More Thoughts on Company Culture

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Following Ken Daly’s talk with Continental Airlines director and NACD board member Karen Hastie Williams at NACD’s Director Professionalism® course in Laguna Beach, CA, I have been thinking more about company culture and the board’s role in shaping it. The power of culture to make or break an organization is something recognized by many NACD members, and I have been lucky to learn from some of their reflections on this topic over this crisis-ridden summer for big business in America.

NACD member Jim Brady, who is the chair of four public company audit committees, recently shared his views on how board members can both read and contribute to a company’s culture in an NACD Boardroom Excellence webinar on “Tone at the Top.”  Jim talked about the importance of respect and listening and observing body language, both when a director is considering joining a board, and when he or she seeks to influence the culture of the C-suite.

In the same webinar, Mike Pocalyko, a former U.S. Navy helicopter pilot and investment banker who now serves on the boards of Herley Industries and TheramuneX Pharmaceuticals (as chairman), joined Jim Brady to talk about transparency, board accountability, and thoughtful risk management and strategy development—important board responsibilities that, in turn, shape the culture and performance of the company.

Balancing business opportunity with risk management and a wider stewardship responsibility is something that many NACD members grapple with every day in their board work. Directors at PICO Holdings—corporate board members of NACD—govern a company that owns water rights in much of the Western U.S. Speaking to PICO board member Richard Ruppert over lunch one day when he attended our Scottsdale, AZ, Director Professionalism course, I was moved by how he spoke of the need to balance profit with concern for the land and the people making a living on it and from it. “‘Don’t be greedy,’ that’s our motto” he said. (BTW, the issue of the global water shortage, and how it may affect your company’s strategy will be examined in a session called “Enabling the Future” at this year’s conference — don’t miss it.

Also at the conference, Dr. Reatha Clark King, a former Exxon board member and a current director of NACD, will be among those examining corporate culture and its role in rebuilding public trust. Given the trials this summer for one of Exxon’s competitors, BP, her words will be well worth hearing.

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.