Saturday, 5 December 2020 IMS HomepageHome

Board Leadership, Crisis Governance and Governance in Crisis

Prof Colin Coulson-Thomas*

People who accept directorial appointments to corporate boards should expect to face challenges and difficult situations. In an area such as insolvency, arrangements to protect creditors invariably exist in Company Law frameworks. There are insolvency practitioners and other specialists to whom directors can turn. Other categories of challenge may apply more generally to all or most companies, whether difficult trading conditions or the impact of so-called disruptive technologies. Should the term crisis be used in relation to the latter, when past generations of technological breakthroughs such as the steam and internal combustion engines were largely perceived as enabling and transformative? Its use may be more legitimate in relation to widely recognised challenges with serious consequences for people across the globe and for the planet, especially if there is a window of opportunity but many corporate and other responses appear slow and/or inadequate (Stern, 2015; UNEP, 2019).

Various organisations, institutions and public and other bodies around the world have declared climate change related emergencies. Mankind appears to be facing a range of situations, from antimicrobial resistance to extreme weather events that are sometimes referred to as crises. Unlike situations that might suddenly and unexpectedly arise, certain of these threats have been long predicted. They need to be addressed by a combination of activities by multiple parties over a longer-time period than emergencies that may have been quickly tackled by crisis management teams in the past. Their implications can be such as to justify regarding them as a form of crisis requiring more than “business as usual responses”. Corporate boards are expected to provide strategic direction and leadership in uncertain and challenging times (Coulson-Thomas, 2019). This article considers whether contemporary corporate governance arrangements are fit for purpose in relation to ensuring that current corporate business models, operations and practices are responsible and sustainable.

Crisis situations can make different demands upon leaders than those created by more normal levels of change, uncertainty and time pressure. Some directors may be better equipped to handle them than others. The relevance of skill and experience sets could determine who should give a lead and play different roles in crisis situations and to whom day-to-day crisis responsibilities should be delegated. Inappropriate crisis management and leadership can increase the negative impacts of crises, while their appropriate handling, and learning from the circumstances that create them, may create positive benefits. Their consequences may also give rise to new opportunities for beneficial changes and developments (James and Wooten, 2011). In addition to the questions of crisis governance and how directors should prepare for and handle crises, is the related issue of whether there might also be a crisis in corporate governance itself in terms of the ability of current governance arrangements to cope with uncertainty and turbulence in the contemporary business and market environment, and a challenge such as climate change that requires collective and collaborative action.

Boundaryless and Shared Crises

The term “crisis” should not be used lightly in relation to directors and boards, as a range of difficult issues are likely to appear on many board agendas. These could include an attempted takeover in the case of a listed company. Strategic importance, the degree of difficulty, a possible threat to a corporate reputation or other aspect of a company’s existence or operations, and the scale or severity of implications could be among the criteria for deciding whether or not a matter should be referred to a board. Hopefully, crisis management and disaster recovery policies and arrangements are in place and such referrals will take place before a calamity arises or a danger crystalizes, but directors may need to react quickly to an emergency such as a hack or other digital related catastrophe, a natural or man-made disaster, or an existential threat such as the adoption of a better business model by a new or existing competitor. Both proactive and reactive steps may have to be taken in mitigation of certain risks, especially in multi-faceted areas such as climate change, global warming and sustainability. In these areas identifying acceptable board advisers might be problematic.

The implications of a single disaster might be profound and involve short, medium and longer term environmental, financial, health and other consequences (McGinn, 2017). The wider use of social media can increase the speed and scale of public awareness of an incident and amplify reputational and other damage. It can also enable warnings and guidance to be issued to those who are connected. Stakeholder and wider public attention is now being devoted to combinations of situations that may be inter-related. These are sometimes described as crises and/or emergencies to gain people’s attention. They can have implications for many people within companies and other organisations, whether associated with them and/or impacted by them. Such threats and their implications and consequences may be common or shared by most, if not all, organisations. They may require collective responses. Environmental, climate change, cyber and other threats can also be boundaryless and have consequences for the planet as a whole. Addressing them may require collaboration across national borders and other boundaries as well as within them. A diversity of people and organisations may need to be led through them. Can current governance arrangements provide the shared leadership required (Coulson-Thomas, 2019)?

Many directors and boards struggle to understand the multiple and inter-related challenges, opportunities, possibilities, developments, trends and unexpected events of our contemporary world. As a consequence, we may face a crisis of governance when confronting concerns in areas such as climate change and sustainability. Do we have unrealistic expectations of what can be achieved by a relatively limited group of very similar people selected in a previous era and who may meet for a relatively short time once a month or quarterly to consider agenda items set out in an annual calendar of meetings and topics of which they often have limited knowledge and experience? Can such a small group presiding over a large enterprise that may be operating internationally in a variety of markets cope with complex environmental issues and other challenges such as indexation, private equity and globalisation (Coates, 2018)?

Current Status of Corporate Governance

During a crisis directors may face significant and continuing uncertainty in areas ranging from immediate and longer-term consequences to how stakeholders might react. The challenges faced can vary over the life-cycle of a crisis (Johnson, 2017). How can we ensure that legal, regulatory and governance frameworks are aligned with growing diversity, changing operational requirements and new business models, and that they do not inhibit innovation? Have we reached the limits of the ability of our current approaches to corporate governance to address a complex issue such as climate change and meet stakeholder requirements, unless new models and practices are adopted and better support is provided? Are we at a watershed, cross-roads or tipping point? Can directors handle more information without assistance provided to their roles and responsibilities by the application of artificial intelligence (AI) and digital technologies? In relation to the organisational, governance and decision making possibilities created by digital technologies, what should the role of directors and other humans be (Tenner, 2018)?

Much of formerly blue collar work is already automated. Increasingly, more of the work of professionals and knowledge workers is being undertaken by a combination of people and technology (Kaplan, 2015). Many business and management processes and models can be automated. In a growing number of companies they have been. The role of people can be minimal once rules, protocols and algorithms have been developed and agreed, and arrangements made for them to learn and develop as requirements and priorities change. If certain AI applications can outperform most doctors at complex diagnoses and be more reliable at drawing up treatment plans, might a governance application be better than directors at processing the mass of data generated by the activities of many companies and be better able to provide the 24/7 intelligent steering to a more sustainable future they too rarely provide? Might the term crisis come to be associated with situations that cannot be so handled? Where human intervention and judgement is still required, how can this best be provided and from whom?

Rather than referring ‘developments’ and ‘new’ issues to a board largely composed of generalists, would it make more sense for them to be first sorted and categorised by intelligent systems? Should they, along with disputes, complex trade-offs and moral judgements, be allocated to panels composed of those who are best equipped to deal with them? Should certain categories of crisis best be handled in this way? Rather than holding up adaptation, change and required decisions, should boards and particular advisers be the business governance equivalent of a committee of enquiry whose members are brought in to examine a situation and advice on a course of action, or where there is greater time pressure handle specific cases or act when special circumstances apply? In such situations, on certain matters and where there is time, could the views of a wider range of stakeholders be sought by means of appropriate consultation mechanisms and/or voting systems? Given the possibilities, what paths should the future of corporate governance take and how can we future proof boards? What arrangements should be made to handle contingencies and emergencies as they arise?

Preparing for Greater Complexity

Many current governance arrangements are already under pressure, without the added challenge of preparing for crises in an even more complex future. The nature and reach of organisations are changing. As they become networks of relationships, board leadership increasingly has to span boundaries. It may need to move on from leveraging corporate capabilities to utilising those of wider value chains? In the face of multiple challenges and opportunities, and greater uncertainty, how can governance arrangements become more capable, flexible, representative and resilient? How might they remain current and relevant in crisis situations and in a variety of arenas? Should the focus of governance now be upon anticipation and response and behaviour and conduct rather than structures? Is culture change now a priority if desired changes of behaviour are to be achieved (FRC, 2016)? Alternatively, given the diversity of cultures that can exist across different functions and within stakeholder groups and the time any apparent culture change may take to achieve, is culture a distraction? Are there much easier ways of modifying behaviour as and when required and independently of culture and corporate structure (Coulson-Thomas, 2015a & b)? Are so many developments underway with potentially serious consequences that some form of crisis governance should become a new norm?

Are new competences, practices, performance measures and the systems thinking needed to analyze and understand difficult and interdependent issues and crisis situations required (Coulson-Thomas, 2018a & b)? Do boards need to become more diverse and inclusive, including in relation to those affected? Should crisis communications, governance and collaboration experience and skills be represented within a boardroom team? The UK Financial Reporting Council has been consulting on proposed revisions to the UK Stewardship Code, focused on how effective stewardship can deliver sustainable value for beneficiaries, the economy and society (FRC, 2019). Should more boards assume responsibilities to a wider range of stakeholders, and more explicitly take material environmental, social and governance (ESG) issues and factors into account? Are many corporate boards and Governments overlooking the human, social and environmental impacts of current approaches to growth and development and the crises they may cause for many people, communities and groups (Raworth, 2017, UNEP, 2019)?

How should one assess board performance, including in crisis and uncertain situations? What criteria should be used? Should these include those specifically related to climate change, sustainability and the handling of difficult situations? What constitutes a high performance board? Should the litmus test be how a board handles crises and existential threats and participates in collective responses to challenges for wider society? Does the judgement depend upon a company’s mission, vision, situation, context, opportunities, stage of development and the aspirations of its stakeholders? Is high performance about simultaneously achieving multiple objectives more quickly and affordably and in ways that are less disruptive (Coulson-Thomas 2012a & b, 2013)? What dimensions of leadership or combinations of them should be prioritised, for example: strategic leadership; ethical leadership; visionary leadership; crisis leadership; cultural leadership; responsible leadership; learning, flexibility and adaptation; accountability and responsibility; or engagement and listening leadership (Coulson-Thomas, 2014)? Should the purpose of corporate leadership, how business value and social outcomes can be better aligned, and what represents responsible leadership in relation to an issue such as sustainability be more explicitly addressed (Ahluwalia, 2015; Kempster et al, 2019)?

The Evolution of Corporate Boards

In some jurisdictions boards are becoming smaller, but in other respects such as composition changes may be more limited. What are the consequences for crisis governance? Globally, what are the trends in relation to board evaluation, roles and responsibilities, accountability and the rating of director and board performance? In more dynamic situations, does the emphasis need to switch from monitoring and compliance to inspiring creativity, encouraging and enabling innovation and supporting the entrepreneurship required to cope with multiple challenges and related opportunities (Coulson-Thomas, 2017a & b)? It may not be clear whether factors such as the age of directors, size of boards or attendance at meetings can be linked to board performance, but a healthy degree of challenge and tolerance of dissent has been identified as positive factors, so reviews could look out for openness to dissent and a willingness to challenge (Sonnenfeld, 2002). Should more directors be appointed who have been tried and tested in crisis situations? Guidance is available on the requirements for building an effective boardroom team and what higher performing directors do differently in key areas for corporate success (Coulson-Thomas, 2007a & b). Many boards require more than incremental improvement.

Why is there so little innovation in governance arrangements (Coulson-Thomas, 2018a)? Despite the many possibilities for bespoke approaches that better reflect the aspirations, context, situation and stage of development of individual companies and their networks of relationships, many boards are still reluctant to adopt new models of business, governance, operation, organisation and work. They cling to traditional practices and adhere to standard models that are often derived from those developed for listed companies whose numbers have declined in their countries of origin. Are many current corporate governance practices a hindrance rather than a help, especially in relation to crises, complex issues and severe challenges? Does this reflect complacency, their irrelevance or that a low priority and value is placed upon boards? Relationships with a wider range of stakeholders than just shareholders is another arena in which what curious and imaginative directors choose do rather than legislation and/or imposed structures could be the key to innovation (Freeman and Reed, 1983). Could better use of board committees help to share burdens? Should more ad hoc committees be established to oversee responses to particular challenges?

Board Committees and their Composition

What role should board committees play in contemporary corporate governance and in crisis situations? What responsibilities should be allocated to them? Factors such as firm size and the proportion of independent directors increase committee activity (Chen and Wu, 2016). Are some issues delegated that should be addressed by the whole membership of a board? Do the committees mentioned and/or recommended in corporate governance codes correspond with current requirements? Are they dealing with crises and issues such as sustainability and climate change that may impact upon the work of more than one committee and also require board involvement, direction and oversight? Do committees sometimes result in unnecessary delay without adding much value? How should their modus operandi change when confronted with crisis situations? Should some committees be temporary, perhaps an ad hoc response to a particular need for more detailed consideration, rather than permanent? Would a working party be a better option, or might this result in avoidance and procrastination?

Committees involve costs as well as offering benefits (Chen and Wu, 2016). How often should boards review the justification for their committees? How could committees be more effective, play more of a strategic role and add more value, for example in relation to the development of board policies, reviewing and ensuring compliance, and considering issues that require more time than is available at a typical board meeting? While some evidence is inconclusive, one study of large European firms has found a positive relationship between performance and female membership of board committees (Green and Homroy, 2018). In relation to nomination committees, why is there so little diversity on so many boards and board committees? Are criticisms of the value of audits and accounts, especially when companies fail for reasons that were not apparent in a previous year’s annual report and accounts, a reflection upon the work of the audit committees concerned? Should audit committees do more in relation to conflicts of interest and certain areas of risk? How could they provide better assurance and protection (Moran and Kral, 2013)? Are they devoting sufficient attention to areas such as disaster recovery arrangements and planning?

Who should be involved in the handling of different forms of crisis? What could directors and boards learn from an incident like the Cuban missile crisis (Allison, 1971)? Do or could boards and their committees provide opportunities for a wider range of people to become involved in the consideration of certain issues? In relation to coping, diversity, innovation and certain situations should more ‘outsiders’ be brought inside (Stevenson, 2017)? Might those who do not sit on a committee or who are not consulted feel excluded? Can committees be a useful link between a board and management and other stakeholders, or are there better alternatives? How does the existence and operation of committees and/or crisis teams affect the dynamics of board and stakeholder relationships? Do they divide a unitary board into sub-groups? Are they a barrier or an opportunity for further engagement? Might they result in less scrutiny of important issues by a board as a whole? Some boards are more effective than others at ensuring the effective operation of their committees and resolving differences of opinion between them. What do high performance boards do differently in relation to using their committees for discharging their responsibilities, in areas such as scrutiny, critique, control and handling crisis situations?    

Delegation to a crisis management team can be concerning for those who are not involved and may lead to recrimination when their interests are ignored and/or there are allegations that the wrong calls have been made. More director development programmes would benefit from crisis case studies and the subsequent review of options, actions taken and their consequences for different stakeholders. Is too much power also vested in a single board of directors and its committees when complex networks of relationships have to be governed? Are new and more democratic mechanisms required? Should some or all board committees be opened up to stakeholder participation? Should a dedicated committee be established to better engage stakeholders and enable them to express their views? Should there be votes on important issues and choices as the need arises, either in addition to or in place of Annual General Meetings? Should the emphasis shift in governance debates from the notion of a company as a single hierarchy to network governance (Pirson and Turnbull, 2015)?

Diversity and Challenge

Responsible boards recognise the need for wider responsibilities and engagement with a more diverse range of stakeholder interests. Caution is needed when identifying factors that cause some boards to more effective than others (Sonnenfeld, 2002). However, diversity, along with opening up and the removal of barriers, is associated with questioning, challenge, creativity, innovation and entrepreneurship (Coulson-Thomas, 2017a & b)? If it is beneficial, there is prima facie a case for exploring the potential advantages of diversity in relationships, approaches and business models, and various functional, project and other groups, including corporate boards. Boards that put a high value on consensus, unity, homogeneity, standards and structures sometimes struggle to cope with the dissent, dynamism, flexibility and variety that can accompany greater diversity. Yet in challenging and uncertain times complacency and groupthink can be fatal. What policies are required to achieve greater diversity? In particular, does there need to be a greater representation of experience and expertise related to the environment, climate change and sustainability on corporate boards?

Gender is an aspect of diversity that has long been studied. Inclusiveness, fairness, representation and other cases have been made for a greater proportion of female directors on corporate boards (Terjesen, 2009; Nielsen and Huse, 2010). While some earlier investigations have been inconclusive, a study of French firms has found a positive relationship between female directorship and both return on assets and return on equity (Bennouri et al, 2018). In some jurisdictions, Governments have taken steps to increase the proportion of women on corporate boards. Could this represent an opportunity to proactively seek women directors who have crisis handling experience and environmental, climate change and/or sustainability credentials? If the desirability of this objective is accepted and given the challenge of identifying qualified candidates for board appointments, why are more boards not themselves seeking to widen their gene pool beyond the ‘normal suspects’ as recommended by the Tyson Report (2003)? What more should boards do to drive the change? What other steps are required in areas such as development, mentoring, selection, induction and support, the removal of real and imagined barriers, and the practices of boards, to ensure that additional women directors will lead to improved economic, social and environmental performance?

Given that diversity encourages creativity and challenge, and more of both of these would benefit many boardrooms, why are so many discussions of diversity largely limited to gender and to a lesser extent ethnic diversity? Why is so little attention devoted to diversity of thought, experience and perspective, or diversity of age, nationality or social class? The composition of many boards does not reflect the need for sustainability and action to address climate change, the geographical reach of the companies concerned, the range of their activities, or the diversity of their customers and other stakeholders. Are family businesses overlooked in discussions of diversity? In general, should governance debates pay more attention to governance challenges in emerging economies where in some countries family firms are especially significant (Armitage et al, 2017)? How can the progress of unrepresented groups be accelerated so that potential candidates within them are ‘board ready’ and, once appointed, they feel included and are encouraged and enabled to influence?

Technology and Digital Governance

Technology can address sustainability issues (Hawken, 2017). It can also widen participation. Digital and other disruptive technologies such as robotics and 3D printing can have multiple impacts and create both challenges and opportunities. They can enable transformation and alternative and more sustainable business models, but they can also open doors to new forms of hacking. Boards that are proactive and move quickly can use them to great advantage to support new ways of working, learning, operating and building relationships. Those failing to react can suffer from the inroads of alert competitors or become victims of malevolent activities. Cyber security is now a major area of risk (World Economic Forum, 2018). Are innovations and emerging technologies viewed as disruptive or as enablers? Are steps taken to mitigate the former and encourage the latter? Is technological progress outpacing board and corporate responses? For example, how will Blockchain affect the operation, management and governance of economies, companies and/or the Internet (Swan, 2015; Mougayar, 2016)? How boards react to the potential of ‘The Internet of Things’ and/or 5G communications will determine whether they usher in a new era of connectivity, control and possibilities, or create further arenas of vulnerability, potential crisis and loss of control. Will the naivety of purchasers and users present their beneficial potential from being realised? What should boards do to protect customers and other stakeholders?

A longstanding criticism of corporate boards is that their members lack the information and time to be more effective and to challenge executive teams (Lorsch, 1989). Why is this still the case with many boards in today’s era of ‘big data’, when a mass of data, much of which is being continually refreshed, is available in ‘real time’ to those with questions to ask, and a growing variety of tools are available to analyse, interrogate and present it? Could intelligent scanning, AI and cognitive systems be combined and harnessed to enhance analysis, increase understanding, identify areas to question and improve decision making? Could performance support enable ‘new leadership’ and better board decision making (Coulson-Thomas, 2012b, 2013)? Alternatively, if collective and collaborative responses are required, maybe relationship building, negotiation and political skills are the issue, rather than the analysis of data. If there were a genuine desire for boards that challenge, would we see a much more determined effort on the part of nomination committees to seek out individuals with explicit experience of probing, cross questioning and getting to the root causes of complex situations?

How should boards ensure appropriate strategies in relation to automation, robotics, the adoption of new business and operating models, and the use of technology to address climate change and ensure sustainability? Could and will digital developments transform corporate governance? Are new forms of governance and management required for the digital-era (Dunleavy et al, 2005)? Many current organizational and governance models are expensive compared with digitally enabled alternatives. To what extent could governance itself be automated by rule based applications of Blockchain and/or AI? Would they increase trust (Mougayar, 2016)? Might they enable a community or network of relationships to grow organically and be largely self-governing with limited intervention, with stakeholders exercising voting rights as appropriate? What about relationships between actors and within them (Daily et al, 2003)? Do governance arrangements and our understanding and regulation of them need to take more account of interactions among the members of value networks?

Sustainability Considerations

Despite environmental concerns, many business leaders appear to be continuing along an unsustainable ‘business as usual’ path of growth and development, while there is discontent with elites and a 2019 global survey found that only one in five participants believe the system is working for them (Edelman, 2019; Stern, 2019). Biodiversity and species are being lost at mass extinction rates and 90% of the world’s population lives with polluted air (World Economic Forum, 2018; UNEP, 2019). Are too many boards focused upon sustaining current priorities, operations and practices rather than inspiring and adopting more sustainable approaches and business models? Do sustainability, social responsibilities and climate change need to be given a higher priority? Must rhetoric be matched by crisis action? How many boards are forging strategies to deal with their social and environmental roles and responsibilities as well as their economic ones? How many have a sustainability committee or explicit governance arrangements concerning sustainability? Are they addressing the drivers of long-term value creation in relation to sustainability? Where the need for action to deal with climate change is clear and pressing, and the costs of delay may be increasing at an exponential rate, why are so many boards not taking more effective steps while there is still time (Stern, 2007 & 2015; UNEP, 2019)? What needs to be done and by whom to get more boards ‘on board’? Will Governments come under greater pressure to intervene?

Sustainable development can be a source of competitive advantage (Pop et al, 2018). Could a sustainable approach to corporate governance, with a board addressing economic, social and environmental expectations, be a source of competitive advantage and a long-term success factor for more boards (Salvioni et al, 2016)? How could directors be more effective in ensuring that strategies for longer-term sustainable value creation are developed, adopted and implemented? What should be the key elements of such strategies? Who should be involved in their formulation? Are directors and boards able to determine and provide the collective responses and collaborative action required to address a global challenge such as climate change? Lord Stern (2019) believes that the pursuit of a zero-carbon economy will generate strong and inclusive growth that can result in a more acceptable climate and assist the delivery of the United Nations (2015) Sustainable Development Goals (SDGs).

What more could boards do to help countries in which they operate meet their obligations for achieving SDGs? How many boards are seeking to adopt and implement approaches and strategies recommended by the UN Environment Programme (UNEP, 2019)? While aware of negative consequences, should more of them also take a positive view of climate change and view it as an opportunity rather than as a problem? The multi-billion costs associated with zero-carbon strategies represent potential income in areas such as carbon reduction, replacement and capture. India, China and the US are the world’s major sources of carbon emissions. A variety of technical and potential solutions are available and areas where further innovation is required have been identified (Hawken, 2017; UNEP, 2019). Lord Stern (2019) believes the policies required to unlock a new, sustainable and inclusive model of growth can be identified and that the finance and technology required to make a rapid start is available. Young people around the world have demonstrated their concern about sustainability and the consequences of climate change (Maynard, 2019). Do complacency, the composition of boards and a lack of diversity in the perspectives of their members limit corporate responses?

Sustainability Governance

Traditional, single and largely standard approaches to corporate governance are struggling to cope with multiple challenges and opportunities and the diversity of possibilities offered by disruptive technologies and new business and organisational models. Are different arrangements required according to the situation, context, nature and scale of an entity and how critical it is in relation to climate change and scarce natural capital? Might more than one governance model be required across a diverse enterprise and/or network? What form should an overall umbrella take? Could sustainability against a background of environmental pressure, climate change and commitment to the United Nations (2015) SDGs provide the unifying theme that could embrace monitoring, compliance and risk frameworks and hold a network of relationships together? Could it help to align organisational goals and ethical practices? Would this provide the responsible leadership that might start to rebuild trust with stakeholders? Might more ethical, inclusive and principle-based forms of corporate governance emerge focused on sustainable development?

Could more effective and responsible corporate governance become the corner stone of responding more effectively to crises and longer-term and collective challenges such as climate change and sustainability? More boards could focus on and exercise their legal responsibilities. In several jurisdictions these reflect a concern for sustainability and are designed to further a company’s long-term interests or promote its success, rather than the pre-occupation with short-term performance one often finds? Not to do so favours the interests of short-term traders and speculators, rather than those with a longer-term perspective. The exercise of corporate governance involves board decisions (Useem, 2003). Do directors need to view more matters through a sustainability lens? For example, are wider, downstream, upstream, life-time, ‘true’ and decommissioning costs being overlooked when decisions are taken (Rowe, 2019)? Should company and other legislation make it more explicit that environmental, climate change and sustainability considerations be taken into account when board decisions are taken?

Internationally operating companies should monitor global trends in corporate governance, accountability and reporting that affect sustainability. Does more attention need to be devoted to collective responses, collaboration and the alignment and co-evolution of corporate and political strategies (Bleischwitz, 2004)? Should responsible board leadership go beyond strategy and policy to include a review of a company’s rationale, mission and purpose (Handy, 2002; Kempster et al, 2019)? Should boards give a lead in relation to sustainability by redefining corporate purpose, excellence, quality, performance, productivity and success in terms of sustainability considerations such as reducing environmental and resource footprints and addressing climate change? Should they champion the adoption of more sustainable approaches, paradigms, lifestyles and business models?

Navigating Risks and Opportunities

Many boards need to review their strategies, policies and practices for managing risk and preventing frauds, and review the role of risk management and risk managers in an uncertain and volatile world (Coulson-Thomas, 2017c). How many boards are equipped to identify the full range of risks such as those identified by the World Economic Forum (2018)? Are they taking individual and collective steps to monitor related trends, assess and mitigate their impacts, address their root causes and seize related opportunities? What additional strategies should they adopt for managing risk and monitoring performance relating to crises and longer-term threats? What expertise and experience do risk managers have of handling crises, climate change and sustainability? How many boards also recognise that the corporate and collective activities of many companies represent a major risk for themselves, external parties including stakeholders and life on our planet (Dauvergne, 2018)? What could and should they do, individually and collaboratively, to mitigate the risks they cause for others? Might helping others to understand and cope with such risks represent a business opportunity?

Embracing uncertainty has been described as the essence of leadership (Clampitt and DeKoch, 2015). Will networks have so many connections and inter-connections and generate so much more data than can be handled by a central team, that hierarchical control of many activities will become almost impossible unless sub-networks are given much greater autonomy? In relation to cyber exposure and cyber fraud what needs to change (Leech and Hanlon, 2017)? Certain crises can arise because of the actions of malevolent parties. Will cyber risks evolve to the extent of the possibility of digitally enabled and Blockchain and AI based networks and their governance being taken over by hackers? Are corporate internal and external arrangements, processes and systems risk-centric, learning and sufficiently dynamic and resilient to be able to cope? Will collaborative arrangements, law enforcement agencies, and corporate, national and international laws and regulations keep pace with and handle the diversity of new applications and models that could emerge?

Communications that are authoritative, balanced, responsible and timely are key elements of crisis management and need to inform stakeholders of what has happened and the steps an organization has taken and is taking to deal with consequences and the resulting situation (Haggerty, 2017). How might corporate reporting better represent risk, corporate responses and performance? Is the ‘International Integrated Reporting System’ keeping pace with emerging sustainability and other risks? Does it provide the integrated global approach required by stakeholders of contemporary companies for performance monitoring and reporting, including at the levels of response required to deal with climate change and other threats? Are directors clear about their responsibilities for financial reporting (ACCA, 2017)? What changes are required in practice? Financial reporting could inhibit or enable new forms of corporate governance and relationships and a greater diversity of access to financial information (Baker and Wallage, 2000). For example, making a greater volume of information available electronically might open up opportunities for individualised searches and personalised information alerts.

Grasping Nettles

Who should be involved in the discussion of future corporate governance arrangements? Should the aim be extension, refinement or re-invention? What role should company secretaries, chief officers, auditors, consultants, stakeholders and regulators play? Who might best articulate and/or represent crisis considerations and climate change and sustainability concerns and options? Do we need to better understand a range of external individuals and groups who exert influence over directors and boards, their decisions and corporate governance arrangements (Hambrick et al, 2008)? If recruitment issues continue the trend towards smaller boards, who will be the powers behind the thrones? Will qualities relating to the navigation of crises be represented? Growing threats such as climate change and natural capital shortages may impact upon some more quickly and severely than they affect others. How will additional and more varied conflicts of interest be handled?

There are so many questions and uncertainties to address and possibilities to explore that our current and inflexible approaches to corporate governance and sustainability may need to give way to more agile, diverse and fast moving alternatives that can better respond to crises, evolve and mutate to benefit from innovation and accommodate changing responsibilities and new options. Might general guidance and principles governing conduct, rights, responsibilities and relationships replace detailed governance codes and rules? Whether or not this unleashes the creativity and innovation required in the time available to avert the worst consequences of a threat such as climate change and/or sustainability will depend upon today’s directors. Certain boards have consciously risked a bottom line to improve corporate sustainability. Existing customers have responded positively and new ones have been attracted (Adams, 2019). Are others too cynical, jaded and distracted to respond, or will they be sufficiently alert, open and determined to provide inspired and responsible leadership?

References

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Adams, David (2019), Money isn’t everything, Economia, July/August, pp 48-51

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Chen, Kevin D. and Wu, Andy (2016), The Structure of Board Committees, Working Paper 17-032, Cambridge, MA, Harvard Business School

Coates, John C. (2018), The Future of Corporate Governance Part I: The Problem of Twelve, Harvard Public Law Working Paper No. 19-07, Cambridge, MA, Harvard Law School

Clampitt, Phillip G and DeKoch, Robert J (2015), Embracing Uncertainty: The Essence of Leadership, Abingdon, Oxon, Routledge

Coulson-Thomas, Colin (2007a), Developing Directors, A handbook for building an effective Boardroom team, Peterborough, Policy Publications

Coulson-Thomas, Colin (2007b), Winning Companies; Winning People: Making it easy for average performers to adopt winning behaviours, Peterborough, Policy Publications

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Note

This article draws upon a Theme Paper prepared by the author for the international conference element of the 19th London Global Convention on Corporate Governance and Sustainability which is organised by India’s Institute of Directors (http://www.iodglobal.com/). Further information on the convention can be obtained from: https://www.iodglobal.com/london-global-convention-2019.html

*Author

Prof. (Dr) Colin Coulson-Thomas, President of the Institute of Management Services, has helped directors in over 40 countries to improve director, board and corporate performance. He leads the International Governance Initiative of the Order of St Lazarus, is Director-General, IOD India, UK and Europe, chair of United Learning's Risk and Audit Committee, Chancellor and a Professorial Fellow at the School for the Creative Arts, an Honorary Professor at the Aston India Foundation for Applied Research, a Distinguished Professor and President of the Council of International Advisors at the Sri Sharada Institute of Indian Management-Research, a Visiting Professor of Direction and Leadership at Lincoln International Business School, and a member of the advisory board of the Aravind Foundation and ACCA's Governance, Risk and Performance Global Forum.

An experienced chairman of award winning companies and vision holder of successful transformation programmes, Colin is the author of over 60 books and reports and he has spoken at over 300 international events. He has also held public appointments at local, regional and national level and professorial appointments in Europe, North and South America, Africa, the Middle East, India and China. He was educated at the London School of Economics, London Business School, UNISA and the Universities of Aston, Chicago and Southern California. He is a fellow of seven chartered bodies and obtained first place prizes in the final exams of three professions. He obtained the CSR Lifetime Achievement Award at the 2018 CSR Leadership Summit. Details of his most recent books and reports can be found on: http://www.policypublications.com/

Abstract

Many directors and boards face challenges, difficult situations, multiple threats and related opportunities. Certain of them are shared, inter-related and multi-faceted. They impact upon many areas of corporate operation, supply and value chains, a variety of stakeholders and wider communities. Unlike situations that might suddenly and unexpectedly arise, certain of the threats have also been long predicted. They represent a challenge for board leadership and they need to be addressed by a combination of activities by multiple parties over a longer-time period than emergencies that may have been quickly tackled by crisis management teams in the past. They raise questions about the adequacy of crisis governance arrangements, how directors should prepare for crises and handle them, and whether there is also a crisis in corporate governance in terms of the ability of current approaches and practices to cope with crises in the contemporary business and market context and environmental, sustainability and climate change challenges that require collective and collaborative responses.

 ^ Published in Effective Executive, a quarterly peer reviewed journal of IUP (ISSN 0972-5172) as:

 Coulson-Thomas, Colin (2019), Board Leadership, Crisis Governance and Governance in Crisis, Effective Executive, Vol. XXII No 3, pp.42-58

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