Just about every month for the past fifteen years, I have participated in a board meeting, an executive committee discussion or an advisory group consultation for a company, government or a not-for-profit interest. At the best of these meetings, the members bring a variety of experiences, perspectives and ideas to the table. They engage in a lively and fulsome debate of important issues and developments. They focus on strategy and planning.
As a result, the leadership team serves as a compass for the organization’s future direction, as an anchor for its vision and values, and as a magnet for potential investors and employee talent.
Lately, however, in the wake of recent high-profile corporate scandals, much of the discussion around corporate board tables has shifted to governance reform, new rules and legal compliance. Reassuring investors that their interests are protected is not a bad thing, but I believe that more boards should remember that it’s not the only thing.
Time and time again, research has shown that an effective board of directors is not simply a matter of putting in place independent directors, audit committees and ethical guidelines. These certainly help to avoid problems. However, I believe that investors, employees and other stakeholders have come to expect much more from their corporate leadership teams, especially now.
With the economy shifting back into a growth mode, stakeholders are increasingly focusing on the longer-term value and purpose of an organization rather than its short-term movements in stock price. Corporate social responsibility – a company’s commitment to improving its community, protecting the environment and supporting its employees – is taking centre stage as well. And employee talent, not investment capital, has emerged as the scarcest resource for all kinds of companies.
As Warren G. Bennis, the distinguished management teacher and author, said, “Leaders keep their eyes on the horizon, not just on the bottom line.” To gain this broader, more future-oriented perspective, I believe that corporate boards should look at more than the rules to be followed; they should also carefully consider their role as leaders and the responsibilities that this leadership brings.
First, as several Ivey research studies have shown, effective business leaders, including those around the board table, must articulate a clear set of organizational values embracing integrity, fairness and compassion. Values are not the same as ethical guidelines or codes of conduct. Guidelines and codes are specific rules about what a board member can and cannot do. Values, on the other hand, are more profound and enduring. Values communicate beliefs.
During their extensive research, Ivey professor Pratima Bansal and Ivey MBA student Sonia Kandola discovered that organizations need a strong and consistent set of values to ensure all employees act with integrity. “These values establish a framework for what is considered to be acceptable within an organization.” They further concluded that these values must be lived by every employee, especially board members and executives. Every employee looks to the corporate leadership team to show the way.
Second, as Ivey’s research also shows, leaders must encourage open and honest communications across all levels, but especially with top management. Authentic leaders listen with intent and invite feedback. And they act on what they learn. This honesty and openness engenders trust, reinforces relationships and secures the loyalty of employees, customers and investors. It is vital in a business environment marked by uncertainty and change.
Third, I believe that boards of directors must have a vision for their organizations – a vision that recognizes that a company has a purpose as part of a larger community. The best companies are passionate about contributing to society – from the products they sell, to the examples they set, to the charities they support. The best companies have a vision that employees are proud of, that customers believe in, and that investors understand.
The new rules concerning governance and the increased emphasis on compliance will undoubtedly help to reassure the investment community. However, new rules are not enough. Investors, in the long term, are looking for more. So are employees and customers.
The best boards understand the importance of clear values, honest communications and social vision in building a company that will be consistently successful year after year. Above all, they recognize their critical role in fostering this success.