Executive decisions or boardroom politicking?
Recent coverage in the Business Herald and other news outlets such as Bloomberg and the Wall Street Journal signal a massive change in our understanding of how organisations work on the inside.
The spring creek mine closures, the finance company directors in courts, the receiverships of certain enterprises, the diversity of boardroom directors, the job losses, the change in the way Fonterra accesses capital all point towards something which is different to our traditional view of how decisions are made. Perhaps it is the plethora of information or maybe it is just the greater research focus on businesses as an employment vehicle.
So what is it actually like on the inside? Most of us spend our weekdays or weekends either poring over the newspapers or in general DIY but some of us who are practicing managers wrestle with writing board papers.
To most employees out there who aspire to one-day lead large organizations this would almost seem something alien. However, to the thousands of managers in New Zealand the term “board paper” or “political report” makes one nervous.
Irrespective of whether you work in the private or public sector, the term decision maker in the report always conjures up two alternative universes. Is it the chairman and the board who makes decisions or is it the executive team who wields the baton?
To dissect what lies beneath researchers have been fundamentally rethinking their lens of analysis. Organisational theorists led by Professor Terry McNulty who contributed to the Higgs Review (into the Role and Effectiveness of Non-Executive Directors which led to revisions in the UK Combined Code of Corporate Governance) in the United Kingdom have moved further than the agency theorists who believe that management are agents who are hired by principals (the board of directors) who in turn represent shareholders.
Researchers now view boards as more than rubber-stamping bureaucrats. They see them as actively involved in making decisions. Yes, making decisions. But does this apply to New Zealand?
Studying at the University of Auckland brought me in close contact with both chief executives and governance thinkers of large enterprises in New Zealand. As part of a research project I explored whether chairmen of boards were involved in decision-making. The research revealed an emerging pattern, which researchers at the University are now exploring further.
Specifically chairmen in New Zealand are actively involved in not only making strategic decisions but also shaping strategic choices.
The chairman and the chief executive share a very close relationship almost like Tango and Cash or Simon and Garfunkel or Thelma and Louise.
Lots of discussions outside of the formal board meeting process were found to be necessary to help formulate successful long-term strategy. Board papers (which usually included detailed modeling and analysis) were not considered that important.
They represented just the rubber-stamping step. To be noted was that I spoke to only 15 chairmen whose companies were profitable throughout the great financial crisis.
So what happens when you do not play ball with the Board or perhaps they just do not like your style as a manager? The moot example from last week was that of Vikram Pandit at Citigroup, the Chief Executive who led Citi through its greatest crisis.
The change in the non- executive chairman also led to cleanup of sorts amongst the ranks of the senior leadership soon after announcing positive news about the state of the company’s finances.
While the event is too close to be analyzed with certainty it makes one think – as to who is the actual decision maker? Other examples of casualties of boardroom politicking include Greg Dyke at the BBC and Arun Sarin of Vodafone Plc.
Quite surprising is the fact that non-executive directors are paid a fraction of what members of the senior leadership team earn and are at times personally liable for wrong decisions.
So does all this mean that governance is actually a profession above all professions with the ability to influence events and negotiate outcomes? Should we be revisiting the management jargon like Professor Rakesh Khurana at Harvard Business School who argues that management is a profession much like lawyers and doctors?
From my perspective maybe making job titles more sexy would make the decision making exercise much more transparent. Much as Marketing Manager has become Chief Customer Officer and Research and Development Manager morphed into Chief Innovation Officer or Information Technology Manager has become Chief Information Officer.
Performance notwithstanding, maybe we should go from Chief Executive or Chairman to Chief Influence Officer. Or perhaps subtlety has inherent benefits.
* Yadeed Lobo is a recent MBA graduate from the University of Auckland
Recent coverage in the Business Herald and other news outlets such as Bloomberg and the Wall Street Journal signal a massive change in our understanding of how organisations work on the inside. The spring creek mine closures, the finance company directors in courts, the receiverships of certain...
Recent coverage in the Business Herald and other news outlets such as Bloomberg and the Wall Street Journal signal a massive change in our understanding of how organisations work on the inside.
The spring creek mine closures, the finance company directors in courts, the receiverships of certain enterprises, the diversity of boardroom directors, the job losses, the change in the way Fonterra accesses capital all point towards something which is different to our traditional view of how decisions are made. Perhaps it is the plethora of information or maybe it is just the greater research focus on businesses as an employment vehicle.
So what is it actually like on the inside? Most of us spend our weekdays or weekends either poring over the newspapers or in general DIY but some of us who are practicing managers wrestle with writing board papers.
To most employees out there who aspire to one-day lead large organizations this would almost seem something alien. However, to the thousands of managers in New Zealand the term “board paper” or “political report” makes one nervous.
Irrespective of whether you work in the private or public sector, the term decision maker in the report always conjures up two alternative universes. Is it the chairman and the board who makes decisions or is it the executive team who wields the baton?
To dissect what lies beneath researchers have been fundamentally rethinking their lens of analysis. Organisational theorists led by Professor Terry McNulty who contributed to the Higgs Review (into the Role and Effectiveness of Non-Executive Directors which led to revisions in the UK Combined Code of Corporate Governance) in the United Kingdom have moved further than the agency theorists who believe that management are agents who are hired by principals (the board of directors) who in turn represent shareholders.
Researchers now view boards as more than rubber-stamping bureaucrats. They see them as actively involved in making decisions. Yes, making decisions. But does this apply to New Zealand?
Studying at the University of Auckland brought me in close contact with both chief executives and governance thinkers of large enterprises in New Zealand. As part of a research project I explored whether chairmen of boards were involved in decision-making. The research revealed an emerging pattern, which researchers at the University are now exploring further.
Specifically chairmen in New Zealand are actively involved in not only making strategic decisions but also shaping strategic choices.
The chairman and the chief executive share a very close relationship almost like Tango and Cash or Simon and Garfunkel or Thelma and Louise.
Lots of discussions outside of the formal board meeting process were found to be necessary to help formulate successful long-term strategy. Board papers (which usually included detailed modeling and analysis) were not considered that important.
They represented just the rubber-stamping step. To be noted was that I spoke to only 15 chairmen whose companies were profitable throughout the great financial crisis.
So what happens when you do not play ball with the Board or perhaps they just do not like your style as a manager? The moot example from last week was that of Vikram Pandit at Citigroup, the Chief Executive who led Citi through its greatest crisis.
The change in the non- executive chairman also led to cleanup of sorts amongst the ranks of the senior leadership soon after announcing positive news about the state of the company’s finances.
While the event is too close to be analyzed with certainty it makes one think – as to who is the actual decision maker? Other examples of casualties of boardroom politicking include Greg Dyke at the BBC and Arun Sarin of Vodafone Plc.
Quite surprising is the fact that non-executive directors are paid a fraction of what members of the senior leadership team earn and are at times personally liable for wrong decisions.
So does all this mean that governance is actually a profession above all professions with the ability to influence events and negotiate outcomes? Should we be revisiting the management jargon like Professor Rakesh Khurana at Harvard Business School who argues that management is a profession much like lawyers and doctors?
From my perspective maybe making job titles more sexy would make the decision making exercise much more transparent. Much as Marketing Manager has become Chief Customer Officer and Research and Development Manager morphed into Chief Innovation Officer or Information Technology Manager has become Chief Information Officer.
Performance notwithstanding, maybe we should go from Chief Executive or Chairman to Chief Influence Officer. Or perhaps subtlety has inherent benefits.
* Yadeed Lobo is a recent MBA graduate from the University of Auckland
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