Welcome to Boardisruption – Most revolutions start – and succeed – because of a fairly simple unifying idea that is held by enough people and for long enough to change the status quo.
Likewise this blog starts with the fairly simple but potentially revolutionary idea that it is time to disrupt the boardroom itself. It challenges the very notion of the ‘old world’ corporate order, with its origins stretching back beyond the industrial revolution and featuring a small, closed, fixed group (the board) making (or at least delegating) ALL of the decisions of the company or organisation.
The idea of the need for ‘board disruption’ is born out of the sheer frustration that I suffer, in something of a groundswell with others in the same boat as myself, as a practising boardroom director and governance consultant. This is the frustration of seeing boards and organisations shackled to the legacy of a rigid prevailing corporate legal structure dating back hundreds of years when today’s world cries out for far more flexible governance decision‑making models than today’s legal constraints on boards permit.
There is a certain irony about the need to disrupt the prevailing board‑as‑ultimate‑ decision‑maker model. Boards are constantly reminded (hounded?) to think big and come to terms with ‘disruption’ in their companies – disruption of established business models and even entire industries that will affect the way their company does business in the near and far future. Yet the one thing that seems ironically impervious to disruption is the prevailing corporate legal structure and hence the way boards themselves work. It is my hope to start and contribute to an important debate about how to disrupt the way that boards work in such a way that they can drive beĀer organisations for the modern world.
At the heart of the ‘simple idea’ of the need for board disruption is…information. Information. Cherished in many ways as the greatest friend of the director. Yet at the same time, with the veritable explosion of information in the 21st century, often it is at the same time the most lethal of enemies to the director.
Labouring under the dominant corporate legal model with its roots stretching back hundreds of years to a very different information‑poor world, directors today constantly lament the sheer volume of information with which they deal in order to make complex, and often even outwardly simple, corporate decisions. Most directors today actively and responsibly strive to fulfil their ethical and legal duties in the time‑honoured belief that they bear ultimate responsibility (and liability) for all decisions of the company.
The law has long deemed the individuals within the board (directors) and some others close to them (officers) to be liable for corporate decisions as well as merely ‘responsible’ for them in the practical sense. Fearing the rising tide of corporate liability, boards inevitably retain to themselves more and more decision‑making authority, rather than delegating it to others. In addition they demand more and beĀer information to help them in making these decisions. In doing so, they create a major rod for their collective backs as they must come to grips with a vast range of complex and technical fields of knowledge.
Legal decisions against directors personally are somewhat surprisingly infrequent and not overly numerous. Nonetheless, from a legal perspective, directors of today feel the legal heat. They operate on the belief that they are expected to be the corporate ‘font of all wisdom’ as they can be held legally responsible even for failing to catch the failings of others on whom they rely for deeper and specialist knowledge (managers, auditors etc).
As reality would have it however a single, closed, fixed and relatively small group of individuals (the board) making all (or most) of the major (and quite a lot of the lesser) decisions for the company makes less and less sense in today’s world. Today’s world is overflowing with complex webs of information and bodies of highly technical knowledge. In this context, even with all of the good will in the world, the single, closed, fixed and relatively small group of individuals that is the board of directors realistically cannot hope to have a sufficient combination of experiences, skills and backgrounds amongst their number to make them the best placed group to make every such decision for the company, can they? And yet they do.
I am not here alluding only to a need for boards simply to delegate more decisions to management. Far from it. Whilst delegation to management may be part of the solution, it is not the whole solution. The constructive tension of the board/management relationship is still a worthwhile expression of corporate accountability checks and balances and so merely delegating more decisions to management could even erode the value of that healthy tension.
The real question then is whether the very nature of the board – as the single, closed, fixed and relatively small group of individuals that ultimately make every decision for the company – might be transformed (disrupted?) to embrace more flexible and enhanced decision‑making models that allow for the voices of a range of others to be included in governance discussions and decisions.
I want to share my thoughts with you about that over time, but first I’d love to know your thoughts, so let’s start the conversation…