‘Governance nerd’ took 20 years to reach his ‘aha’ revelation

Article content

At the risk of coming across as patronizing or trivial, can you define “corporate governance” in one or two sentences that anyone could understand?

How about defining “good governance” in a way that makes it clear what the leaders of an organization could be doing better tomorrow than they are today?

If you can, you’re already a few steps ahead of just about everybody in my closely knit community of governance nerds. Even those who eat, sleep and breathe governance struggle to explain what, exactly, they’re trying to accomplish.

In my own case, it took me 20 years before it occurred to me that I had no clear concept of good governance. I do now, though! And it’s completely changed my outlook and my enthusiasm for my work.

Before I share my definition, we have yet another problem: I’ve found precious few people who do have a confident concept of good governance, and we all mostly disagree with each other!

Case in point, I had a conversation at lunch today with my longest-standing ally in the governance world – someone with whom I’ve spent more time talking about CEOs, boards and families than everyone else in my life combined. Turns out even he and I have diametrically opposed perspectives on the nature of good governance. And I only just found this out today!

The disagreement goes like this: He believes that the only important metric of good governance is if it generates, in his words, “responsible long-term return to shareholders.” In other words, outputs. After all, he argues, what conceivable good could there be to governance if it doesn’t produce results?

I, on the other hand, think it’s about the inputs. In fact, the only part of his framing that I like is the “responsible” part.

Let’s break it down.

If good governance were only about the long term, then we couldn’t take big risks with big upside. In other words, we would never innovate. Besides, we can all admit that long-term returns are only possible with a healthy dose of luck, and I can’t accept that good governance is equivalent to good luck.

If good governance were about return to shareholders, then we couldn’t make investments that might benefit other stakeholders if they presented the slightest distraction from shareholder value.

Making matters more complicated, not all shareholders’ interests or timelines are aligned with each other. I can’t accept that good governance happens only if we somehow satisfy the complex demands of all shareholders.

Reading books about the science of making decisions will be more fruitful than reading a book with 'corporate governance' in the title.

Most importantly, a results-based framing of good governance assumes that we have more control over outcomes than we do. We can never know the result of a decision until after we make it. After that, all we can do is react and make more decisions – the outcomes of which we won’t know until after we’ve made them, and so on.

Which brings me, finally, to my current definition of good governance: Intentionally cultivating effective conditions for making decisions.

Sit with it for a second before you embrace or reject it. Notice that the word “effective” comes before the word “conditions,” not before the word “decisions.” An effective decision implies that we know how it will turn out, which, well …

So, instead, I think about the inputs or conditions that we actually control.

Think for a moment about the things that might help you as you prepare to make a big decision, like accepting a tempting job offer or getting married or buying a house.

You probably want lots of information that’s relevant, clear and accurate. Maybe you’d benefit from having conversations with a bunch of smart people who could share their insights on what you’re getting yourself into. You’d also probably be happy to have a few days or weeks or months to consider it instead of, say, minutes or hours. You could consider what other options you might have, like sticking with the status quo or considering competing offers from other companies/potential spouses. Maybe you feel more comfortable making decisions on a full stomach, or in casual settings, or with input from your friends, or while skydiving.

Go back for a second to my definition of good governance. All of those things that might help to make you feel better while you make your decision? Those are examples of the conditions I’m talking about.

I bet you can already imagine how this might apply no matter what group or individual is making decisions in your family office or enterprise.

Need to have a difficult conversation with your parents? What are the conditions that might help to ensure that everyone feels informed, engaged, safe and maybe even excited? How can you be intentional about those conditions? It’s not about getting them perfectly right, but about being purposeful and thoughtful instead of passive. That’s good governance.

Preparing for a board meeting? Same ideas apply. That’s good governance.

What’s especially cool about all this is that there’s tons of honest-to-goodness science out there that examines the ways that individuals and groups tend to mess up decisions. And some of it is really fun to read! Google “decision science book” and you’ll get really cool results from Katy Milkman, Adam Grant, the Heath Brothers, and others. In fact, The Art of Gathering by Priya Parker might actually be the best governance book out there.

Whether you’re buying what I’m selling or not, I promise you that reading these books will be more fruitful than reading a book with “corporate governance” in the title by an author who struggles to define what governance even is.

Matt Fullbrook is a corporate governance advisor and educator based on Toronto. He is the host of the One Minute Governance podcast and creator of the Ground-Up Governance platform. www.mattfullbrook.com 

More from Canadian Family Offices:

• Survey says: How to draft a family charter with staying power
• Fifteen more books that inspired and invigorated Canadian advisors
• Nitty-gritty of succession: Holding a mirror to families, looking for leaders

Please visit here to see information about our standards of journalistic excellence.