I believe that’s BAD governance. What makes this a bit tricky is that there are jurisdictions – the United States, for example, where boards are *required* to prioritize the interests of shareholders. In other words, if the board makes a decision that benefits some other stakeholder at the deliberate expense of shareholder value, then they have failed to discharge their legal duty. I encourage organizations in the U.S. to remember two things. Even when the interests of shareholders seem at odds with those of other stakeholders, they probably aren’t. If you take time to generate multiple options and examine them through different lenses and different time horizons, there is almost always a path that benefits shareholders and, say, the environment. The other thing to consider is this: what if the rules are bad – and I’m not saying they are…? What if a change in the rules would be good for your organization, for your customers, for your employees, for your country, your society? There are lots of loud voices in the U.S. speaking up in favour of stakeholder capitalism. Maybe you could add your voice to the chorus.

I don't care how good your financial performance is...it doesn't mean you have good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

Corporate governance evolves *slowly*. Even in a single boardroom, real governance change tends to happen at a glacial pace, but on a system level…man. Seriously, every single little change to regulation – however, toothless or insignificant – gets treated like some kind of revolution, and then the real-world impact is basically nothing more than symbolic, or maybe a tiny addition to public disclosure. Perhaps the most frustrating example of things that take forever to change is the insistence among many corporate leaders that as long as an organization is performing well, it must have “good governance.” I agree to a tiiiny extent, in the sense that if you observe performance over a long enough period, say 20 years, then a corporation with great performance is unlikely to have awful governance. Right? A failure to make effective decisions for 20 years would only lead to amazing long-term performance with extraordinary luck? As for short- and medium-term performance, anyone who insists that they are useful indicators of good governance can go fly a kite, if you know what I mean. Let’s think of some governance disasters – oh right, we listed some a few episodes ago: Enron, Theranos, etc. and others we didn’t mention like Wells Fargo or Boeing – you know what most governance catastrophes have in common? The catastrophe is revealed in the wake of AMAZING financial performance. Think of the Financial Crisis – basically the culmination of a thousand awful decisions by a thousand corporations, all performing EXTREMELY well! Nah, financial performance is not the same as good governance.

I often hear people say that hiring the CEO is the most important thing that a board can do. Still, even doing a great job at hiring a CEO isn't the same thing as good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

I had originally planned to do an episode later this season called “Is hiring and/or firing the CEO really the most important thing a board does?” and maybe I still will, but I feel like this topic fits nicely in the sequence we’ve got going on right now. The idea that a board’s most important job is always to choose the right CEO kinda bothers me. I think the problem is that it seems like such a lazy, unambitious concept of what makes boards valuable. And also puts too much emphasis on one element of good governance – an important one, at that – but still just one piece. If I were trying to describe my ideal board of directors, it wouldn’t sound anything like “you better hire the perfect CEO, and if you don’t…you better fire them quickly and make sure the next one is perfect.” As far as I know, most CEOs are just people. Some people are exceptional leaders of people OR projects. Very few people are exceptional at both. Regardless of what your CEO is great or awful at, don’t you think that what differentiates an average board from a great board might be its ability to help to activate the CEO’s superpowers, and provide a bit of air cover around the CEO’s weak spots – however tiny they might be? Sure, every board needs to take the selection of the CEO REEEAAALLLY seriously, and to be courageous enough to fire the CEO when it’s time to go in a different direction. But the *most important part of a board’s job*? I’m not so sure about that.

Increasing emphasis on corporate purpose is a *really* good thing, but it's not the same as good governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

This is probably the most obvious of all the titles in this sequence. Of course purpose is not the same as good governance. Take any incorporated entity, from a one-man-shop like my company, Fullbrook Board Effectiveness, to let’s say Amazon, it’s really helpful to be able to answer the question “why does this organization exist?” if you want good governance to  happen. Does Fullbrook Board Effectiveness Inc exist just as a tax shelter for my work, leaving me free to just kinda do whatever I want for a living? Does it exist to make the world a better place by helping organizations to make better decisions? Is it something else? Without some clarity, it’s hard to figure out if you’re making good decisions. Imagine being a director on the Amazon board and starting to come to terms with the organization’s countless operational activities and hundreds of thousands of employees. Without a clear understanding of Amazon’s purpose, it would be impossible to sit at the table and assess the potential value of a new opportunity, or even to know what kind of questions to ask or what conversations to have. Purpose, mission, vision…they’re all so important to sorting through the paths in front of you that it’s hard to imagine good governance without them. But even when you get them right, there are still a lot of factors that affect decisions, like culture, people, processes, physical space, legal constraints, and, well…you get the picture.

LOTS of experts will tell you that corporate governance is all about strategic oversight. I'm here to argue that there's a lot more to good governance than that.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

Let’s get something important out of the way right off the bat: good corporate governance and board effectiveness aren’t the same thing. In fact, there are plenty of incorporated entities out there that don’t even have functional boards of directors, but that doesn’t mean they don’t have good governance if we stick with the definition of good governance from a few episodes back. Either way, if there is one challenge that’s generic to just about every BOARDroom I’ve been in, it’s the struggle to find the right balance between the board’s focus on operational matters vs it’s focus on strategy – or, how much do we reflect on the past vs. how much do we dream about the future? It’s *very* common for people who talk about corporate governance to emphasize that the board has little to no role in operations, and should spend as much time and energy as possible on future-oriented strategic matters. We’ve talked about this a bunch of times before on OMG so I won’t belabor it. Suffice it to say that I believe boards can and should focus on whatever they think is going to result in the best decisions for the organization and its stakeholders. But even in a case where a board chooses to focus on day to day minutiae, or even to run the organization entirely, that doesn’t relieve them of their obligation to make sure that the organization has a well-articulated purpose, strategy, strategic plan, and objectives. Either way, it’s pretty clear that strategic oversight is not the same as good governance.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #5: What, specifically, makes a director great? Last episode we asked what board effectiveness looks like under normal circumstances. It kinda goes without saying that an important and related question is what makes a director great. As in, what are some specific differences between a great director and a not-so-great director? We talk a lot about the skills and maybe even competencies that we want. We probably even talk a lot about how we might go about baking those into the way that we recruit directors. You know, the whole skills matrix thing. In most cases, though, the skills matrix doesn’t have anything to say about the stuff that actually makes someone a good director. For instance, let’s imagine we all agree that we want an experienced CEO on our board. I bet we can all also agree that just being a CEO isn’t enough to make someone a great director. But what *would* make them great? Is it active listening? Willingness to change their mind when presented with new and relevant information? Kindness? Courage? A pleasant singing voice? And don’t get distracted by any research that claims to find any connection or lack of connection between board composition and financial performance. There are all kinds of reasons those studies are flawed. That’s why we’re trying to cultivate effective conditions for our decisions instead of using our skills matrix to directly affect, say, share price. So, ask and answer the question. Then think about how to recruit directors for what actually makes them great.

Sure, the "G" in ESG stands for "governance," but ESG and good governance aren't the same.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT:

ESG is an initialism referring to Environmental, Social & Governance. I remember when I first heard the term ten, eleven, twelve years ago, I assumed that what it was trying to get at was an organization’s governance when it comes to environmental or social factors, and it’s secretly how I continue to think of the term. But that’s not what ESG means out in the real world. ESG is really just a catch-all for non-financial factors that people might want to take into consideration when running an organization or measuring an organization’s performance. Whether you like my definition of ESG or the real-world definition, or some other interpretation, I bet it has started to impact your idea of what good corporate governance looks like. Here’s a generic example: if an organization fails to take environmental or social factors into consideration when making an important decision – say, opening a new mine, or cutting down old-growth forest – I ma, they completely fail to take any interest at all in the potential environmental or social impact of their decision…is that good governance? OF COURSE NOT! Not just because it seems somehow immoral or evil, but because it’s important to consider as many factors as possible or else we’ve failed to create the conditions for an effective decision. But let’s say we DO take E and S into account when doing G. Is that sufficient on its own to say we have good governance. Um…no.

Thinking of compliance as good governance is probably the most common, and distracting, false equivalency in corporate governance.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT

I spent nearly 20 years running a project at the University of Toronto’s Rotman School of Management that resulted in a couple of different sets of what we called “board ratings.” Fundamentally, these board ratings were just sets of rules against which we would score the governance disclosure of big listed companies. If a company’s disclosure was in line with the rules, they would get a favourable board rating. Even just describing it out loud makes it seem kinda silly, doesn’t it? Applying generic rules to 250 different companies in different industries with different models, structures, sizes, and people. The implication being that somehow I – as the manager of the project – had come up with the single answer to what an effective board is, and thought I could measure it through public disclosure. Well, as absurd as that sounds, it’s basically the same as most of the rules, regulations, and laws that apply to corporate governance. And lots of corporations OBSESS over complying with all of them – even the optional ones like the board ratings I managed. It helps them to signal to the world that they have good governance. But when it comes to our definition of good governance, compliance is virtually meaningless. There isn’t a single regulation or law that sets corporations or boards up to make good decisions. That doesn’t mean compliance is bad or useless – in fact it’s probably pretty valuable for a lot of reasons. But good governance isn’t one of them.

If I'm going to give you a definition of GOOD governance, I guess we'll need one for BAD governance, too.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT

In the previous episode, I suggested that we define good corporate governance as creating conditions that maximize the likelihood that effective decisions will get made. I’ve had months to sit with it, and you’ve only had a few days but it still gives us a useful starting point for a bunch of conversations. Including thinking about what BAD corporate governance might mean. The most high-profile conversations about bad governance – or good governance, for that matter – are usually triggered by big, sexy crises or blowups. Especially if there’s a criminal or systemic element to the story. Theranos, Volkswagen, Enron, the Financial Crisis…they all prompted interesting conversations about corporate governance and in some cases played a role in kicking off major policy changes affecting disclosure requirements, board composition, and more. But does bad disclosure mean you have bad governance? Does less-than-perfect board composition mean you have bad governance? What, really, do the Volkswagen, Theranos, and Enron cases have in common that they don’t ALSO have in common with lots of other organizations that have never had a crisis, and never will? Maybe I’m overstepping here, but could the definition of BAD governance just be the absence of good governance? In other words, the definition of bad corporate governance is NOT creating conditions that maximize the likelihood that effective decisions will get made. It’s a bit of a scary thought, isn’t it? What even ARE the conditions that make effective decisions happen? Before we get into it any further, let’s take a break for a few days and sleep on it.

I'm putting a definition of "good corporate governance" out there just so that you know exactly what I mean when I refer to good governance. Feel free to let me know what you think.

Background music is Of the Stars by KC Roberts & the Live Revolution

SCRIPT

Welcome to season three of One Minute Governance. It’s been a long break, and it’s good to be back. I signed off the last season with a bunch of unfinished business, including a threat to write a book. Lots more to come on all of that very soon. In the meantime, let’s kick off season three by revisiting the heart and soul of what OMG is all about. You all know by now that I like to define corporate governance as “the way that decisions are made in a corporation…meaning ANY incorporated entity regardless of structure, purpose, size, or complexity.” A lot of people have a hard time with this definition because it doesn’t say anything about boards, or managers, or rules, or processes, or anything like that. Putting it another way, my definition doesn’t tell anyone what they should be DOING. I mean, decisions can just kind of happen, right? Without anyone thinking about or doing anything at all. Well, in my opinion, just letting things happen is still corporate governance, for better or for worse. But is it GOOD governance? What does GOOD governance even mean in the first place? I’ve thought about this a bit over the past few months and think I have an answer that will at least serve as a good starting point for season three. Here it is: Good corporate governance means creating conditions that maximize the likelihood that effective decisions will get made. There it is! It might not sound like much, but sit with it for a while before accepting or rejecting it entirely. I’ve had a couple of months to live with it and you know what? It grows on me more each day. Welcome to a new season of OMG.

Season 3 of OMG is finally almost here! I can't wait to dive back in.

Oh, and if you like the background music, the song is Of the Stars by my band KC Roberts & the Live Revolution. Check out the whole new album, Grit, here:

https://ffm.to/kclr-grit

SCRIPT:

Season three of One Minute Governance launches on Monday June 27th, just a few days away. I’ve always thought of OMG as a platform for taking complex topics in corporate governance and finding ways to make them more accessible. Or even sometimes to find seemingly simple elements of corporate governance and showing that they might be more complex than they seem. If I have an overarching goal for the podcast, it’s to provide boards, senior executives, advisors, and other governance nerds a new lens through which they can ask questions, provoke discussions, or just sit and think about how organizational leaders might do things a bit better tomorrow than they did yesterday. In episode one, I’ll finally take an audacious stab at figuring out what GOOD corporate governance might be, followed in episode two with a definition of BAD governance that’s might be even more ambitious. We’ll do some, exploring, some storytelling, and some mythbusting, all a minute or so at a time. Oh and this year’s background music is Of the Stars, performed by my band KC Roberts & the Live Revolution from our new album Grit. If you like it, it’s available wherever you get your music.

Thanks for sticking with me through two seasons and 101 episodes!  

Episode 100 was supposed to be the season 2 finale, until something annoying came across my desk...

We already established that learning about corporate governance can be embarrassing.  I think I might be able to help.  One way is by writing a book.  I'll tell you more soon, but in the meantime, send me positive vibes and any questions you think I could help to address.

There are lots of reasons why successful and influential people might feel reluctant to go back and learn the basics of corporate governance.  That's OK, although I wonder if we might be able to find a way to make it more comfortable...

I rely on other, smarter people for inspiration.  To that end, I wanted to do an episode acknowledging some organizations out there that push my brain in new directions when it comes to corporate governance and leadership.  It's not an exhaustive list, nor is it intended to be a "best of" - it's just some folks who have been on my mind of late.  Please check them out!

www.the51.com

https://www.blackopportunityfund.ca/

https://www.futuredirectors.com/

https://fnmpc.ca/

https://filene.org/

https://neythri.org/

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #4: What does board effectiveness look like on a normal day? We – and by “we” I mean people who talk about corporate governance – have a tendency to talk about the impact of boards through examples of massive failure. Whether it’s Enron or Boeing or Wells Fargo or Theranos or the Challenger space shuttle explosion, we feel compelled to highlight all the ways things might go really wrong, but then we forget one tiny important thing: most boards aren’t in crisis most of the time. So, what does it mean to show up to a regular old board meeting and do a great job? It’s obviously really important to acknowledge how bad things can get, how important the role of the board can be in navigating potential catastrophes, and why it’s helpful to have some anxiety about how things might go wrong. But I think we can all agree that a board’s job is way more than catastrophe avoidance. So, when we show up for the next board meeting, what might great look like? Maybe we don’t even have any consequential decisions to make. Maybe we have every reason to believe that our organization’s future likely to be very bright. And maybe we’ve already done all the work we can do to acknowledge and manage potential catastrophes. So, when a normal meeting wraps up, what would cause us to look back and say “holy smokes! The board absolutely killed it today!” Sure, for some people, it might involve imagining new ways that things might go wrong so that we can be prepared for the worst. For other people it might involve dreaming about how to get even better. But being specific helps. What’s the right tone? What are the right conversations? What would it take to increase the probability that everyone is engaged and participating? How can YOU, individually, be as useful as possible? But if we don’t make an effort to describe board effectiveness under normal circumstances, we’re not likely to get it done.

"Where were the directors?" was basically the question that launched the corporate governance "industry" in Canada.  Turns out it's still an important question...

Corporate governance basically never changes, and every time any little thing happens it seems like a huge deal.  Why is that?

It can be hard to engage entrepreneurs in conversations about governance.  They have a lot of other important stuff on their minds.  Here are a few tips.