View from the top: what directors say about board process

View from the top: what directors say about board process- Dr. Rookmin Maharaj
Title: View from the top: what directors say about board processAuthor(s): Dr. Rookmin MaharajJournal: Corporate GovernanceYear: 2009Volume: 9 -Issue: 3 -Page: 326 - 338Publisher: Emerald Group Publishing LimitedAbstract:Purpose – This paper aims to use the argument that formal regulations alone may not be the defining factor in improving corporate governance and the decision making process of the BOD. Design/methodology/approach – Based on 20 semi-structured interviews with board chairs, members of corporate boards, CEOs, and upper/executive management at 12 Canadian companies, a bird's eye view is taken from the top. A content analysis of the interviews was performed. a clear picture about the interaction and behaviour of directors emerged. Subsequently, three objectives that are required for effective decision-making were developed: knowledge; motivation; and transmission channels/internal control. The analysis offers three critical objectives, which all boards should endeavour to accomplish. Findings – These interviews demystify board process and provide the bases for three critical objectives for effective corporate governance: ascertain and embellish the knowledge base of directors; motivate directors to share and gather information; and ensure clear and fluent transmission channels exist. Practical implications – The usual board measures such as CEO duality, insider and outsider ratio, number of board members and directors' share ownership may not be the only critical determinants of board effectiveness. Originality/value – Conventional notions of decision making have neglected key human faculties and individual characteristics that combine to determine organizational outcomes. This paper fulfils a need for research in the area of board processes and board decision making and provides a roadmap to improve corporate governance within organizations.Keywords: Corporate governance, Decision making, Senior management board decision makingArticle Type: Research paperArticle URL: http://www.emeraldinsight.com/10.1108/14720700910964370
Posted by Dr. Rookmin Maharaj at 7:11 AM
Labels: Corporate governance; Decision making;Senior management; board decision making;

The US IS IN A DEEP RECESSION!!!!

With the US IN DEEP RECESSION!!!! (http://www.financialpost.com/ story. html?id=326071)
Dr. Rookmin Maharaj’s Corporate Governance Model may be one of the solutions to bringing the US economy back on tract. Dr. Maharaj’s research work examines the characteristics (knowledge, groupthink, and values) and tools (interconnections, evaluations and skill matrices) can be used to select candidates to be nominated to the board to improve corporate governance Qualitative interviews with chairs, board members, CEOs in the leading energy, coal, pipeline, and chemical industries in Canada were conducted. The Quantitative phase included a survey questionnaire, which was sent to 1200 US and Canadian executives, data were collected and statistically analyzed. The findings indicated a temporal linkage between board characteristics, and tools, on decision-making, the Formal rules (SOX related rules) had no significant relationship with decision-making. Dr. Maharaj’s research is unique, as this is the first time that board characteristics have been operationalized and a model developed to test the effectiveness of directors serving on boards. “Boards and Management can no longer expected to be decorative, but are expected to exercise more influence and power and become more engaged with management, other board members and all stakeholders of the organization”(Maharaj, R., 2008).
Dr. Maharaj’s articles and blogs are a must read.
1) International Journal of Disclosure and Governance - Corporate Correspondence: ... I thank Dr James Gillies, Professor Emeritus of Policy, and founding ...www.palgrave-journals.com/jdg/journal/v5/n1/full/2050074a.html
2) http://corporategovernancesoxboards.blogspot.com/
3) Corporate Governance - Critiquing and contrasting “moral” stakeholder theory and “strategic” stakeholder: implications for the board of directors Rookmin Maharaj (pp. 115-127)
http://www.emeraldinsight.com/10.1108/14720700810863751
Purpose – This paper aims to critique moral stakeholder theory (MST) and to contrast it to earlier strategic stakeholder approach (SSA). Design/methodology/approach – Interview data were gathered from top executives at 12 companies in the energy sector in Canada and an in-depth literature review was conducted on MST and SSA. Findings – “Value” for shareholder and stakeholder may not be mutually exclusive in some instances. MST may hold the key to giving the board a more useful, comprehensive framework of the firm's utility and purpose to society. Practical implications – Organizations may be selected on their ethical performance by investors. Depending on whether ethical criteria are included in the definition of “firm's value”, decisions about which stakeholder theory to use become an issue of strategic importance to all organizations. Originality/value – The paper illustrates how the board of directors as the governing body of the organisation may find that continuous assessment of the company's stakeholders is valuable in reducing risks.
http://www.emeraldinsight.com/Insight/viewContainer.do;jsessionid=AFFFA9B264B7619EFFD296FC452108FB?containerType=Issue&containerId=6012734
Critiquing and contrasting “moral” stakeholder theory and “strategic” stakeholder: implications for the board of directors Rookmin Maharaj (pp. 115-127) Keywords: Boards of directors, Decision making, Market value, Stakeholder analysis
There are several references to the management/boards refusal to be fair to their stakeholders, for example,
1) “Senator Obama has made frequent reference to the spread between CEO compensation and average worker pay…..We have a [moral] deficit when CEOs are making more in ten minutes than some workers make in ten months."
2) According to David Rosenberg, “The U.S. economy has landed in recession, according to an economist at brokerage firm Merrill Lynch. David Rosenberg, Merrill Lynch's chief North American economist, said Friday’s employment report — which showed the U.S. jobless rate jumped to a two-year high of five per cent in December on weaker-than-expected job creation — "strongly suggests that an official recession has arrived." 'To say that the backdrop is "recession-like" is akin to an obstetrician telling a woman that she is "sort of pregnant."
References:
Dr. Rookmin Maharaj, 2008: http://www.emeraldinsight.com/10.1108/14720700810863751
http://www.cbc.ca/money/story/2008/01/08/merrilllynchrecession.html
http://www.americanthinker.com/2008/04/obama_ceo_pay_and_the_politics.html

CORPORATE GOVERNANCE, GROUPTHINK AND BULLIES IN THE BOARDROOM Dr Rookmin Maharaj

CORPORATE GOVERNANCE, GROUPTHINK AND BULLIES IN THE BOARDROOM

EXECUTIVE SUMMARY:

This research study discusses corporate governance issues from a behavioural viewpoint. It makes a distinction between strict adherence to formal rules and regulations: CEO/Chair separation, independence of board members and board size and informal characteristics of board members: knowledge, values and groupthink.There are three main conclusions:1) This research clearly proves that formal rules and regulations are inadequate; they have little effect upon decision making by board members. Informal characteristics must be considered in unison with the formal system when nominating board members in order to restore shareholder confidence and to rebuild trust in board governance.2) Similar values and groupthink can contribute positively to board members' decision making. There is, however, a high possibility for groupthink and values to become redundant, masking board members' knowledge.3) Skills matrices that include questions related to values, knowledge and groupthink and three behavioural characteristics should be considered by boards to ensure the nomination of well-rounded members.

Changes to board process, and board decision making, are seminal in preventing future Enron and WorldCom fiascos. It is only by changing the behaviours of the board of directors, through adopting skills matrices, that sweeping changes can occur.

In the past, boards have asked: who are our board members? The most important question a board can ask today, however, is: how can the skills and knowledge of our board members be used in service of the strategic direction of the corporation? This can be achieved by recruiting new board members who fill the needs of an organisation, in contrast to nominating 'friends' and continuing the tradition of the old boys club.

It should be noted that out of the 100 of the largest economies in the world, 57 of these are corporations and 49 are countries. Corporations are powerful entities in our society, operating in a manner similar to representative governments. Like heads of government, at the top echelon of each corporation is the board of directors; their decisions have enormous ramifications for everyone.

Although most citizens have a limited or a passive interest in corporate governance, we each depend on these corporations for jobs, salaries and as investors. Governance of these gargantuan corporations, which wield considerable economic power in the world, concerns each and every citizen.

My research draws novel conclusions about the state of governance today, and presents practical solutions for corporations to consider when selecting board members. The detailed discussion about what happens in the boardroom demystifies board process and provides the bases for three critical objectives when selecting new board members or evaluating current board members performance:

1) ascertain and embellish the knowledge base of directors;

2) motivate directors to share and gather information to ensure personal values are congruent with organisational values; and

3) ensure clear and fluent transmission channels exist to reduce the potential of having groupthink on board.view Dr.Rookmin Maharaj's full journal article at:
http://www.palgrave-journals.com/jdg/journal/vaop/ncurrent/abs/2050074a.html

Posted by Dr. Rookmin Maharaj at 8:21 AM

Labels: behavior, boards, corporate governance, decision making, directors, Dr. Rookmin Maharaj, oil and gas, SOX
3 comments:
Anonymous said...
nice job
January 13, 2008 6:42 PM
Anonymous said...
What's happening in the different areas in society? Financial? educational? governmental? Just look at the housing market in the US? What impact would this Corporate Governace Model you talk about have on improving the system in these sectors?
January 31, 2008 10:52 AM
Anonymous said...
No one wants to take responsibility when things go bad in a corporation......but when things seem to be going good it is always "I was responsible for implementing this or that." I think that corporations are being run by a bunch of crooks, what do you think?
February 7, 2008 7:57 AM
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