May 9, 2018
May 9, 2018
“What would you do if I sang out of tune? Would you stand up and walk out on me? Lend me your ears and I’ll sing you a song, and I’ll try not to sing out of key. Oh, I get by with a little help from my friends.”
When The Beatles first recorded that song in 1967, it’s a safe bet they weren’t thinking about corporate governance and the role of the board of directors. Yet, as I’ve pondered the array of corporate scandals over the past decade, I found these fifty-one-year-old lyrics floating to the forefront of my mind.
Whenever there is a highly publicized failure of corporate governance, the first question that’s typically posed is, “Where was the board?” However, in my experience—after 20-plus years of service in public and private companies, both in the for-profit and nonprofit sectors—that question rarely gets to the heart of the matter because process isn’t the primary culprit. A better question is, “What happened and why?”
Conventional wisdom examines whether the board had sufficient information, process, and the right reports. What often doesn’t get scrutinized is whether the board had the right people in the right places and if the chair or lead director is doing his or her job setting the tone at the top.
In this rapidly changing, complex world, it is incumbent upon the chair or lead director to continuously improve both the process and substance of governance, even in the strongest and healthiest of companies. This is where The Beatles’ lyrics come into play.
The Complexities of Conducting
The role of the chair or lead director is similar to that of an orchestra conductor. The conductor’s primary duties are to interpret the musical score of the composer via an ensemble of players. Using indications within the score, the conductor sets the tempo, shapes the phrasing, and guides the players to perform in concert. While it sounds simple enough, it’s a task of enormous complexity.
The sheet music that an orchestra is given can be likened to the committee charters and board responsibilities. The paper needs to contain the “right tune” and the right mix of notes, etc., but those same notes can be played beautifully or poorly, in harmony or in discordance. Even if individual performers are playing well, one bad violinist can wreck the whole orchestra if his or her part is not minimized or if the conductor doesn’t have the power or influence to get rid of the bad player. Taking the analogy further, the conductor also has to spot the talented players (i.e. board members), even if they are hidden away or young, and feature them.
Then there’s the pacing of the score—think board process. Whether it’s played loudly, softly, fast or slow, is a matter of feel. That’s what the conductor is expressing with his or her gestures and baton-waving. And, of course, the conductor has to be ahead of the music, so the sound carries to the audience, as well as anticipate what’s next.
So, you can have all the scores (or board processes) you want, but if the conductor can’t make the band of sterling musicians work together, the net result is less than stellar performance.
It’s doubly challenging in cases where the board doesn’t have an independent chair because the power of the lead director is usually quite limited, leaving him or her to conduct solely through influence versus explicit authority. In the corporate realm, these are some of the factors that must be considered when making governance better.
Soft Yet Hard
In its recent report, the NACD Blue Ribbon Commission on Culture as a Corporate Asset aptly stated, “While it is often perceived as a ‘soft issue,’ [culture] is actually a hard issue—both in the sense of having concrete impact, and in the sense of being difficult to assess.” The same is true of tone at the top. It can be incredibly hard to assess because it’s ethereal in nature, like the orchestra conductor filling the concert hall with melodious music.
But it does come down to the interactions among the board and its committees, and the transparency of information flow between management and the board at all levels. The responsibility for the “tone” of these interactions, i.e., getting the music to sound good, resides with the board chair or lead director.
In the collective interest of corporations and shareholders everywhere, there’s much to be gained by the ongoing tuning of this tone. Regularly posing the following questions is one example:
The answers are less important than asking the questions and bringing this kind of curiosity to the board room now.
As the aforementioned NACD Blue Ribbon Commission reported, even for companies with healthy cultures, resting on laurels isn’t an option. The stakes are simply too high and the operating environment too volatile not to seek continuous improvement.
It concluded that, “Performed properly, culture oversight not only can be embedded into directors’ existing activities, but also can significantly improve the quality and impact of the board’s work overall.” This notion of making the music match the words when setting the tone at the top goes right along with the Commission’s finding. That, and a little help from friends, might even mean singing on key.
Roger O. Goldman is chair of the executive committee of American Express National Bank, lead director of Seacoast Bank, and former chair of the board for Lighthouse International. Opinions are his own.