Amongst a universe of possible ‘corporate sins,’ we will look closely at some of those that have raised alarm and concern due to their bearing on the effectiveness of boards (as well as executives) and their effect on the success and sustainability of organisations. It is advisable for board members and executives to be apprised of these troublesome transgressions during board inductions and strategy evaluation sessions. This can assist in maintaining an awareness thereof, eventually facilitating possibilities for the prevention of these sins.
The first sin that is generally known to thwart governance efforts is that of greed. There is ample evidence of self-interest and opportunistic mindsets in boards of organisations as well as at executive managerial levels of firms. The advent of the global financial crisis (circa 2008) was very closely linked to greed and self-interest, with boards and executives approving considerably feeble financial securities at the expense of investors and organisational sustainability. There is general consensus that greed and shareholder returns are negatively correlated. A balance in this context must be stimulated by the existence of an intelligent and independent board, prudent managerial discretion, and limits on tenures of board members and Chief Executive Officers. This can assist in avoidance of individual self-interest and instances of corporate greed.
Fear is another corporate sin worthy of note. Fear, in the executive sense, is multidimensional. We witness corporate fear in instances where executive managers are excessively scared of the board of directors without justified cause. Justified cause in this case does not necessarily relate to executives fearing decision-making due to the board’s independence. We refer here to the fear of appropriate decision-making and fear of healthy risk taking that is approved within the organisational strategy. Executives may not meet the organisation’s full profit potential by having a ‘play-it-safe’ mentality that keeps the organisation in a mediocre state vis-à-vis its competitors.
Fear has been known to affect informed decision-making that would drive growth of the organisation. This is not a call for reckless corporate behaviour. It is rather a call to executives and boards to agree on both spheres and confines of performance that managerial staff can be comfortable to operate within so as to ensure that the organisation reaches its full potential for the benefit of staff, shareholders and other stakeholders.
A sin that tends to be more common at board levels is that of sloth. This is evidenced by the reluctance of some board members to fully apply themselves in matters material to the organisation’s success and sustainable growth. The term “Deadwood Directors” is used in this instance. Individuals appointed to boards must always understand that they have been placed in such positions due to their experience, prowess, and their perceived ability to contribute positively. It is disheartening to witness situations where there is an imbalance in the collective contributions made by board members. It is consequently considered a sin for one with a fiduciary duty and entrusted with leadership accountability to not apply themselves fully and unreservedly to the success of the organisation (and/or beneficiaries) that they serve.
Pride is a corporate sin that is usually evident in instances where board members (and executives) refuse to step down following the lapsing of their tenures, which can in many cases be to the detriment of the organisation. Pride entails a certain sense of attachment to the board members’ roles. In this case, the said attachment to the board members’ roles exceeds their understanding of their duty as a steward or trustee, consequently blurring lines that would direct the board member to act reasonably.
Pride is a sin closely tied to arrogance, which is harmful to the crucial relationships of individuals and departments within the organisation. Arrogance has the capacity to induce fear in management which would taint achievement of organisational objectives. Very closely related to the ego, arrogance presents difficulty with respect to harmonised actions towards organisational growth.
An overall understanding of corporate sins can present a platform for pertinent and constructive questions to be asked with regard to director incapacity, organisational leadership, and overall board accountability. As such conversations are spurred, insight into intellectual naivete can be attained, giving room for redress of identified inconsistencies at board and executive levels. It is therefore crucial for all concerned parties to consider the above in order to avoid seeing the organisation succumb – sadly – to the wages of sin…
The views and opinions expressed in this article are those of the author, Dumisani F. Ntini – Governance and Strategy Practitioner. Contact Global Governance Group; info@governancegroup.org. Visit www.governancegroup.org.
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