Although there has never been exact science to prove a direct link between poor boardroom culture and business failure, many commentators believe that a company’s performance is affected in some way by the tone set by those at its helm.
This is a connection that perhaps ought to be more closely considered by many of those considering or using risk and compliance services like those of London Registrars, not least given recent high-profile failures at RBS and Kids Company.
The former may be an especially instructive example of the importance of the right board culture, rather than simply the right chairman or chief executive officer. Former RBS CEO Fred Goodwin was slammed by the media and largely blamed for not merely his own institution’s failures, but also those of the UK banking industry as a whole at the height of the late 2000s crisis.
However, the board did go along with Mr Goodwin, and most of the shareholders signed off on the proposals with which they were presented. The key lesson for many organisations from the downfall of RBS may therefore be to ensure that a CEO is sufficiently held to account by their board, with directors willing to listen to others and all board members able to participate in genuine conversations that help to ensure a measured approach is taken.
This may be an especially pertinent conclusion given rumours that Mr Goodwin’s personality meant many felt unable to challenge his opinion – indicating a boardroom that may have become a shrine to the cult of personality rather than a focal point for healthy, constructive debate.
Similar issues appear to have affected the now-defunct UK charity Kids Company, where founder Camila Batmanghelidjh proved such a force of nature as to rally the government, celebrities and members of the public around her organisation, bankrolling it to a greater extent than would have otherwise been possible given the lack of evidence it produced to back up its claims.
In the words of Miles Goslett in The Spectator last year, “charm is no substitute for transparency… if you’re too well connected for anyone to criticise you, if you’re always pulling strings, you risk losing transparency and therefore accountability – however well-intentioned you are.”
Indeed, it appears that the boards of all too many high-profile and even feted UK organisations in recent years have become ineffective due to the overt dominance of one person. It has never been more important, then, for measures to be taken to establish an effective, diverse boardroom culture in which large egos can be kept in check and a proper sense maintained of the best interests of the organisation as a whole.
The reward for companies that do embed a proper, diverse culture that is reflected across the entire organisation, is often a much greater chance of long-term success. As Simon Osborne, Chief Executive Officer at the Institute of Chartered Secretaries and Administrators (ICSA) has recently observed on the subject: “Businesses sell to people and people are diverse. It is as simple as that.”
March, 2016