Page 11

prefer “buddy boards,” in which they can be assured that nobody is going to ask difficult or embarrassing questions. Indeed, many CEOs view boards that get involved in setting the organization’s strategy as an interference in their managerial responsibilities - not to mention their sense of personal power (“Nobody is going to tell me what to do!”). Former Volvo CEO Pehr Gyllenhammar is a case in point. He created such a hostile environment for any board member who dared to express views opposing his that most dissenters eventually resigned. The company ended up paying the price, though. Unchecked by anyone with a different perspective, the CEO launched Volvo onto a losing streak of unrelated diversification moves. CEOs who want to distract their boards from discussing the tough strategic issues also like to cram the agenda with items designed to dull the mind (copious slides, graphs and charts), dazzle the senses (“And now, Fred is going to give us a virtual reality presentation of the new corporate headquarters. Everybody got their 3-D glasses on?”) or induce commitment and loyalty - all within a strict three- to four-hour time limit. After all, it’s much more fun to contemplate at which luxury resort the board is going to hold its next meeting - “Make sure it’s the one with the fancy lobster sandwiches!” chimed one director I know - than focus on torturous, but essential, details of finding the right strategic direction.

Board Junkies It’s time for boards to stop allowing their CEOs to use them this way. That’s not an easy prospect; it requires board members to have the internal fortitude and personal ethics to refuse to be bullied or bribed into submission. After all, board pay and perks can make Temptation Island seem like child’s play. A corporate director I know told me he’d once held 26 board appointments simultaneously - at a time when he was CEO of one of North America’s largest industrial companies (and while he was negotiating a major merger). With average board pay around $80,000 per year per appointment, plus stipends for meetings and committees, it is not hard to figure out such board junkies’ motivation. It’s no wonder that, considering the time this CEO must have devoted to sitting on so many boards, the former industry giant ended up being overshadowed by its rivals.

Formulating strategy means determining what businesses an organization should be involved in and what methods it should use to attract and retain customers and employees. This responsibility is far too important to be left solely to the most talented of CEOs. Astute CEOs know this and use their boards as a fresh set of eyes in plotting their organization’s future. They know and accept the common sense wisdom that every organization can benefit from multiple perspectives. Such a CEO, though, must have faith in the competence of his or her board.

hard truth is that many directors are uninformed about the need to measure and monitor strategy in a proactive and progressive way. Indeed, my years of advising organizations on how to implement strategy have taught me that most companies and boards simply fall apart when it comes to measuring anything other than cash flow, revenue, costs and profits. This is not because they lack intelligence; rather, they lack the critical knowledge necessary to guide their organizations into the new economy of the 21st century.

Constructive Engagement

That means many of the Caribbean’s major and emerging corporations may end up being led by directors whose knowledge of their organization’s strategy is questionable. Interestingly, few of the Caribbean’s current cadre of corporate directors seem willing to acknowledge this.

Probably the most significant impediment to director effectiveness in the area of corporate strategy, however, is the absence of simple measures and reporting mechanisms relating to the achievement of strategy. You can’t manage what you don’t measure, and directors today are simply uninformed about the status of their organization’s strategy, its mission, and its values - other than through the financial statements. But to correct this situation means developing new measures and metrics, then incorporating them into the organization’s information system. This can be expensive and time consuming. So what’s the alternative - to simply bury our heads in the sand and pretend bad things won’t happen as long as the current financial statements “look alright”? Of course not. Surely it’s better to anticipate environmental and resource changes before the proverbial wolf shows up at the door. Why, then, do boards not insist on strategy measures for their organization? It could be out of concern over what measures and metrics are appropriate. But waiting for measurement perfection is not a solution. As long as CEOs view their board’s participation in corporate strategy as one of constructive engagement, there is nothing to fear, and they can jointly explore measures that best suit their boards, adjusting them along the way as circumstances require. After all, it’s better to be 50% correct than 100% wrong. And when the measures are used for internal purposes only, there is less risk of misinterpretation by the general and investing public.

Educate Directors I contend, however, that there’s a more powerful reason why boards put little importance on measuring strategy in nonfinancial terms: ignorance. The cold,

What can be done? First and foremost, the education of Caribbean directors – especially when it comes to providing strategic oversight - should be a prerequisite to board appointments and to their continuing appointments. Also, the Regulators of publicly listed Caribbean companies should work to ensure that director education becomes a statutory requirement for all directors within the next five years. After all, investors would like to know that their organizations are being “supervised” not just by individuals with successful track records in business, but also by men and women who have the professional qualifications - and perhaps even the certification - necessary to provide sound board leadership. So here’s the big, uncomfortable question for Caribbean directors: to what extent does your board have the competence it needs to astutely assess and give effective oversight to your organization’s strategy as well as the wherewithal to engage with and advise the CEO if – and how- the strategy needs changing? If you think that there is room for improvement in the way your board carries out this important governance oversight function, you might want to consider sending them to one of the corporate governance training programs available in the region – like the exclusive three day “Chartered Director Program” that has been offered by The Caribbean Governance Training Institute since January 2014. After all, it’s not education which is expensive, but rather ignorance. ¤

BusinessFocus July / Aug



St. Lucia Business Focus 82  

Our special feature in this issue is the 10th Anniversary of First Citizens Investment Services Ltd. which has grown into a regional powerho...

St. Lucia Business Focus 82  

Our special feature in this issue is the 10th Anniversary of First Citizens Investment Services Ltd. which has grown into a regional powerho...