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What if Corporate Boards Acted Like Google?

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By Julie Garland McLellan*

Garland McLellan

Julie Garland McLellan

Jeff Jarvis’ latest book ‘What Would Google Do’ envisions the ways in which running businesses the way Google is run would change industries. It is impossible to read this book without having a few innovative ideas of your own. It got me thinking ‘What would Google do if they regulated boards or designed corporate governance systems?’

Here are some ideas:

Give shareholders control – in theory this happens at annual general meetings (AGMs). In practice the process stultifies the content and the exercise is often an empty formality. The AGM could be webcast and votes cast remotely after hearing the arguments for and against each issue. Chat rooms could allow shareholders to communicate with each other and the board on issues.

Life is a beta test – instinctively, when we make mistakes, we feel embarrassed. We shouldn’t.  A board that truly values innovation or creativity should be out pushing the boundaries of what is possible and failing a little from time to time.

Don’t be evil – Google’s founders wrote, before their IPO, “We believe strongly that in the long term, we will be better served – as shareholders and in all other ways – by a company that does good things for the world even if we forego some short term gains.” Wow!

Elegant organisation of data – When you type a search into Google you get back a simple list of relevant sources of the information sought. There is no clutter, no distracting graphic, and the sources are ranked in order of likely importance. Why aren’t board papers presented like that? Why don’t corporate boards report to their shareholders like that?

Meritocracy wins – In boardrooms, it is often the sad case that directors are selected because of what they have done in the past and with insufficient real analysis of what they will provide to the board in the future. On Google data is realtime; imagine if we could constitute boards that had access to the best expertise on any topic, instantly, as required. How would that affect quality of data, independence of thought and speed of reaction?

Better searching of previous information – With Google a board could call up such board governance data instantly and use it to support decisions. A system for tracking and reporting dividends and share purchases or sales when annual tax returns are being drawn up would remove the potential for errors and inaccurate reporting of dates, quantities and assessable imposts. Shareholders do not want impersonal reports that are delivered months after the end of the financial year; companies can close of their accounts faster and shareholders expect faster reporting with greater customisation.

The impact of the Google mentality upon regulators and judiciary is also apparent; these institutions are using sophisticated search and tracking to catch inconsistencies in reporting and recording data. The ability to cross check and match large data sets will change the corporate compliance and reporting environment.

Love it or loathe it, the ‘Googlisation’ of corporate boardrooms will have an effect on directors that may be as profound as the effect of globalisation of business.

Julie Garland McLellan is a practising company director with experience on a range of boards including public listed, non-profit and government sector organisations. She is also a boardroom consultant and the author of Dilemmas, Dilemmas, a book of practical case studies for company directors. Julie will be presenting at the NACD conference in Washington on the topic of “Digital Directorship”.

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NACD Insight & Analysis for August 20, 2010

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Recent news has brought the topic of ethical standards in the boardroom and C-suite to the forefront. The board’s oversight responsibility is to ensure that processes are in place to promote the agreed-upon tone at the top. According to the 2010 NACD Public Company Governance Survey, nearly all respondents indicated that their management actively promotes a culture of integrity by precept and example. This can be accomplished through:

  • Standards of conduct
  • Guidebooks and manuals
  • Classroom sessions and training
  • Talks and visits, especially by senior executives

Boards must evaluate performance on many levels; this includes ethical as well as financial performance. For more guidance on the topic, please see NACD’s Director’s Handbook Series: Corporate Director’s Ethics and Compliance Handbook.

On the Global Investment Menu

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In these times, it is rare to be able to use the words “extremely successful” and “real estate investor” in the same sentence. So when I consider the utterances of my friend Joe, an extremely successful real estate investor, I often take heed. One of Joe’s key aphorisms has long been:  “If we all had the same taste, we’d all be eating in the same restaurant.”

Those words, and their applicability to the choices and preferences of investors, regulators and directors, came to mind while on a recent two-week stretch in Singapore, the UK and the US.  The range of attitudes and approaches in responding to rule-making and compliance was noteworthy, as it demonstrated the spectrum of approaches that can be employed in attempting to reach the goal of good, responsible governance.

Without getting enmeshed in long, generalized discussions about cultural differences and attitudes on ensuring compliance, I thought it might be interesting to offer a few quick snapshots of what is on the regulatory menu around the globe.  Think of them as small “appetizers” from a number of cuisines, and please, disregard any old biases about English, Asian or American food.  There are great chefs at work, and great meals to be had in each of these places.

  1. SGX Blacklist

    SGX Blacklist

    In Singapore, regulators “name and shame” companies whose governance practices fail to measure up on specific requirements.  One of the consequences of ignoring the mandate to have separated the chair and the CEO roles, is having the company name appear on a list of those “out of compliance”, and having that list well-publicized and broadly published. The newspapers and the financial press are ready consumers and promulgators of the list.

  2. In the UK, the Financial Reporting Council (which is the principal corporate watchdog) has proposed a “comply or explain” requirement in a proposed UK Stewardship Code for the behavior of institutional investors as shareholders, matching the UK Corporate Governance Code which is already in place. In this case, for example, the goal is to bolster shareholder involvement in corporate governance.  The code, as proposed, is not mandatory, allowing for the possibility of extenuating circumstances such as size or a specific investment strategy.  At the same time, who adheres to the code, and who does not, becomes a matter not just of public record, but of public disclosure as well.
  3. Dodd-Frank financial reform has moved many of the questions regarding corporateIn the US, we have seen that governance, such as majority voting, out of the hands of legislators and into the hands of regulatory entities who are charged with balancing the interests of a wide band of constituencies, ranging from public-sector pension funds that own huge quantities of corporate shares all the way to smaller-scale, newly-public companies.  The public-sector investors have substantial leverage, and are clear about the practices they expect to see disclosed and followed on the corporate governance menu.

NACD Dodd-Frank Act Webinars

Business Judgment Rule

Business Judgment Rule

2011 Shareowner Expectations

2011 Shareowner Expectations

NACD Members, click here to access the complete Dodd-Frank Act webinar archives

So what’s the takeaway from all of this? Does it whet your appetite for more in the way of voluntary compliance?  More in the way of mandatory compliance? More or fewer consequences for non-compliance?

In the arena of restaurant practices, there is wide variation. Some jurisdictions publicize the names of restaurants who have recently “failed” inspection, and why.  Others make restaurants conspicuously post the most recent results of their inspections for cleanliness, with big colored signs carrying a letter grade or a test score.

Keeping in mind Joe’s views on peoples’ tastes, along with the global availability of venues in which to invest or manage, what do you want on the menu that will satisfy your appetite for good governance?

*NACD Members, click here to access the complete Dodd-Frank Act webinar archives.