One Minute Governance

Let me talk about Canadian boards for a second. We indoctrinate our boards with the phrase “you owe your primary fiduciary duty to the corporation.” It’s factually correct, concise and memorable. Problem is, on its own it’s substance-free. Think about it. What the heck does it mean to have a duty to the corporation? Whether you’re a Canadian or not, take a second to think about what it means to you. When asked, many people offer that they think it means you are responsible to look after the long-term survival of the corporation. Some people will say its about taking care of the people inside the corporation. Some people say it’s about keeping shareholders happy. But if we pause on any of those things it becomes clear pretty quickly that none of them are exactly right. For example, if we had to prioritize the long-term survival of the corporation, then we would never take any big swings that might have big downside, and if we went out of business or sold the company wouldn’t that mean that we were in breach of our duty? Anyway, what I’m saying is that understanding the actual spirit and substance of the law matters *a lot* in boardrooms. Not just to make sure we don’t mess up too bad, but also to give us clarity about what exactly it is we’re supposed to be doing. In the end, even though the law isn’t a condition that we can cultivate directly from the boardroom, it is a condition that should inform our cultivation of other conditions. Including the rules that we set voluntarily, which we’ll get into in the next episode.

For the first time in OMG history, I scrapped an entire script concept in the crafting of this episode. I had a whole nother narrative here that was about rules and bosses and a bunch of other stuff that, sure, matters to corporate governance, but it just didn’t align well with the spirit of our season-long thing about the conditions that affect decisions. So instead, let’s remember back to episode 135, called “is everyone in an organization ‘doing’ corporate governance?” The argument I made there is basically that corporate governance is the sum total of all of the decisions that happen anywhere in an organization, no matter who’s making them. The decisions made on the front lines impact the decisions made at the top and vice versa. Everyone *is* doing corporate governance. That means that good governance matters everywhere, too. Remember the Wells Fargo fake accounts scandal in 2016 – which seems to somehow maybe be back AGAIN as of August 2023? If not, you can take a sec to google it. A lot of people who educate corporate directors use it as an example of a board failure. I always thought that was a bit of a stretch. But it *is* a governance failure. They failed to intentionally cultivate conditions for their sales people and their managers to make effective decisions. And I actually think it’s a great exercise for boards and senior executives, from their position at the top of the hierarchy, to wonder about their role in cultivating those conditions. And also wonder how the decisions by those throughout the corporate hierarchy might be affecting conditions in the boardroom. It’s foolish to think there’s no effect.

In the last episode I tried to encourage you not to fall back on the temptation to use your corporate model as an excuse not to try new things in the boardroom. In my experience, the most common constraint related to corporate structures and models is democracy. And democratic processes are *definitely* a condition that affects decision-making. And let’s be honest, it’s not likely that we can be too intentional about democratic processes themselves, although we *can* be intentional about other stuff in order to make our democratic constraints less painful. A couple of obvious examples. Let’s say you, me, and some random person called Luis are all siblings, and we’re board members of a company that our parents built, grew, and still own. Let’s also say that our parents are kinda super stubborn and tend to reject any idea that feels weird or different to them. Let’s also say that we think the status quo isn’t working. Well, we can’t change the fact that our parents own and control the company. But you and Luis and I *can* ask ourselves, “what conditions might make our parents feel more comfortable having a fun conversation about what new things we *could* try?” Or maybe the three of us aren’t siblings, but instead are board members of a big trade association with a politically complicated membership. Maybe, in fact, the three of us tend to fight a lot in the boardroom because we’re protecting the interests of the regions that elected us. It’s our democratic model that brought us to this point. Take a step back, though. Scroll through some of the previous episodes in this season. Start writing down some of the conditions you might be intentional about in service of cutting through the political BS and, y’know, cultivating EFFECTIVE conditions…instead of crappy ones.

If you’re anything like me, you’re kinda inspired by the idea of good governance as being intentional about all these conditions we’re talking about, but you also find yourself mostly doing the same stuff as always. Or at least you find it hard to break the gravity of your habits and routines. In a lot of boardrooms, one of those habits is to fall back on the excuse of your corporate model as a reason not to try new things. “We’re a huge listed company, it’s just not proper for us to experiment in the boardroom. Or, “we’re a not-for-profit organization, we can’t ask our volunteer directors to try new things or spend their time in new ways.” Or, “we tried something like this before and our regulator didn’t like it, so let’s not try it again even if we think it will make our board way more effective. Or whatever. And it’s true: your corporate model *is* a condition that affects the way you make decisions. It’s also true that every one of those excuses I just gave is both relevant and totally fair enough. BUT, I want to try to convince you that all you need to do here is take those excuses, change the wording a bit, and then suddenly your corporate model becomes a point of curiosity instead of an excuse or constraint. Like this: “We’re a huge listed company, how could our shareholders benefit from a bit more experimentation in the boardroom?” or “We’re a not-for-profit organization. How could we cultivate better conditions for our volunteer directors to thrive despite time and resource scarcity?” Or “We’re really excited to try new things. What would it take for our regulator to be supportive of the stuff we want to try in our boardroom?” Just making excuses and leaving it at that is the opposite of being intentional.

You can probably tell from the last few episodes that I’m on a bit of a Google Scholar binge right now when it comes to OMG. And if you browse through the conditions we’ve covered so far this season, part of the subtext is that people’s moods matter. I definitely don’t want to leave you with the impression that you’ve failed unless everyone feels great all the time. I mean, sure, I think board meetings are altogether too serious for the most part, but that doesn’t mean they’re not, y’know, work. And hard work at that. Sometimes hard work is just not compatible with a diverse group of people all feeling pumped. But it’s obvious how and why mood matters, right? Take anger or sadness or whatever other powerful and ostensibly negative emotion. If just one person in a group gets super angry, the entire vibe changes for everyone. Same thing if just one person starts laughing uncontrollably or gets super excited. Sometimes these moods are something we can and should try to tap into as a group. Sometimes we need to take a break. Most of all, we can be at least a little intentional, hopeful even, about cultivating a specific vibes for different parts of our meeting. Our moods are naturally different sitting with friends with some scotch around a roaring fire compared to, say, a boring lecture in an auditorium classroom. What are the boardroom equivalents? Oh and back to Google Scholar: as far as I could find, the relationship between mood and cognition and leadership is…let’s just say complicated. So don’t expect to get it right every time.

I like a lot of different smells. A lot of food and drink smells make me happy. I am ambivalent to most cosmetic fragrances, but really like some others (and ya, I also can’t stand some of them). I love many of the varied smells in a natural environment. I even kind of like the smell of skunks because I think skunks are very cute and hilarious, so I get excited when I smell one and sometimes wander around to see if I can find it. Some other people have really negative reactions to smells – both natural and artificial. I did a bit of poking around to see if I could find any research to explain this and the only paper I found that wasn’t just based on either tiny samples or self-reporting in surveys was from 2019 in Regulatory Toxicology and Pharmacology, where Basketter, Huggard and Kimber found “adverse health effects arising from fragrance inhalation are uncommon and remain to be identified and confirmed by methodologically rigorous epidemiological investigations supported by a convincing biological and mechanistic basis.” In other words, yeah some people definitely have bad reactions when they smell certain things, there’s no reason to believe that the fragrances CAUSE the bad reactions. But that’s no reason not to be interested in creating an environment in your boardroom where people feel most comfortable and welcome. What if, and I’m just spitballing here, your board becomes more creative and strategic when the room smells like Cinnabon, and more careful and detail-oriented when the room smells like cedar? What if half of your board members are super bothered by strong smells while the other half gets really stoked when they can wear their favourite fragrances? You’d probably want to know these things, right? And maybe be intentional based on what you learn.

Let’s just get it out of the way: caffeine is one of the world’s great miracles. If you’re not a caffeine consumer, that’s fine: we can still be friends. But, I will never completely get you. For the rest of us, every bit of scientific evidence that I’m aware of suggests that caffein consumption, in moderation,  is both good for us – protecting against cardiovascular disease, obesity, diabetes, some cancers, and more – and also has the potential (in my experience) to make us feel like we have a superpower. Also, seriously, check out the 2021 paper in Nursing Reports by Feng, Wang, Jose, Seo, Feng and Ge that looked at a 15 year dataset of 23,898 adults and found an inverse relationship between moderate caffeine intake and mortality from ALL CAUSES! I won’t say that caffeine makes you immortal…although…. Anyway, let’s bring this to the boardroom. I am pretty sure that one of the worst experiences I’ve ever had with a board was when we arrived for our session at 8 in the morning on a Sunday expecting the local coffee shop to be open, only to learn that it was closed until 9:30. We made the stupid mistake of deciding to just push through without coffee for the first 90 minutes. The mistake was most obvious the moment that we got our coffee and the vibe, creativity, and engagement improved by about a million percent. But if we’d taken a step back from the start, we would have known right away that something just wasn’t clicking. Call it an addiction (it is), call it trivial (it isn’t), or dis it any way you like. But don’t try to convince me that caffeine doesn’t matter in the boardroom.

Let’s dive in to the second half of season 4 with one of the most important conditions of all: food. Food matters *so* much to people’s moods, cognitive performance and attention spans that I’m sure it’s obvious why it’s on my list here. Let’s start with the silly extremes. If you don’t feed people anything for long enough, they’re just gonna leave, and that’s after they stop paying attention and/or get all hangry. That said, if you set out a luxurious banquet of everyone’s favourite food with all the associated sights and smells, why would anyone be the least bit interested in the work at hand? Of course, most of us wouldn’t consider either of those extremes during a board meeting. They still illustrate how food can affect us without having to go to Google Scholar to find relevant research. Although, I *did* go to Google Scholar to find relevant research and I found a paper from 2020 in Advances in Psychological Science by Xie, Xie and Yang where they reviewed prior studies on the effect of hunger on cognitive performance and found that – in their view – the methodology of existing research was based too much on subjective feelings and poor methodology to be reliable. So, for now, let’s trust our guts (literally) and think about how we might be intentional about food to keep our directors and executives sharp, focused, and maybe even a bit excited to show up. I guess what I mean is how can we make sure the literal main course is nutritious, delicious, and satisfying, without it being the figurative main course of the board meeting?

OK, we’re 23 conditions in with 24 to go. How you feeling? I’m willing to bet that some of you have occasionally felt a bit of “really?? Temperature?? We’re talking about a frickin boardroom! Get out of here with this trivial nonsense.” And honestly I’m not trying to convince you that you need to pay special attention to every single one of these conditions during every part of every board meeting. But I think we’re doing a pretty good job so far of showing how each of these factors really *does* affect the way that we show up. Making matters more complex, each condition will affect different people in different ways. And the best conditions for one decision probably won’t copy and paste to another. So it’s not like we can have a set it and forget it mentality here. But before we add a bunch more stuff to the pile, I want to remind you about something. Good governance is intentionally cultivating effective conditions for making decisions. Notice that I didn’t say optimizing every condition and getting it right every time. The “good” part of good governance is being intentional. So, if you notice someone across the table shivering, that would be a good reason to find a moment to pause and have a quick conversation about the temperature in the room. Good governance doesn’t mean finding the perfect temperature that makes everyone happy. It *does* mean you have to care when you notice a potential opportunity for one or more conditions to be better than they are. And you know what? The impact of that intentionality is going to be so much more profound than, y’know, talking for a few extra minutes about how you’re going to disclose your board evaluation process in your next proxy, or whatever. Anyway, if you’re not convinced by this conditions thing yet, or even if you are, head over to mattfullbrook.com and send me a note. I want to learn more about how you’re feeling. Alright, on to the next one.

You remember in the before times when people who couldn’t attend board meetings in person would attend by (gag) telephone? It was awful for everyone involved, but especially for the poor souls on the phone. Can’t see anyone. The conference phone audio makes it impossible to hear, well, anything. You sit through any breaks in the action listening to other people socializing. You don’t get to follow the exact flow of the slides or other materials. Worst of all, everyone forgets you exist because you have no presence in the room besides being a ghost on the other end of a phone line. Even when you try to speak, it’s doesn’t come through loud enough to get anyone’s attention. A fate worse than death? Maybe not, but still far from optimal. So yeah, being the one virtual attendee at an in-person meeting is at least a bit better now, what with the advent of Zoom and company. Having your face showing in a square on a screen for everyone to see makes it less likely they’ll forget you. Plus, you can follow along and participate a bit easier. And being able to see a wide angle shot of the boardroom, or maybe even a closeup of everyone in the meeting if your board has gone to those lengths…it makes you feel a bit more like you’re part of the action. But, in my opinion, this is the hardest meeting format for which to be intentional about the conditions because the stuff that works best in-person often doesn’t have the same impact for virtual participants, and vice versa. This might be one of those situations where instead of looking for compromise, you commit to set aside at least a little bit of time focusing specifically on making the virtual participants feel engaged and activated, even if it’s a bit weird for those attending in person.