Written by Joseph F.X. Zahra, 5 November 2013
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The boards of directors of listed and regulated companies have been hardened further during these last ten years as regulators’ tentacles have reached the board rooms and company secretary offices of thriving business and financial institutions. I once was about to dare say while speaking in a regulator sponsored event that the authority had succeeded in getting closer to central planning and control of private enterprise more than socialist governments had been successful in doing in decades. Regulators through increasing rules, regulations and guidelines are dictating the board’s agenda besides burdening business with increased indirect costs. The Basle II regulations for banks were 20 pages long the Basle III regulations are spread over 300 pages. Much of this regulation is useless and futile if business does not have a soft heart.
The crux of the issue is that of business running their business in the right way. Business’ job is that of being a good business. And this falls only on the tone set by the board of directors. They should not be coerced to do this; it should be done naturally by the people who sit around the board table. The choice of competent and experienced people with integrity is critical. We need more soft items on our agenda, and less (perhaps even much less) hard agenda items.
How much do boards spend time on strategy, new markets, business development, people motivation and development matters, customer satisfaction and customer complaints, innovation? The time spent discussing and deciding matters on these fundamental issues is becoming less and less as compliance reports dominate board time.
Leadership of the board room has to be only in the domain of the company’s directors. Boards have to be accountable to the people who work for them and their customers. They need to operate bottom-up and not top-down – they start by listening to the employees who are facing the client and interacting with them. The agenda in boards needs to look at issues related to corporate strategy and delve into the enablers through which results are achieved - management, employees, customers and other critical stakeholders.
I am a great believer in the day of retreat – a day for the board of directors outside the head office and with a simple agenda with items which are definitely not imposed by the regulator – topmost being - a proper inward look at the business, and a fresh outward look at the future.