- February 22, 2021
- Posted by: Bernard Mallia
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Company boards are one of the fundamental building blocks of good governance and resilient corporate strategy. Their role is to regulate, monitor, supervise and shape the relationship between shareholders (who own the company and may be thought of as principals) and managers (who run the company and may thus be thought of as agents). This effectively means keeping a watchful eye for managerial incompetence, strategic-tactical misalignments, inefficiencies and fraud, as well as steering the company’s strategy while taking cognisance of the changing operating environment.
To-date, the record of company boards may be said to have been mixed. The first two decades of the twenty-first century have produced the likes of the Enron, WorldCom, Parmalat, BlackRock, Madoff Investment Securities, Lehman Brothers, Pilatus Bank and Satabank indignities. On the other hand, they have also at least been partially responsible for the stellar rise of Microsoft, Amazon, Tesla, Google and Coinbase.
Where they exist, board problems have been pervasive and deeply-entrenched. Among the many documented misdeeds, CEOs, board members, directors and company shareholders have roped in unfit cronies to fill in board positions, side-lined and muffled critics, ignored advice they didn’t want to hear, allowed reckless decisions to go through without opposition and also allowed organisational politics games to play out at the expense of the company. Board members are also known to have been at war, either openly or underhandedly, with one another at the detriment of the businesses the interests of which they were supposed to represent. This has been reported at higher frequencies in family-owned companies, where past occurrences unrelated to the business ended up resulting in unresolved family feuds which in turn invariably end up erupting in the board room. There is overwhelming evidence that board problems are not limited to specific countries or cultures. They are, in fact, common across the globalised corporate world.
The past two decades have seen a number of attempts to bring corporate boards in line with modern expectations. In the USA, for instance, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 have significantly changed the face of corporate boards.
These reforms have nevertheless fallen shy of addressing the basic problem with most boards today. Modern companies have very often been admirably brutal and inventive when they needed to reinvent themselves. They have, among other things, adopted disruptive technologies at break-neck speed, experimented with every imaginable organisational form, experimented and tinkered with different ways of attracting and retaining required talent, and contracted out everything from manufacturing to strategy formulation. Yet when it comes to boards they have been fanatically conservative. Indeed, boards today are almost exactly what they were a hundred and fifty years ago. The fundamentals have remained the same.
Most board members are either part-timers with neither the knowledge nor the incentives to monitor companies effectively, or else they are full-timers who are operationally involved in the running of the company at senior management level who have the knowledge to be able to carry out board functions effectively but who are too heavily absorbed in daily operational matters to be able to take a step back, look at the bigger picture, ask the right questions and steer the company strategically. Most often they are also beholden to the people they are supposed to monitor or are themselves the people who are supposed to be monitored by the board.
Simply put, when boards don’t get to ask the right questions and provide strategic guidance, corporate governance fails.
Equinox Advisory has long taken an active interest in good corporate governance and how to be able to implement it in practice. Over the years, we have put together a suite of board services governed by professionalism, strict confidentiality, non-competition (we don’t provide board services to firms operating in sectors where we already have clients that might be in competition with prospective new clients) and a thorough understanding of our clients’ business. Our services are structured along the lines of Stephen Bainbridge’s and Todd Henderson’s 2014 to 2018 works on the subject.
The idea behind it is that in the same way that companies would never buy legal services or management advice from people only willing to spare a few hours a month, they shouldn’t put up with the same arrangement from board members. Indeed, at board level, where value added is potentially much higher than in any other area of the business, hiring a professional Board Service Provider can not only supply the company with a full complement of board members, but also furnish it with its collective expertise. This spans digitalization, the ability to process huge quantities of information, regulatory expertise, and specialist advice on things such as mergers, acquisitions, talent management, finance and cost-saving technologies. This means that having Equinox Advisory as your Board Service Provider will enable you to leverage the expertise of Equinox obtained over the course of thousands of assignments.
- Appointment of one of our Experts on Company Board
- Provision of Professional Board Advice
- Strategic planning
- Executive coaching
- Board retreat facilitation
- Board decision support
- Succession planning
- Board development programs
- Board orientation programs
- Board training on specialised topics
- Board evaluation of board members and committees
- Board assessment and development of director skills
- Director orientation and development for new members of the board
- Executive committee facilitation, planning, and training
- Trustee training and development