• Published: Aug 6, 2022
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Each month we sign post for you some good reading on governance from around the web

How board culture affects board performance

 

PwC has produced a publication pointing to how behavioural psychology might explain what’s holding boards back. In Unpacking Board Culture, its authors refer to typical boardroom shortcomings like derailed discussions, dismissed opinions, side conversations and dominating personalities. Board members bring their own habits, preferences, past experiences and individual biases, all of which affect a board’s culture and decision-making. Boards can only achieve a culture that supports effective performance by taking these dynamics into account. The publication suggests how boards can spot the issues that may be holding them back, focusing on four dynamics that commonly affect the boardroom: deference to authority, groupthink, a preference for the status quo, and confirmation bias. It offers warning signs to spot these issues and tools to address them.

(Note: the basic content of this report can also be found at the Harvard Law School Forum on Corporate Governance).

 

The possibility that your SMART goals may not be

For many years it has been almost universally accepted that goal statements should be Specific, Measurable, Attainable, Relevant and Timebound. Louise Watson has recently issued a timely challenge to the application of the concept in  She shows how each of the SMART components in common usage can result in SMART becoming DUMB: Disappointingly vague, Unreliable (in reference to the baseline data used to set targets), Meaninglessly measurable and Beyond implementation. Read more in Could Your SMART Goals be DUMB?.

 

How to make use of formal meeting procedures

For readers unfamiliar with formal meeting procedures—and whose boards do not have ‘standing orders’ to fall back on— has produced a very useful resource. A helpful narrative explains the use of motions, both substantive motions that deal with the business of the meeting and procedural motions that deal with the way the meeting is run. An accompanying flow chart could be particularly valuable for anyone faced with the responsibility of chairing a meeting (e.g. an AGM) in which this kind of formality is necessary or appropriate. It will be helpful in avoiding confusion and speeding up action. Read more at CommunityNet Aotearoa.


A taxonomy of business risks

Driven by a confluence of stakeholder interests, regulatory pressures and senior management concerns, companies are taking a more rigorous approach to identifying risks to their valuation and business performance. Published risk registers show that businesses vary significantly in their perception of risks. Risk registers are not consistent—even in businesses in the same sector of commercial operation, where the risks could be expected to be similar from one company to another.

The University of Cambridge’s Centre for Risk Studies has developed a taxonomy of business risks spanning the range of threats that could affect a business. The research suggests that governance risks are underestimated in risk registers, and geopolitical—and possibly financial—risks may be overestimated.  provides a comprehensive checklist of the full range of risks that could pose a strategic threat to a company’s business plans. This is a framework for testing and prioritising which risks are important for an individual company, as part of a systematic approach to risk evaluation. Read more at The Cambridge Taxonomy of Business Risks


The implications for boards of staff working from home

In Working From Home: The Risks of the New Normal, Richard Sheath acknowledges —as hybrid working is set to become the norm— that temporary fixes to the control environment must be replaced by permanent, considered solutions. Wider implications also arise, such as how to train new hires in the corporate culture, as staff welfare needs are changing.

He argues that boards in financial services businesses, in particular, must be on the case. The UK’s Financial Conduct Authority (FCA) has issued requirements that every regulated entity (and its directors) must look at closely. But boards in other sectors and other jurisdictions may face the same risks, whether or not they are regulated. A rigorous check-up should arguably become a standard part of risk management oversight.

Sheath has taken the FCA’s statement and drawn out some generic advice and pitfalls for all boards to think through.