Why do we trust boards and can they sort out the challenges facing companies?
Andrew Kakabadse, Professor of Governance and Leadership at Henley Business School and Chairman of the Henley Directors’ Forum, and Nadeem Khan, Henley Business School PhD student, outline how boards can make a difference to the competitiveness of companies.
Boards, as we know them today, were shaped by the Harvard Business School debates of the early 1920s. In determining the role and purpose of the firm, Harvard Business School proposed that the investors needed protection from the management’s possible misuse of their funds. Harvard recommended that an agent (i.e., agency theory) was needed to watch over the management on behalf of the shareholders. So, from the very start, the underlying principle of its governance was one of ‘no trust’ – management was not trusted with investor funds and needed to be observed.
This thinking does not easily meet the governance challenges of today. Facilitating stakeholder interests, promoting diversity in terms of gender, race and colour, ensuring for ethical standards and protecting reputation – these cannot be effectively addressed through just monitoring and controls. It is clear that the tone set at the top, shapes the culture, orientation and behaviour of staff and management. What is needed is not just control mechanisms, but the board’s sensitive stewardship of the enterprise by encouraging dialogue between the various interests who determine the future of the organisation.
What the research reveals
Our research at Henley Business School of over 5,500 boards across 14 countries, strongly highlights that board directors are only too aware of the various issues and concerns facing their enterprise. Yet, when stretched, these very same directors find it difficult to raise that pertinent, but uncomfortable issue. By not doing so, the very essence of the firm – its unique competitive advantage – is undermined.
Board performance, in terms of procedural and monitoring requirements, needs to be countered by insightful stewardship. In this way, the setting of board agendas and meeting legal stipulations is balanced by appropriate facilitation and counselling of management. Being close to and yet being independent of the management, attending to narrow financial performance criteria, as well as long-term positioning of the firm, makes for a high-performing board. It is these boards that set the appropriate expectations to realise competitive advantage.
The Board Directors’ Programme at Henley Business School balances the art of stewardship against the disciplines for monitoring. We pay attention to how chairmen, CEOs, independent directors, finance directors and company secretaries, learn to effectively leverage their discretionary capacities in order to effectively handle the dilemmas they face and engage with each other, emerging with essential high-performance decision-making skills.
The programme covers:
- what it means to be a chairman, CEO, independent director or company secretary
- attending to risks
- how to work towards high levels of board effectiveness through board reviews
- how to gain a board position
- the ethical challenges boards face
- how boards can engage with investors and global stakeholders
Learning is through in-depth, collaborative, practice-focused sessions and real case experiences that examine the complexities and dynamics of boards. Understanding how to engage with contrasting stakeholders is part and parcel of how to execute governance throughout the organisation.
Delivered by senior practitioners (chairmen, CEOs, senior partners of search and consulting firms, top level investors) and experienced Henley Business School academics, the programme will enhance skills for wider board level engagement through continual learning. It will benefit individual board members who will learn how to influence and shape board performance, as well as their own performance. The overall aim is to help board directors make a significant contribution towards realising the competitive advantage of their companies.
Find out more about Henley Business School’s Board Directors’ Programme