The Supreme Court decision upholding the rulings of lower courts will be of interest to all directors. The judgement will take time to digest but some early views are available.
The Institute of Directors took the opportunity to press for full review of the Companies Act, here. The original High Court decision is worth a read. The Supreme Court’s decision is here.
Planes, trains and corporate governance
Charles Elson, a leading authority on corporate governance issues (and now executive editor-at-large of Directors & Boards) has written an interesting piece on the need for boards to have a perspective on company service delivery.
Elson describes a bad set of experiences at a major airline and rental car company. He was particularly concerned about the apathetic and dismissive actions of both companies’ ‘customer service’ teams towards his complaints. He decided to examine these companies’ boards for some sort of clue as how two respected organisations dedicated to customer service could have been so apathetic to basic customer needs and so dismissive of a simple request for accountability.
It turned out that each board’s membership was heavily weighted (one almost exclusively) to individuals with a significant investment and finance orientation.
A board’s role includes monitoring—and sometimes directing—management down a productive path, which requires many divergent skill sets. For example, he suggests marketing, HR, operations, IT, regulation compliance and even consumer relations as important talents a good board should look out for. A board heavily dependent on one only—such as finance—may miss the mark. Bad service at a large corporation is not necessarily the fault of the company’s board. However, a weakness in the composition of the board that compromises its ability to hold corporate management to account for ineﬀective operations is, undoubtedly, a governance concern.
A guide to becoming an exceptional non-executive director
A recent article, Governance by Emma Combe and Dee Symons, published by the Harvard Law School Forum on Corporate Governance, introduced the concept of T-shaped Non-Executive Directors. These are directors who have both deep expertise in at least one domain (the vertical stroke of the T) and the ability to engage effectively across the board agenda (the horizontal stroke of the T).
Vertical expertise can come from a wide array of areas, such as deep functional experience, managing a major line of business, certain geographic experience, or from specific business challenges like managing turnarounds or Mergers &Acquisitions. However, what sets them apart is their credentials in working with an enterprise mindset, understanding the interconnections and interdependencies across the organisation.
The authors highlight three advantages of T-shaped non-executive directors:
Directors who fill a specific skills gap but also bring a broad understanding of the board agenda can feed into multiple committees and contribute to a wide range of discussions, leading to better decision-making.
T-shaped individuals understand the trade-offs boards need to grapple with in all their agenda items. Rather than having a narrow focus on their own area of expertise, they can identify connections and patterns between different areas. This broader perspective enables non-executive directors to make strategic decisions that consider the implications across the organisation.
T-shaped non-executive directors can better understand emerging trends, embrace innovation and guide organisations through change as they have more diverse knowledge and experiences.
The article’s advice on how to prove your T-shaped credentials and tips for developing T-shaped skills make this a valuable read for aspiring directors.
Mintzberg on boards: The board as a bee
This is an excellent discussion from Mintzberg on boards. He suggest that boards are necessary but problematic. They need to have an acute sense of what they don’t know, and how to find it out. In its relationship with the chief executive, he offers an extended analogy of the board as a bee. It’s always buzzing around but can only sting once (firing the CE). There is a good discussion around the reality of a board that meets infrequently and the amount of genuine control they have or should have.
Roger Martin on Bud Light
This is a study in trying to do the right thing but getting it spectacularly wrong commercially. Bud Light’s use of a transgender spokesperson led to a 25% drop in sales, utterly unheard of in a stable consumer goods product. Martin calls this a catastrophe, not because he disapproves of using a transgender spokesperson (he doesn’t) but because of the strategic thought that led to the decision and the subsequent reaction by Anheuser-Busch. This was essentially a failure to understand the market and especially ‘fault lines’ within it. It is worth a read: Bud Light fiasco.
McKinsey on AI
A thorough examination of what AI is and isn’t, the article explains machine learning, deep learning and generative AI. It looks at which sector will benefit from its application and considers the current limitations of Ai and how they might be overcome.
The article has multiple links to related material for those who want to explore the matter in detail: What is AI?