This autumn issue of the Journal covers a broad range of topics: modern slavery in the supply chain; stakeholder and regulatory trust; small-time corruption within our organisations; managing compliance programmes within the restricted confines of small sized firms, and even project management. Finally, we have a timely summation of soon-to-be implemented changes to the capital markets union.
You may find the breadth and disparity of actions required of companies, their boards, executives and control functions striking. Where does one draw the line when there is zero tolerance? How does one prioritise when all risks are weighted equally? How do we define our role, when it appears to be omnipresent?
Indirectly perhaps, this was the theme at a 2-day Forum for Bank Directors I attended recently. A regulated industry, we were submitted to presentation, upon presentation detailing regulatory expectation placed upon the bank director over their understanding of a very broad range of topics; but also demanding of a level of knowledge of detail of process and risk calculation that was – when all presented together – breath taking. In the words of one Bank Board Director present: “If I have learnt one thing today, it is not to assume the position as Chair of the Risk Committee.” This from a man who, two years ago, was the CEO of a sizable bank himself.
It is not that these expectations of ability are misguided, but it is a matter of capacity. I do not argue with regulators around the general notion that bank governance structures, and board performance in particular have failed to prevent crisis – either systemic or corporate. There is furthermore ample evidence that non-regulated industry suffer the same problems, such as recently demonstrated by the Volkswagen Group. However, I have to ask the question – in the knee-jerk aftermath of crisis – have regulators lost sight of purpose and outcome? Is it the role of board directors to scrutinise and effectively run a quality check on everything the executive does? What does this imply – nay, impose – on the behaviour and focus of the board of complex organisations in particular?
Professor Otto Scharman of MIT runs an online course on Theory U. One of the concepts covered are the four levels of listening. Oversimplified in my own words, these are (i) Downloading information and slotting these into pre-existing frameworks without much thought, (ii) Factual where new information is debated, but not digested, and viewed from a perspective of justifying or defending existing bias, (iii) Empathetic whereby new information is engaged, and there is a willingness to consider changes of tactics and strategies to accommodate the realities of unanticipated realities, and (iv) Generative: A dialogue and engagement with new sources of information where bias and concern for ego is set aside and we explore and reflect on what our potential future has to offer. We look for the trends, new dynamics and influences and imagine our role in this new, emerging reality. You may need to read the above twice, but you will probably not be surprised to learn that studies show the majority of our listening behaviour is factual; and you will probably agree that generative listening promises greater value over time.
Legislators and regulators, in insisting on “deep-dive” involvement by board members into the activities delegated to its executives, appear to have forgotten the division of roles between the boardroom and the executive suite; the distinction between the executive and board roles of the “executive director” seem to have been blurred at the expense of the oversight capacity, and strategic role of the board director. How is the boardroom to assume its responsibility for the long term success of the firm, when it’s agenda is pre-determined by compliance driven control topics, and discussion and challenge devoted to running day-to-day management concerns, rather than generative listening and the identification of emerging potential?