Are new director appointees a burden to the board?

When I was reseaching my fourth book, The Twenty First Century Board, it was put to me by a prominent and experienced chairman that a new non-executive director can take a year to settle into the new role, learning how the company operates, the nuances of the corporate strategy, the dynamics of the board and the personalities of the key players in management. As well as many other things.

I thought it was as odd thing to say - surely a board needs a new director to be more actively engaged a lot earlier? And I started to think about how this could be done.

As part of my research into "Leading for Diversity in the Boardroom" I considered the three main parties who are responsible for ensuring that a new director can start making a contribution at the board table from their very first meeting. They are: the chairman, the board as a whole, and the new director.

Often a new non-executive director feels that the most appropriate way to behave in
the first few board meetings is to remain quiet, to listen and to participate in the
discussion only if they have something valuable to say.

The underlying motivation for this behaviour is the new director wanting to ‘fit in’ and not dominate proceedings or exhibit other behaviours that the group cannot tolerate.
Ironically, this behaviour can send the wrong message. If the other board members have heightened expectations about how the new member will add to the collective
value of the board’s composition they will be disappointed with the silence. They
would prefer the new director participates in board discussions immediately.

Obviously the new director takes a risk with whichever approach they adopt.

I'd welcome comments on the experiences of other directors who are new to boardrooms or from those who remember what their first board meeting was like.

More about this topic can be found in my article, "Cultural Governance: ensuring 'fit' in the boardroom" which was published in the refereed governance journal, Keeping Good Companies, in August 2011.

In subsequent posts about "leading for diversity in the boardroom" I'll discuss how a chairman can avoid the burdens associated with inducting a new director.

Should company directors be on Facebook?

Before social media was part of daily life for many people, I was engaged by KPMG to research and write a report on the training and education of Australian board members.

After conducting a series of interviews, I concluded that board members believed they only needed to attend courses on corporate governance and related topics if they weren’t “experienced” in the boardroom.

The interviewees – all prominent company directors serving on boards of listed companies as well as significant non-profits - considered the content of most courses to be too “low level” to be of any assistance to experienced board members. Consequently, they were more likely to be guest speakers at such courses, rather than participants, they said.

Their time would be better spent reading and talking to peers and management rather than attending formal courses. Of the sources of information on which they most relied was the Australian business bible, The Australian Financial Review (AFR).

Fast forward a decade and I wonder how many directors today think the same way? Is the AFR – or its equivalent in other countries - still regarded as the best source of business information for the company director?

There is a plethora of information available online but how many company directors are comfortable sourcing it? Many tell me: “I’m on Linked In but I hardly ever check it because I don’t have the time.” One director said that in order to maximise the time she spends with her children, she severely restricts her usage of her computer. She relies on the weekly media updates she’s sent by her companies; she also reads the AFR.

Yet social media forums such as specialist discussion groups on Linked In provide directors with a network of peers and specialist advisors with whom they might not otherwise engage, let alone meet.  Some of the world’s biggest brands have a Facebook page. The chairman of an ASX20 company may not feel the need to tweet but all directors should understand the power of Twitter.

Social media is the way many people choose to engage with the world – people who are a company’s shareholders, stakeholders, employees and customers. These new ways of receiving and disseminating material shouldn't be ignored.

A quick peruse of a selection of "favorite" websites - including overseas business newspapers - as well as logging in to Facebook and Linked In is exactly the same as opening the AFR over breakfast, turning on the radio to listen the the ABC, or watching the late SBS news of an evening. It's a habit and it's part of staying in touch with how the world is thinking.

Do you lead your board like Margaret Thatcher?

It is January, 1984. The place is No 10. The forum is the British Cabinet’s Overseas and Defence Committee. The subject is the possibility of an attempt to normalise relations with Argentina…Sir Geoffrey Howe is four minutes into the Foreign Office paper on the need to open exploratory talks with the Alfonsin Government. Mrs Thatcher cuts in: “Geoffrey, I know what you’re going to recommend. And the answer is ‘no’.” End of item: nobody argues with the boss.
                                                    - Peter Hennessy, Cabinet, 1986.

The chairman plays a crucial role in determining the quality of decisions made by board members.

If the chairman is a person to whom deference is afforded by the group, the decisions made by the board will be influenced by how the board members predict the chair’s preference for, and expectations of, the final determination.

A chairman must appreciate that in order to ensure a high standard of decision-making by the board he or she should adopt a neutral position while simultaneously eliciting a range of views, and especially perspectives which are the antithesis of the group norm.

Unlike the former British Prime Minister Margaret Thatcher, whose domination of her Cabinet remains the stuff of legend, a chairman should avoid stating personal preferences too explicitly during the boardroom debate.

Group decisions are usually determined by a majority - rather than the minority – rule as I wrote in a 2003 corporate governance opinion column for the now closed CFO magazine.

The minority rule, however, should not be unappreciated, as it can be exactly the position needed to make a better decision, to reverse a “bad” decision, or to add a new perspective to an outcome which is ultimately determined by the majority rule.

If a chairman was so bold as to encourage the minority rule, it must also be understood this will cause dissent in the group. Board members are predisposed to endorsing the most socially-desirable viewpoints of the group and a “deviate” will upset this balance.

The chairman, therefore, must be able to celebrate and support the views of the “devil’s advocate” while simultaneously managing the ensuing furore of the group caused by the dissenting voice.

The “devil’s advocate” must likewise be responsible for the fallout caused by airing a viewpoint counter to the group norm.

There have been several notable examples of chairmen in Australian board history who were Thatcheresque in the execution of their duties because they believed their particular leadership style was the only way to express authority and power.

The more elegant, courageous and influential approach is if a chairman lets the minority have its say, celebrates the “deviate” viewpoint and learns that being the centre of attention can also mean standing outside the spotlight.

Leading for Diversity in the Boardroom

At The Boardroom Consulting Group I engage in regular, self-funded independent research on issues I believe will be challenging boards in the near future.

For the past 18 months I have researched the topic of Leading for Diversity in the Boardroom. I chose this topic in the wake of new gender diversity guidelines introduced by the ASX Corporate Governance Council as part of its Corporate Governance Principles and Recommendations in 2010.

Rather than focus on women in the boardroom, I chose to investigate what it would mean to introduce one or more dimensions of diversity into a board which has traditionally been composed homgeneously.

My key findings are:

1. chairmen need a specific set of skills over and above the traditional skills of chairmanship in order to lead a diversely-composed board;

2. the board culture needs to be one which embraces diversity, with each and every member exhibiting skills that engender openness to a wide range of ideas;

3. the new member must accommodate the incumbent culture while at the same time acknowledging that their inclusion in the group will mean that the group dynamic will change.

I'll discuss each of these findings more fully in later Leading for Diversity in the Boardroom posts.

The work has been published in three parts in the peer-reviewed journal, Keeping Good Companies, which is published by Chartered Secretaries Australia. I have already addressed CEDA on the topic and I am receiving requests to make board presentations and to speak to private lunches of directors.

Do you have the skills to lead a diversely-composed board?

If you are the chairman of a listed company board which is composed of people who are representative of many dimensions of diversity - age, gender, nationality, educational background and geographic location - you are in the minority.

Many of your peers will be leading boards which are homogeneous; some will chair boards with one or two female directors. In governance jargon a board of men and one or two women translates as being "diverse".

But gender isn't a synonym for diversity.

Chairmen of truly diverse boards are rare. I have talked in depth to many of this select group of men and women. Their experiences of managing the views and contributions of people who are quite different to one another formed part of my research for "leading for diversity in the boardroom".

The skills that a chairman of a diversely-composed board requires fall into the catagory of "soft" skills.

In the report of my research, "The Chairman of the Future: Leading for Diversity in the Boardroom", (Keeping Good Companies, February 2011), I write:

"The ability to chair a diversely composed board will require a range of what are often called “soft” skills that have traditionally been considered the domain of women. The most significant of these is being able to listen closely. In all probability, someone who is different to you – because of gender, age, nationality, work and education background, religion – will not think the same way. But that doesn’t mean you both aren’t working towards the same solution.Therefore, the leadership skills required for a diverse group will also include patience, understanding, and the ability to put aside ego in order to accept that there may be another way of doing something. Finally, a tolerance for dissent is critical."

The leadership skills of patience, understanding, the ability to accept other viewpoints, the ability to listen and a tolerance for dissent are in addition to the traditional skills that a good chairman will bring to board leadership.
As more companies in Australia and globally continue to pursue diversity as a critical strategic goal, the people who are chosen to lead boards may well be selected based on their demonstrated ability to "lead for diversity".

iPADS FOR QANTAS

In late 2011 one of our clients, Qantas Superannuation Limited, formally shifted to electronic delivery of its board papers via iPads.
I interviewed QSL chairman, Anne Ward, about why the directors wanted soft copies of the board papers, what was involved in purchasing the technology and the software and whether directors needed training.

“The main reason we introduced tablet technology was to do with efficiency,” says Anne Ward. “The board wanted to have the board papers delivered more quickly and to have past papers readily available in a central location and in soft copy.

"We also wanted to reduce the cost and time involved in preparing hard copies of board papers and then couriering the papers to our directors wherever they may be in the country.”

QSL believes the cost of purchasing iPads and software programs for all its 10 directors will be recouped within 12 months. The savings in the time taken to prepare Board packs and the speed of delivering the papers are already apparent.

“At least half the directors were familiar with iPads and were using them in other environments so the implementation was relatively easy,” says Ward. “The tablet and the software are very intuitive so it only takes a few taps on the screen to locate the board papers, convert them to PDF expert format and have them ready to read and to annotate.”

Board members received individual training sessions with QSL company secretary and head of operations. The sessions lasted between 15 minutes and an hour depending on how familiar the director was with the technology.

“For the first meeting in which the iPads were going to be used we delivered the papers electronically as well as in hard copy to help us make the transition,” says Ward. “This year we are only using the iPads but directors can request hard copies of individual papers or the whole board pack.

"So far no-one has taken up this option, however; everyone is trying very hard to familiarise themselves with working in soft copy which is what we all agreed to do.”

Many of the members of the QSL board travel frequently – one is a pilot and another is a flight attendant - so the directors are pleased to be able to have the papers delivered to their iPads.

“Tablets are light and easy to carry so the convenience of using an iPad to receive and read board papers is much appreciated by our directors,” says Ward.

iPADS IN THE BOARDROOM

The information that comes to the board, and the manner in which it is presented, is critical for board decision-making.

Traditionally the board receives a "board pack" - a thick pile of papers written by management which is packaged by the company secretary and sent via courier to the director's office or home.

This information is supplement by presentations to the board by the CEO and the management team.

Over the past year, the possibilities of the iPad are changing the way directors consume their board papers.

Chartered Secretaries Australia says the advantages of iPads include:
1. portability and ease of access to current board papers and an archive of past papers;
2. security - password protection may mean board papers are more secure on an iPad or tablet than in hard copy;
3. printing and delivery cost savings (after initial outlay for the technology);
4. improved record keeping.

Introducing iPads to directors isn't always a straight-forward exercise. Company secretaries I speak with talk about intensive training being required for some directors who are unused to the technology. Ensuring security of sensitive information is an imperative.

In subsequent posts on boardroom technology I'll convey the experiences and advice of company secretaries and chairmen who have accepted the challenge of using iPads in the boardroom. It's not simply a case of buying a set of eight or 10 iPads and letting directors start annotating their papers. Much more preparation is required. The good news is that the effort seems to be worth it.