Episode 4 - Is there an elephant in the boardroom?

SC: Good day, Rachael. Thank you very much. I'm Sharon Constançon, I'm Chief Executive of Genius Boards and Genius Methods, where we focus on board evaluation, board development, and director and chair development.

Today, we’re going to be talking about unaddressed issues [in the boardroom]. When I’m talking to boards, I often like to align our conversations to an animal because it helps them understand the animal behaviour and therefore correlate it back to what is happening within their environment without being directly confrontational.

Today, we talk about the elephant [in the room]: the elephant is there, it's always present, it's just how big, how small? Is it hidden under the table? Is it looming in the room? Is it outside the door? Is it wrapped up and vaguely hidden, or is it very blatant and obvious to everybody? What are the things that this board in question is not owning up to, addressing, discussing, taking ownership of, and dealing with in whatever way? So, we talk about the elephant in the room.

SC: That’s a very interesting question because it is very difficult to achieve. What we're looking to do, as an external party, when we're working with a board, is [to] give them the opportunity to address the unknown question, [by putting it] in front of them in a non-confrontational way. So, the evaluator’s the one who talks about the unspeakable issue, rather than one of the team being the one to raise the unspeakable issue and have the darts aimed at them. It's always really difficult to put your head over the parapet. So sometimes it's really valuable for somebody external, post their independent assessment of the circumstances, to raise the potential issues that are preventing this board from being as effective as possible. In that process, if there is a big elephant, it will be addressed. But if there are a number of small elephants, they will equally be addressed. But they're addressed from the point of view [that], it's not one person's perception, it is the evaluator’s assessment of the combined issues. I think that is your best way of addressing the elephant in the room.

There is a role for the company secretary. If they have a strong relationship with the chair, another way is to start warning, talking, influencing the chair around the difficult issues that are not being addressed, making very clear what the risks are to the business of not addressing them. [There’s] no point talking about the issue, if you can't say why, it's important to address the issue. So, you do need that in-depth activity to come from the company secretary.

SC: It's very difficult to decide who needs to do what differently to improve a board's effectiveness. Everybody on the board should be able to self-evaluate. A good place to start with that self-evaluation is with the company secretary, for them to have a look at – do they have the best intentions for the company? Are they making sure they're not being biased or not being influenced? It's important for the company secretary to do that exercise first. And to ensure that, through conversation with the chair, that exercise is occurring on behalf of the chair, for the chair, by the chair of themselves. [They should be] looking at their environment with non-rose[e] tinted glasses, but with some reality. That is something the company secretary can do over a period of conversations with the chair. It's not something [where] you can put up the mirror and say, ‘that's what you look like’ because you're going to get too much pushback; it's not going to give you any outcome. Ensuring that everybody is aligned to the best outcome of the company is stage one and stage two is to start the conversations.

SC: If you are lacking content, knowledge, capability – it could be anything from the ability to have valuable conversations, it could be that we don't have enough of the right technical knowledge for the industry, we also might not have enough governance knowledge, for example, we might not have enough common sense on the board amongst the people, might not have good risk antennae amongst the board. This is where the nominations committee plays an important role. The critical role that the company secretary actually has [is] in ensuring that the nominations committee is not the poor cousin committee, but is really a leading committee of the board, to make sure that the board is correctly complemented. The only way you're going to be effective is to have the right number, the right capabilities, and the right ability to have conversations and challenge so that good decisions are made as a collective. So, it's really important to start with the nominations committee.

If we are short, in the company secretary's opinion, on any of the things I've just made reference to, [those things should be brought] to the agenda of the nominations committee. [That committee should] start a succession plan that will take people off the board faster [and] bring people on the board faster. Sometimes it's really valuable to bubble the board by two or three directors for a period of a year or so to bring the required competencies on very quickly. And then to roll off the existing directors when there's been a decent handover period. A lot of boards are very scared of doing that. But it really does mean that you kickstart change much quicker than just waiting, waiting, waiting another two years before anything can be improved.

SC: So [in this instance you’re] looking at the elephant in the room being the inability for the board to address key matters, and to be mindful of what they are looking like and behaving like. It is important for the company secretary to help the board directors to see what they look like. But there, the company secretary needs to use their resilience, trustworthiness, empathy and influence with both parties – with the chair as a third party, assuming that the chair is not one of the warring parties – to actually get them to understand that business is about a conversation. It's about your perspective; it's equally about somebody else's perspective.

With the company secretary’s ability to be able to talk to both warring factions, get them to recognise where their points of view are valuable to the business, and where their points of view might be detrimental to the business, where they are not listening to another perspective, and the importance of understanding another perspective. Helping them to respect that by listening and learning and coming to a middle compromise is not about losing. It's not about giving in. It's about doing what's right by the business. The fact that you are knowledgeable doesn't mean you're right. It's finding what is right as a collective discussion. This requires very strong leadership in the debates when they are becoming a little heated. It just sometimes takes them to see what they look like in the eyes of somebody else who can share that without it becoming in itself confrontational.

SC: Being bullied is a very disempowering activity, whoever's on the receiving end of it. For a company secretary to stand up in their own shoes in an environment [where] they're being bullied by a chair particularly, or by the CEO, number two, or senior independent director or others, is a very, very, very, very difficult position to get out from under. Sometimes [it] will require some external coaching and support to the individual receiving the bullying.

The other aspect is to bring in an external board evaluator, senior independent director, somebody independent of the activity, who has the influencing power, ability to have the conversation, who can read the room and actually give an independent view on what is happening. Make it obvious to those in the room that kind of behaviour – the way an enraged bull behaves – isn't really conducive to working as a team or being successful as a leader of the business. Help them to understand what their behaviour correlates to.

If you took another correlation, for example, if the conductor of an orchestra leapt off the podium and grabbed the violin, or cello, or anything out of somebody's hand, and tried to say, ‘this is how it's done’ in the middle of an orchestra delivery, I don't think the audience or anybody in the orchestra would really appreciate what had just happened, which is really what is actually happening. Likening [the situation to] other things where you wouldn't expect that behaviour to occur, helps them mirror their own activities in a way that they can maybe understand them better. [Use] case studies, other examples, rather than front-on-front confrontation.

SC: If you've got the elephant in the room, there's a difficult conversation, there’s topics that the board doesn't want to talk about. The board's being ineffective in some way. The company secretary can be a real governance leader, leader of change, 21st century leader in terms of helping the board to be resilient, to recognise the strong points they have, to recognise the bids that are unproductive, and to be agile in a learning board environment. If every single board director does one small thing better than they did before, we're going to unlock a lot of the negativity, a lot of the ineffectiveness, a lot of the unspoken challenges that exist, and it becomes a safe environment. It's really critical though, that we have a true leader in our chair. Otherwise, the moving forward by one or two people making the effort will never be correlated into a forward moving improvement. Unless you've got the chair that will lead the whole board to a better place.

The company secretary can also share that journey that they're having with certain directors with the chair or guide the chair through influence to empower that individual to recognise the changes that individuals are trying to make. It's a bit like group coaching: I’m coaching the chair to recognise the effort and the change being made. I’m working with each individual director to help them be better themselves, but also coaching their colleagues retrospectively, in all cases, all around, 360 degrees, to watch out for the improvements others are making, where’s their effort. It becomes a collective positive competition, with the chair than being mindful of all the effort being made. Immediately the board will be in a better place and a safer place. I say immediately, there will always be the exception where one person, particularly if it's the chair, just refuses to change in any way. But it does take a strong company secretary to make the chair feel safe, not vulnerable, but safe to change their mind, to recognise improvements and to praise and enhance those efforts that are being made.

SC: Absolutely, you're totally right. Others will see that as a positive, not as a weakness, they’ll see it as a real positive, because then it'll help them take their next step. So now everyone's taken two steps. Just think what a better place eight people will be in if everyone takes two steps of improving themselves. And recognising and open to that of others, respectful of it.

SC: Weak governance practices will undermine a board hugely. I think bad behaviour undermines a board more than bad governance, and bad governance, in some ways, is easier to address. One it’s evidenced: you can do a gap analysis against a relevant code, and you could say this is what we're not doing right. You can have a look at the policies that should be in place and evidence those that are not. So, it's quite an easy process to identify [weak governance] and it's not a difficult process to fix.

It might be difficult to get the energy of buy-in from others over the exercise. This requires the empowered company secretary to influence the conversations, particularly with the chair, who actually is the person ultimately responsible for governance: it's on their job list, it's on their remit, and they have to do it. Therefore, how the company secretary can make their job more successful, make their tenure that of change, [is that] they will be recognised [as] the ones who improve the governance. So, all the company secretary really needs is buy-in from the chair and the rest is actually quite easy. The company secretary knows what needs to be done, it's just a case of getting that deluge of work and effort done. That is important.

SC: I think most chairs have come through a life of executive leadership in various aspects of the business that are unlikely to be in the governance route. So, it will be something that they will feel threatened by the word. And then all the detail and it's boring, it's dry, will definitely make them uncomfortable. It's very important for the company secretary to help them understand that they will do the work, they will educate, they will be the ears and eyes, for them. What you're asking is, do you as chair, want a good-governed, excellent-governed board that will therefore be effective?

Once the person has got to that point, we can then have the right kind of conversations with the chair around: I'm going to… and then lead as the company secretary on, these are the policies we need and map out what will happen over a two-to-three-year period, so that they don't feel overwhelmed by the unknown. When they actually look at the steps [that are involved] they say, oh well, that's logical, that’s logical, well actually, all put together, I actually get it. [Saying], ‘we have a major gap against the governance code’ is enough to frighten most chairs and end up with a negative response. So how do you break it down? It’s the policies, it's the behaviours, it’s the committees, it’s the terms of reference: and I will look after all of them. Don't worry, I just need your buy-in.

SC: I think running a good-governed board does create a sound foundation. It doesn't change the personalities. It doesn't change personal agendas. It doesn't change the way people might be biased. It doesn't state that you will have an effective board. It gives you a foundation on which you have a better chance of having a better-governed [board] and better effectiveness in terms of the board.

The other legs of the chair would be leadership, it would be the ability to have a safe environment to have a conversation, and it would be the capabilities of all the other directors and their ability to challenge. If you put all of those legs together, you will get the outcome of effectiveness. Good governance alone will not do, but it's an absolute foundation because, without it, it’s a lot more difficult.

SC: That’s an interesting one. I've seen different company secretaries handle fobbing off of conversations, or missing conversations, or running out of time. That's one of the tricks: the company secretary is given a far more powerful role within the meeting. It's not just the chair that's trying to hold everyone to account, and ask them to challenge, and then hold them to time. Allow that time and action management to be handled by the company secretary, who are usually very capable of doing that.

Another aspect is the company secretary owning the closing of conversations if it's not done effectively by the chair. Stating, ‘in terms of the minutes, we conclude that this is what we've decided.’ Make it absolutely clear that is what is going to be minuted, not as a story: two sentences, maximum, which then closes down the conversation.

Another trick that a company secretary can [use relates to] the seating position of the company secretary, not necessarily next to the chair, which is what they currently do – so everyone can watch them trying to message each other. [Instead,] put them opposite to each other. A little bit of eye language between the two of them actually works far better than scribbling a note to one another or kicking each other under the table, which is so obvious to everybody else. It actually works better to be in the eye line sight of the other person. And to have sign language to state when things need to come to a close. Just a finger, an eye, all sorts of ways I've seen company secretaries pull up the chair, in terms of – conversation now needs to be closed, we're running out of time. Or, specifically saying, ‘you've missed out, we haven't addressed these things [that] need to be completed before we close the meeting.’ So being quite specific, as well.

SC: The true elephant in the room, the one that is really the time bomb to the business if they don't address it. The company secretary has a number of routes. One is to talk directly to the chair and/or the CEO about their views and how they feel, and why they think it's [a] critical [issue]. Assuming one of those two [people] is the gatekeeper to the [board’s] effectiveness, [the company secretary can talk] to the senior independent director, having conversations informally with all the directors and the board. [The] purpose of that is to socialise whether their view is unrealistic relative to the view of others. Are they being sensible about their opinion in the first place? Second of all is to decide how many people feel similarly but would never have raised it and, therefore, is it something worth having a conversation about? Then bringing these all back together and feeding it back to the chair or CEO in question who's acting as the gatekeeper to the conversation.

Another way of doing it is to have meetings at the end of the board meeting, where different people are present: the whole board, no observers, then the non-executive directors and chairman, and then the non-executive directors without the chairman. So, you have these three short, 10-minute meetings. The objective [of] reducing the number of people present is to be able to raise the thing you wouldn't dare have said in another environment. The only time you can say that is in that ‘unminuted’ meeting where it's not fed back, word for word. The point is [that it’s] the safe place for the NEDs to do their job, which is to be an independent voice. If they collectively feel that somebody is such a gatekeeper to the business' success, they can actually have a collective voice to do something about it. The only way they're going to find that out is to have those three style levels of conversation.

A board that I worked with very recently, one of the chairs of the committee was really, really angry. I thought, goodness, what have I done? Wasn't me at all. He was angry at themselves as a board. Why did it take you to tell us what the elephant in this room was? Why did we not see it ourselves? It took the collective conversations I had with everyone to identify the elephant. They could have done it themselves if they'd had the safe environment at the end of meetings to talk as a non-executive group alone without always having the executive present. I think that is a critical, critical solution to the question you've just asked.

SC: Thank you very much, Rachael. I appreciate it and enjoyed it.