It Is Time to Fix Our Boardrooms
As board members we are living in interesting times. For years, we have conducted our business in a black box well away from public scrutiny. Now a hot light is shining upon us and it makes for deeply uncomfortable viewing for both directors and those outside the boardroom.
From Yahoo we get descriptions of a weak and indecisive boardroom that could never get its act together.
From the HP boardroom we get a picture of a group that is at war with itself and “just too exhausted from all the infighting.”
What is distressing about this is that it gives an impression — all too easily generalized — that boardrooms are at best clueless and at worst destructive, and above all selfish.
One gets the sense that Yahoo and HP are hurtling from one bad decision to the next, in a (one hopes) well-intentioned frenzy to do something — anything — to stop the fire. Yet, at the same time it also seems that, in fact, they are throwing water on an oil fire, exacerbating the problem instead of addressing it in a calm, methodical manner.
The effect is to make everyone watching uneasy. The markets are uneasy, which is never a good thing. It taints how all other businesses and their boards are viewed, casting a pall over other technology companies and the wider business community. Also, critically, employees are uneasy — something I know because I’ve got an inbox full of angst-ridden emails from employees from these two companies, and others, asking me to explain once and for all what a board should do and more specifically what their boards should be doing to bring their companies back on an even keel.
These emails are telling me that their authors feel their companies’ boards are filled with people who don’t care, have personal agendas, do not understand the business that the organizations are in, and are disinterested in addressing stakeholder concerns. Also, most employees within these organizations have never even seen or heard from a board member and feel as if decisions are being made by faceless people who neither know nor care about them. One email has asked if there is anything employees can do to have a vote of no confidence and get rid of the board themselves.
All of this further erodes confidence in the companies as a whole: investors and customers alike begin to think about exit strategies as they no longer see boards looking after their companies in ways that takes account of stakeholder interests.
When I’ve reached out this week to people whom I hold in high regard in the world of boards and investments for their take on this situation, I’m told that unfortunately they don’t think any real change will come. Activist investors may put in people they feel comfortable with, but those people might not actually look so different from what we’ve got right now.
It begs the question: how bad does it have to get before we come to terms with the fact that we need to fix the boardroom?
This atmosphere is not good for anyone, but as directors and investors, we must not let this crisis go to waste. There is a potential for something really positive to happen and that won’t come to pass by trying to go back in the black box and sweep the whole range of underlying issues that have contributed to the current crisis under the carpet. The solution is to tackle these issues decisively and effectively and to be seen to do so.
So, let’s take the opportunity of these high profile cases of boards gone awry to speak openly about boards and best practice.
It is time for all of us — directors, investors, customers, employees, and journalists — to demand something better.
We need to remind ourselves why we gather around the boardroom table and embrace the opportunity that we have been handed by the current crisis to turn over a new leaf. As board directors our job is to dedicate the time and energy necessary to be good stewards of the company.
As such, boards need independent directors with skill, vision and commitment. They need to take a cold hard look around the boardroom table and assess whether the board and the individual directors have the skill and the will to rise to the challenge of future-proofing the organizations that they serve.
In many cases, this will need to begin with fixing deep structural problems and mustering the courage to take some hard and uncomfortable decisions in the interest of the company they are meant to guide through these troubled times — including changing the composition of the board. Directors must not be selected on the basis of name recognition and the false sense of security they give to the market.
Boards need to be composed of people with diverse skills that combine sector specific expertise with the ability to take in knowledge, synthesize it quickly, and make informed decisions, all in the full knowledge that as directors we will be held publicly accountable. Board chairs need to demonstrate true leadership ability and directors need to redouble their commitment to developing a focused vision and a credible strategy for its realization.
Above all, now is not the time to back away from the hard work ahead. It is time to fix our boardrooms.