One Minute Governance

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #29: how many of us wish our work were more structured? Ever notice how lots of people get uncomfortable the moment things get unpredictable? It’s both normal and understandable. And thankfully, most boards and executives approach their work together in a pretty structured and predictable way. But that can make it even more jarring when something unexpected happens, or when someone in the room starts suggesting (or insisting) that we try something new. Even though I personally feel more comfortable in situations that lean toward the unpredictable – at least most of the time – I think it’s obvious that there’s nothing right or wrong about preferring structure. And I bet you can picture how someone’s preference for structure and predictability might affect the way that they engage in discussions at a board meeting. As long as we’re sticking pretty close to the scheduled topics and not introducing any significant new information, they’re right at home. But instead of making an assumption that anyone – or everyone – is happy with the balance we have, why not ask? What if it turns out all of us would prefer to increase the predictability of our meetings? Wouldn’t that be an important bit of information?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #28: How many of us would benefit from an occasional change in scenery? In episodes 192 and 193 of OMG I talked about the importance of breaks and physical movement. These are not trivial nice to haves – they are critical to making sure that people are cognitively engaged and comfortable – both of which we can all agree are important to board effectiveness. Speaking of trivial, it’s maybe a bit too easy to trivialize breaks and think of them just in terms of gaps in our agendas for people to do with what they please. Mostly to grab a coffee and get caught up on email for 15 minutes. But we all know that that’s no break at all. It’s like if I giftwrapped your overflowing work phone and presented it to you like the greatest gift in the world. No, breaks are different from simple agenda items. If you could design the ideal break – one with no constraints, anything is on the table – what would it look like? We might all come up with something different, but I suspect almost everyone’s dream break would include a change in scenery. Maybe you’re out on a walk or sitting on the beach or up on a roof or on your bike or whatever. And the thing about a change in scenery is that you don’t even need a break to get it done. You could hold different parts of your board meeting in different rooms or have a quick walk and talk or even just play musical chairs. So, how many of us would benefit from an occasional change in scenery?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #27: How many of us would like our board meetings to feel more “creative”? As any casual OMG listener will already know, I spend a lot of time encouraging corporate directors and senior executives to do things that are outside of the range of normal behaviours in boardrooms. First off, I’d like to argue that the range of normal behaviours in boardrooms is way too narrow and doesn’t work very well. But second, I am compelled to admit that it can be hard to find the confidence to try things that literally nobody else has ever tried, even when everything that everyone *has* tried doesn’t work. To that end, I often get challenged by my clients and students on that exact point, usually in the form of “that all sounds fine, Matt, but how do you expect me to go into my boardroom and actually do this stuff?” My initial response often involves the subject of today’s episode. I will look around the room and say, “OK, raise your hand if, in general, you would like your board meetings to feel more creative, whatever that means to you?” Every time I’ve asked this question, more than three quarters of the people in the room raise their hand. And what I’m try: first, that we are all open to trying new things and as a result you probably won’t face as much resistance as you think. Second, just asking a show of hands question requires basically no permission, gets you immediate and valuable information, and in itself injects a bit of active and creative engagement into the flow of a meeting. Creativity doesn’t have to be difficult or complicated or transformative. But it does have to push you outside the range of normal behaviour.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #26: How might subtraction help to solve our stickiest issues? Back in episode 189, I talked about the amazing work by Leidy Klotz and others on a cognitive bias called “subtraction neglect”. Basically, subtraction neglect describes that our brains find it really easy to consider solutions to problems that involve adding stuff and really hard to think of solutions that involve taking things away. Unlike most cognitive biases, we can short circuit subtraction neglect just by asking “how might we solve this problem through subtraction?” So that’s what I’m urging you to do in today’s episode. Think of a typical board meeting – and I don’t care if your meetings are one hour long or three days long – I think it’s safe to assume that you discuss approximately two important problems per hour. Maybe more, maybe less, but two-ish on average. Every single one of those problems will be compromised by subtraction neglect. Even more important are the problems that you’ve put up with forever – maybe you even assume they *can’t* be solved. Things like information overload or getting stuck in the weeds or whatever. Instinctively, we can see that trying to solve those problems through addition could sorta work, but will probably unintentionally make things a bit worse. But if we get into the habit of asking “how might we solve this problem through subtraction?” We’re opening ourselves to a whole new world of ideas.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #25: Is our pain really necessary? In the previous episode, I admitted that work sometimes sucks, and the work of a board is no different. Despite the fact that we can never completely avoid or alleviate the pain of board work, that doesn’t mean we shouldn’t try. So now that you’ve identified and described your pain points, the next question is whether we really have to suffer, or if there might be a different path. The fact is that almost everything that boards do is optional. In other words, the list of specific activities that a board *must* perform is short. Now, there’s tonnes of optional stuff that boards *should* do to make sure that their butts are covered and that they feel confident they’ve discharged their duties. But even here, the range of approaches that boards take to discharging their duties is strangely narrow. Making matters worse, boards have a tendency to want to model themselves after each other. Whenever they need to do something new or different, the first question is “well, what are other boards doing?” The answer, I’m afraid, is “nothing very interesting.” What I’m getting at is that a lot of your pain might be unnecessary, but you’ll never find out if you’re not open to ditching some of the optional stuff and resisting the urge to seek validation from other boards. As long as you’re complying with laws and regulations, I think it’s worth experimenting with novel approaches to pain relief.

Check out Matt's tour schedule here: https://ffm.live/MattinOz

TRANSCRIPT:

Hi everyone. Matt Fullbrook here. This is a quick bonus episode of OMG to spread the word to everyone who follows the show that I’m going to be in Australia and New Zealand next month on a bit of a roadshow. Over the course of the month, I have stops in Brisbane, Auckland, Melbourne and Sydney (in that order) with events tailored for everyone from students to board chairs to CEOs to generally curious nerds. There are breakfast events, cocktail events and casual dinners. If you’re going to be in any of those places in October, or if you know anyone who is, check out the link in the show notes for an evolving list of dates, including links to get tickets or submit RSVPs. If you’re hearing this, I assume it means you’re a fan of the show, and if you like OMG you’ll really enjoy all these sessions. Thanks for checking it out and spreading the word. Hope to see you down under.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #24: What are the most painful elements of our meetings? The work of a board is, well, work. And for almost all of us, work sometimes sucks. The fact that work sometimes sucks is not an indication that something is wrong. It’s just often a fact of life. As long as it also doesn’t suck – preferably most of the time. So, with that out of the way, board meetings are sometimes painful. Different parts of board meetings might be painful to different participants. For example, what’s painful for the board is often less painful for management and vice versa. But in almost all of the cases I’ve encountered, there are parts of board meetings that are painful for everyone. Maybe it’s the times when we pull something out of consent agenda. Maybe it’s the presentations by that one executive who’s just kinda boring. Maybe it’s every time that jerk – let’s call him Matt – opens his mouth and goes on and on about some nonsense. Maybe it’s the sheer quantity and weight of the compliance burden we face. Again, I’m not saying that the pain is necessarily bad, and I’m certainly not trying to imply that I know how to relieve all your pain. But if pain relief is to be found, we need to start by naming it.

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #23: What might I do to make things a bit better? Conventional definitions of corporate governance frame it as something that exists: a system of processes and structures that promote transparency and accountability or some other such nonsense. Nonsense because it leaves us with the impression that corporate governance isn’t something that actual people actually do. There’s a similar problem with thinking of corporate governance only as a thing that belongs to the board, as a whole. As in, nobody other than the whole board collectively might have any impact on corporate governance. A weird implication of that framing is that it obscures the fact that individual directors matter. Personally, I believe that an individual director or senior executive can cause good governance to happen. This won’t surprise anyone who’s followed this show for a long time, but when a single person is intentional about the conditions that affect our decisions, that person is literally doing good governance. Just them, on their own, doing good governance. So, what might *you* do to make things a bit better?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #22: Is benchmarking a sensible way to set CEO pay? If you haven’t listened to the previous episode about knowing whether your CEO is doing an awesome job or not, you might want to take a sec and do that. A very large proportion of organizations I meet, and probably 99% of listed companies in the Western world all set their CEO’s compensation amount and structure in large part based on comparisons to their peers, also known as “benchmarking”. This makes sense if you believe that the most important part of CEO compensation is to avoid having your CEO quit and leave for another organization that pays better. The thing is, we have no idea how low a CEO’s pay would have to go before they might quit. And if we combine that with the stuff from the previous episode about how hard it is to know whether a CEO is any good or not, then we’re left with an important question. The one that’s the subject of today’s episode. One of the main problems with basing CEO pay on benchmarking is that it causes CEO pay to increase rapidly from a starting point that was already unjustifiably high. But even if we don’t care too much about the amount, benchmarking also lets boards off the hook of thinking too hard about what truly effective compensation really looks like. I promise you the answer to that question is not “effective compensation for our CEO looks like whatever everyone else is doing.” So, is benchmarking really a sensible way to set CEO pay?

This season, every episode of OMG focuses on a question that directors really need to answer.

OMG is written, produced, narrated and scored by Matt Fullbrook.

TRANSCRIPT:

Question #21: How do we really know if our CEO is doing an awesome job? Did you know that there’s no evidence that the market for CEOs is efficient? An efficient market is one where supply and demand are basically equal. When a job market is efficient it means that both sides of a potential transaction have lots of information about each other and they are able to confidently assess the talent of the candidates, the appropriateness of the compensation, etc. We don’t have any of that for CEOs. There’s a great summary of this in Larcker and Tayan’s amazing paper Seven Gaping Holes in our Knowledge of Corporate Governance, which I’ve referenced a few times on this show. Anyway, since we have no objective way of knowing whether our CEO is the most qualified person for the job, or whether we’re paying them appropriately, it raises an even more urgent question of how good they might be at their job. You can’t just say, “well the company is really profitable and shareholders are happy, therefore the CEO must be amazing.” Why? Partly because to confidently prove that the CEO is the cause of that success would require you to get rid of the CEO and see what happens. Or to have a multiverse with an infinite number of different CEOs so you can compare them against each other. And how many stories can we think of where a CEO had great performance at the time, but once they were gone we realized that they’d done lots of damage in the process. But answering this question should start, in my opinion, with an open-ended and open-minded conversation about what doing an awesome job really means. In terms of actions AND results.