Magic of Board Governance in Turbulent Times – Ethics & Risk

By Mr. KV Rao


 We are all far too familiar experiencing occasional turbulence in the air when flying, but not so often - on the ground in our external environment. If you added “turbidity” to “turbulence” – visibility drops drastically, and you may lose sight of the steering, and crashes are imminent – essentially crashes in managing ‘ethics’ and ‘risks’ – the two most popular words in corporate religion. There are no autopilots in here. 

It is paradoxical to talk about ‘ethics’ in the context of a corporate governance, and when you become board directors – where ethics is so integral in one’s personality, shaped by early life experiences. The first seeds are cast by our own parents, school teachers, early experiences and matured and shaped through the experiences of life. It is rather counter intuitive to expect the learning and practice of ethics, when you are entering a board room. Frankly, either you have them or you don’t.  However, ethics in the area of business don’t fall into straight black and white, I am reminded of the book “The Difficulty of Being Good – The Subtle Art of Dharma”, by Gurucharan Das. ‘Dharma’, is such an integral word that has no equal in English – it encompasses within it – rightitude, truthfulness, fairness, appropriateness, correctness, compassion, care, courage, etc. that make it very so very complex in its practice, in our business environments.

The reflections of what is right and wrong, are both contextual and largely based on the lens used to view the reality. This is what makes the role of Directors challenging in voting for the ‘right’ – what appears right might not always be the right. At the end of the day, one needs to rely on one’s own inner moral compass, when in doubt. Of course, all the literature, case work, and ethics manuals and all good reference materials but no substitute a strong inner moral compass. Still without the rectitude and courage to speak one’s mind and stand ground to what you believe in, simply having a moral compass has no real value – if your protest is only a whimper or a whisper, you just wither away. Ethics in practice is an emotional intelligence at work. 

The second paradox is about ‘risk’ – without risk there is no business, and with risk too there is no business! Hard wired risk management processes, methods, tools have all helped in making business risk taking a far more evolved and objective process, but they often end up becoming restrictive, and counterproductive to growth, innovation, and entrepreneurship, if not managed with a sense of balance. Here again, it is often the collective wisdom of board leadership to support managements in taking, albeit calculated risks and encourage them to hone success. 

The third paradox, to me is on safety – organizations and boards spend considerable time and effort on ensuring, the operations, facilities, systems, people are well ring fenced and secure. The important paradox, that goes unnoticed and often unaddressed is not the external security, but the internal insecurities that management and leaders face. In turbulent times, this personal insecurity can make the best of managers behave and take decisions in a somewhat nervous and self-protective manner, imperiling the organization. Processes in itself, sometimes strangely become self-serving - as protective blankets to cover managements, against their own failures.  

The way forward, has a few elements for us to reflect upon: - 

Board Composition

1. Good People: Ethical Leadership is an outcome of having ethical leaders. It is important to find the right people, not just qualifications and achievements but look at their backgrounds in terms of leadership styles and practice of ethics. 
2. Diversity – beyond a gender diversity, board directors appoint directors from known circles with similar backgrounds, and a ‘sameness’ pervades all over - of thought, of intents, of views, and it does not help in today’s times of disruption. Adding diversity in terms of having a social worker, a sportsperson, an artist or whatever will bring into the board new angles of thought. 
3. Age: I believe a 3 generational composition, i.e. grandfathers, fathers and sons in a family board make a great team. They bring the wisdom of the past, the pragmatism of the matured current, and the youthfulness of current and hence being best of past, present and future to insulate board vision to the future, with maturity. 

Board Culture & Leadership. 

1. Boards cultures we have inherited are archaic, largely colonial, and English. We still wear suits in some boards, in hot summers... There is a stiffness, formality and ceremony with board meetings that cover it all in a thick diplomatic layer. Look good, say right…. Don’t actually help. It’s important to break loose, when needed, and have a no holds barred discussion, debate, and encourage mutual challenging amongst board members. Many forward-looking boards have moved forward to have periodic board retreats to achieve this informality and help break from convention to bring unhinged thought processes. 
2. The Chairman plays a very critical role, and their ability to manage conflict, leading with purpose and keeping the managements challenged, stretched, yet motivated is not found in corporate guide books or manuals. You do need to find, install and empower such Chairmen. The flip side of it is also often seen where larger than life Chairman lead, where there is so much deference to a personality that having a board makes no real difference! Deference should not kill difference. 
3. Independence, is for all directors and not just for the independent directors. Each one should have an independent view on matters and question oneself hard when you find yourself agreeing with ease with others. 
4. All cultures are nothing but a set of shared values and beliefs, there is great value in the heritage and success stories of the past and it is important to preserve that unique set of a cultural mold, that unique glue, and keep re-inventing itself into the future. If your board has done nothing new, in the last 2 years’ time to ask yourself what could have been done differently. 
5. The times are complex, and issues that come to boards are equally complicated and deserve a deeper understanding of the market place, consumers, technology, competition, regulation, etc. and Directors too need to continuously LEARN, and keep themselves abreast than to depend only on management inputs and presentations. 
6. Last but not the least - time management. Not enough time is spent preparing for the board meetings, and reading heavy board notes, with huge stack of presentations etc. There is a whole need for directors, and managements to work more effectively and efficiently on allocating and managing time, and bringing focus, and brevity into discussions. 

It there is really a magic in here? No, old world wisdom has no expiry date – except that it needs to periodically upgrade its OS – (the operating system.) relevant to the emerging environment and challenges. The answers point to the same old wise wine, in new bottles.  

To end on a lighter vein, here are my one-liners with a punch. Quote them, if you wish! 

-      “The job of a Managing Director, is not managing directors’ only! – it’s actually managing the business.” 

-      ‘You don’t have to be an Independent Director, to be independent in your views! 

-      ‘The best and often the most honest conversations happen when walking out of the board room, if only they can happen inside!” 

You are in a 'board', not to get 'bored' !!!!!