High Performance Boards. Didier Cossin

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High Performance Boards - Didier  Cossin


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2.1).

Illustration depicting the three transformational leadership principles that enables leaders and followers to raise one another to higher levels of motivation and morality.

      In general, transformational leaders:

       empower followers and nurture them through change;

       become a strong model for their followers;

       create a vision for the organisation;

       act as change agents for a new direction within the organisation; and

       become social architects.

      One example is the nuclear leak in 2011 at the Fukushima plant of the Tokyo Electric Power Company (TEPCO). Back in 2007, an earthquake had caused a small nuclear leak, and the company's president, Tsunehisa Katsumata, was asked to retire. However, Katsumata then became chair of TEPCO, despite his previous failure to adequately manage this risk.

      Another case concerns Chinese company Sanlu, which raised protein levels in baby milk by using chemicals including melamine. The firm's top management was aware of this and informed the board, which included directors from New Zealand. Hundreds of thousands of babies were affected, and Sanlu's board voted to recall all the products in question. However, because the crisis happened just before the 2008 Beijing Olympic Games, the company's chair at the time reversed the board's decision in an attempt not to harm China's reputation. Six babies subsequently died after consuming the milk. After being informed by the New Zealand government, the Chinese authorities intervened. At the time of writing, the chair is in jail and the company no longer exists.

      Many other large organisations have been hit by scandals related to governance risk in recent years. They include Volkswagen, Boeing, BP, Olympus, Goldman Sachs, Adecco, Lehman Brothers, and Oxfam, to name just a few.

Illustration presenting the components of S&P500 market value based on tangible and intangible assets, over a period of five decades.

      Source: Ocean Tomo LLC

Illustration of the governance DNA that entails balancing decision-making power between an organisation’s leader, board, and owners at the heart of the triangle.

      Good decision-making at the top is the key to governance success, and the underlying force beneath the four pillars. The integrity of decisions is therefore particularly important. This can be reinforced by board members' independence, as well as by overcoming the various conflicts of interest that arise naturally in an organisational context. Diversity, having an open mind, and being able to combine a range of perspectives are vital for quality organisational decision-making in many contexts. But there is much more to a successful director than that. And this is what we explore in the next chapter.

      1 1 Bryant, C. and R. Milne (2015). Boardroom Politics at Heart of VW Scandal. Financial Times (4 October 2015). https://www.ft.com/content/e816cf86-6815-11e5-a57f-21b88f7d973f

      2 2 The calculation and methodology is given by Innosight in the ‘Corporate Longevity Forecast’ available on www.innosight.com.

      3 3 http://www.edelman.com/insights/intellectual-property/2016-edelman-trust-barometer/state-of-trust/employee-trust-divide/.

      Board decisions concern large amounts of resources, and impact people within the organisation as well as external stakeholders. This means board directors wield tremendous power. It is key, therefore, that they adhere to a culture underpinned by fundamental values. In turn, they need to uphold board values, and ensure that their behaviour reinforces the board culture.

      Along with their power, board members must accept and embrace their responsibility toward the company they serve. This requires having total clarity regarding


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