The (other) Rule of Six – and the mistake we make in using it

Last week, British Prime Minister Boris Johnson introduced the ‘Rule of Six,’ limiting gatherings to six people, in order to slow the spread of Covid-19.

This brought to mind the older ‘Six Block Rule’ that directors have used to guide them on their capacity to accept new roles. The ‘Rule’ proposes that, in general, a competent director can manage up to six full board positions (blocks) at any time, with a chair role counting as two blocks, and a committee chair as one-and-a-half.

It suggests, for example, that we can handle two chairing roles and a couple of other positions. I know many people with several more than this. I can also remember one occasion when I was chairing three boards, as well as a bank’s Finance and Audit Committee, and I was newly on the board of two other companies: total 9.5 blocks. 

A challenging and busy period – mercifully quite short.

I also know some directors with several more than this, who seem able to juggle their commitments successfully. On the other hand, you’ll find some – perhaps political ‘favourites of the month’ – who have more appointments than fingers and thumbs, and a few toes, and I seriously wonder whether they do justice to all of their roles.

Some countries have a cap on the number of public company board positions a director may hold, usually five or six. I think this is totally reasonable, but it’s also worth acknowledging that a listed public company is likely to be far more demanding on your time than a medium sized private company or NGO.

I’d argue that the Six Block Rule is actually the wrong way to look at capacity: anyone with some experience knows that different boards require differing amounts of time and effort. I rather prefer the ‘Three to One’ approach: that the time you need to budget is roughly three times the length of your average board meeting … and ‘Three-Squared for the Board Chair’.

It works like this. Suppose you hold a board meeting each month that lasts four hours: budget twelve hours a month: 

  • Four hours in the meeting; 
  • At least four hours to prepare fully – not just reading the board pack, but staying informed about your broader environment and the issues you’ll be dealing with; and 
  • The remaining four hours for those other things you do as a director – committee meetings, strategy sessions, shareholder meetings, discussions with the CEO, and so on. 

If you’re the board chair, multiply this time by three again (you might want to read my earlier post, ‘The Five Roles of the Chair’):

  • First, you have to do everything your other directors do – but probably more so; 
  • You need to build, lead and develop your board; 
  • You’ll be dealing with your external stakeholders; and 
  • You’re likely to be managing the board’s relationship with your chief executive.

… You also hope you won’t have to do all these at the same time. 

Rules of thumb are quite helpful most of the time, but averages are dangerous things. Think back a few months to the early days of pandemic Lockdown. Most directors I know were attending remote board meetings every week, sometimes almost daily; and many chairs were practically full time in supporting their CEOs, and liaising with their colleagues and other stakeholders. 

Here’s the lesson from that time, and the flaw in any rule like this – ‘Rule of Six’ or ‘Three to One’. When you’re deciding whether you can accept a new position, ask yourself not only whether you can cope if one of your boards has a crisis … what if they all have a crisis at the same time? Or, more accurately this year, what if the same crisis hits them all, at the same time? 

Precisely when your board needs you most, will you be missing in action because you’re overloaded? 

That’s what you need to think about, when you’re offered yet another role to add to your portfolio. Good luck!


If you’re reading this post on LinkedIn and want to follow my blog, you can do so at my site chairingtheboard.com

The Four Levels of Board Maturity … and what you need to do about yours

Some people tower over their profession: Albert Einstein – physical sciences, Chuck Yeager – test flying, Florence Nightingale – nursing (and statistics – check her out). In corporate governance, few are as respected as Professor Bob Garratt, author of ‘The Fish Rots from the Head’. It’s an excellent metaphor to illustrate his discussion of board leadership, albeit, as a marine biologist once advised me, biologically incorrect.

Professor Garratt is one of the western world’s leading thinkers in directing and controlling companies. In a recent article from his 2017 book, ‘Stop the Rot: Reframing Governance for Directors and Politicians,’ he describes the four levels of board maturity that help identify how your board is adding value. I’ve looked at each of these below and have suggested how, as chair, you might respond depending on your own board’s maturity level.

First is what Professor Garratt describes as the Accidental Board. In these businesses, often family companies or employee-owned businesses, the directors have been registered, but the board is a formality and largely ignored, except for signing a couple of forms to accompany the annual financial return. This is a dangerous playground: they’re not even aware that directors assume serious responsibilities and obligations when they consent to act … as one senior director put it to me, ‘When you join a board, you hand over a blank cheque which is your reputation and you should aim for it never to be cashed.’

These boards don’t know what they don’t know. At the very least, get them some basic training in governance, and how it differs from what they’ve been doing. You wouldn’t let someone drive a car, boat or aeroplane without some instruction. Why let them out as your company’s governors (derived from the Latin for helmsman) without equivalent training?

At the second level is the Grudgingly Compliant Board. These directors understand that they have responsibilities, and personal exposure if they don’t comply. But they see governance as a handbrake on the business and won’t invest any more than the bare minimum of time or resource into it. 

This sounds like several companies I know: they have a board, because they think they should; they hold as few board meetings as practicable, with an agenda that’s largely about ensuring they’ve ticked the legal boxes, reviewed last month’s financials, discussed a few operational matters and aimed at making today’s meeting shorter than the last. These boards don’t understand the value that directors can bring when they stand back from the business, test management’s thinking, and offer guidance and insight from a range of perspectives.

For these directors, the appointment of the board’s first independent director can provide the wake-up call. Alternatively, they may decide to seek outside advice or training when they, or a newcomer, sense that the board could deliver much more. For you as chair, this is your opportunity to stop the board from staring in the rear-view mirror and force it to look ahead to shape the company’s course.

When this leads to the Learning Board, the company’s top management and owners, as well as the directors, recognise that an effective board is a vital component of the leadership. The board grows from its limited role of overseeing and holding the CEO to account, and becomes an enabler and accelerator for the business – setting policies, looking ahead and working with management to formulate strategy and set challenging but achievable goals and objectives.

Here is your chance as chair to take your board ‘from good to great’ – to widen your board’s perspective from a narrow focus on maximising shareholder value. What must the business do, to ensure survival and success over the years ahead: how do you remain a good investment for your shareholders, an attractive employer of your people, a company your customers are proud to associate with, and a valuable member of society, making your small part of the world a better place? 

At the highest level, we have what Professor Garratt describes as the Professional Board. I prefer the Leading Board – 

  • Providing effective direction, oversight and control; 
  • Holding board meetings whose main purpose is to help our chief executive succeed;
  • Constantly reviewing the changing environment around us; and
  • Identifying the opportunities ahead, while spotting the roadblocks in our way.

This Leading Board is willing to raise difficult issues, to hold challenging conversations, and to listen to views that may make us uncomfortable. This board evaluates its performance and the contribution of each director, on a regular annual or biennial cycle. 

  • When the world changes, why assume (if only implicitly) that the board we had last year is necessarily the one we need for next year? 
  • Does our current way of governing, with its associated ‘infrastructure’ of meeting preparation and support, add to or detract from the value we bring? 
  • How might we do it all better?

These are tough questions, but ones we must ask if our board is to continue adding value and providing the guidance and support our chief executive needs. 

As chair, you have the opportunity (and responsibility) to ensure that your board’s composition, skills mix and practice are relevant to the challenges of the next few years, not simply a legacy of habit or history. As the late Jack Welch memorably summed it up: ‘If the rate of change on the outside exceeds the rate of change on the inside, the end is near.’ 

As chair, you can make sure that doesn’t happen.

But you need to act: first, acknowledge your board’s real maturity level (perhaps not what you’d like it to be).

Is it

  • An Accidental Board?
  • A Grudgingly Compliant Board?
  • A Learning Board? Or
  • A Leading Board?

Then decide what you need to do about it – today.

And if you’re not sure, call me.

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If you’re reading this post on LinkedIn and want to follow my blog, you can do so at my site chairingtheboard.com

Who saw that coming? The A.R.T. of Risk Governance

I don’t suppose any of us fully anticipated what we, and the rest of the world, have experienced in these last few months. 

Most of our boards have well considered and often colourful risk registers, which they review regularly. So why was this coronavirus such an ambush? How many registers contained something like: ‘Global pandemic, forcing us to close our business, and generate zero revenue for several weeks’? Perhaps many Chief Risk Officers were too nervous to present anything quite so apocalyptic to their board (note to self: reality check on our board’s culture, and how we respond to bad news from management).

I wrote a few weeks ago (The Wisdom of Wimbledon, Covered Are We) about one organisation that did understand the consequences and acted on it. But, if we’re honest, this virus took most of us by surprise – not least with how fast it turned our lives upside down: airlines and tourist operators, struggling to manage excess demand only a few months ago, were suddenly starved of cash, almost overnight.

In the spirit of ‘Never waste a good crisis,’ this may be time to take a fresh look at how we identify risk. Most of us have extensive risk registers and associated ‘heat maps’, where we plot the likelihood of a risk materialising and the impact or severity if it does.

A 2012 article in the Harvard Business Review was one of the first to explain why we can’t treat or manage all risks the same. Since then, my colleague Vaughan Renner and I have developed the authors’ approach into what we call The ART of Risk Governance™:

‘A’ is for Appetite. Many boards have a carefully crafted ‘Risk Appetite Statement.’ Mostly, they lie.

‘Risk Appetite’ is curried prawns from a side-street vendor in Mexico City. The common definition of ‘appetite’ is ‘a desire or liking for something.’ Unless you’re quite perverse, you don’t have a desire or liking for most of the risks in your register. However, you do need to identify them and decide how to treat them. 

For some risks, though, ‘appetite’ is the correct term. These are the risks we choose to accept, or even seek, because we hope the benefit or return will be greater than the likely cost. 

Banks, for example, set a ‘credit risk appetite,’ which they hope will generate a level of lending where the overall returns to the bank are maximised, allowing for a certain number of bad debts. Other businesses may set a risk appetite for acquisitions or other strategic moves – big enough to make a significant difference, but small enough that they won’t kill the company if they fail. 

We need to agree the board’s risk appetite and set limits around these strategic choices.

‘R’ is for Resilience. Even if we’d had the foresight to include ‘Pandemic’ in our Risk Register, most of us couldn’t have prevented it or stopped its rapid spread across the world. 

Risks like this are normally related to external events. We have no ‘appetite’ for them and we usually can’t stop them, but we do need to be resilient, so we can survive when they occur.

These events may be:

  • Short term – natural disasters like flood, drought or cyclone, or geological, or biological, like the pandemic. 
  • Medium term – often the result of economic or political changes. Our boards need to consider a range of scenarios and ask, ‘What if?’ – ‘What if we do have a change of government?’ … ‘What if we don’t?’
  • Long term – can be some of the hardest to address – such as long-term demographic or economic changes: what might our world, our market, our customers, and our competitors look like in 20 or 30 years, and how can we evolve to take advantage?

‘T’ is for Tolerance. Most of the risks on our register (health & safety, data loss, internal fraud, and so on) have an operational focus, and they offer no strategic benefit. Yet they usually fill much of our risk register, because they lend themselves to quantification, and to controls that we can implement, to reduce the probability of it happening (say, defensive driving courses for our employees on the road), or the impact if it does (regular file back-ups and duplicate sites for our data). 

We could, if we chose, mitigate or eliminate most of these risks. But we’d have no money or resources left for anything else … you could probably build a crash-proof aeroplane – but it would be too heavy to leave the ground.

Some risks we may simply accept, as part of what we do. For the rest, will we reduce or eliminate them, transfer them to someone else, or, finally, avoid them altogether? And let us do so to the extent that it is practicable and cost-effective, while still allowing us to achieve the organisation’s goals.

From my experience with many boards, it is this third category – internal, operational and at least partly controllable – that frequently dominates when we review our risk registers. 

Some internal fraud or the loss of a key person, or a data hack, are annoying, and can be expensive and distressing, but they don’t usually kill the company. But many boards don’t spend enough time considering the longer term, or the external, strategic environment, where the risks fall largely into the first two categories. Yet these usually contain the risks that can put us out of business.

When your board takes its next ‘deep dive’ into Risk, try identifying your main exposures in three separate sessions: one for each of these three categories. You may discover a ‘richer’ trove than you’ve probably considered before. Then consider how you will approach each:

  • For which do you have a genuine appetite, and need to apply some limits?
  • Against which do you need to build your resilience? And …
  • What level of tolerance have you for those risks that you can actually manage?

Welcome to Level One in The ART of Risk Governance!

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If you’re reading this post on LinkedIn and want to follow my blog, you can do so at my site chairingtheboard.com

What’s the Plan, New Zealand? Three strategic questions we need to ask

Every Leader of the Opposition in a parliamentary democracy should keep a copy of The Serenity Prayer on their desk: 

“Grant me – 

  • Serenity, to accept the things I cannot change; 
  • Courage, to change the things I can; and
  • Wisdom, to know the difference.”

The past is one thing none of us can change: it’s happened. Of course, politicians are adept at re-writing history and blaming the other lot for much of it. 

The present is where governments spend most of their time. They like to give the appearance of building a great future, but usually the minefield of daily issues and new crises swamps them, and they have little time for future thinking or strategy development. They need to do that before they get into government.

Oppositions don’t have much ability to change the present, however much they may snipe at Government decisions and tell us what should be happening. But they do have time to consider the future

Right now, New Zealand, like most countries, is looking into an uncertain future: many businesses have been crippled after closing for two months; thousands are unemployed; and for some sectors even the medium-term prospects are bleak. But, if we have the courage, we have an opportunity to make some decisions about how we might come out of the Covid-19 crisis and build the New Zealand we want … the New Zealand I chose to move to as a young adult:

  • Capitalising on our global reputation for quality and integrity, should we make New Zealand the organic delicatessen to the world’s worried wealthy, who will happily pay top dollar for premium brands they trust?
  • It’s ironic that, when our borders are closed, physical distance and geographic isolation become irrelevant for many industries. How can we take advantage of our seven-week crash course in Zoom and Skype, when it’s now as easy to do business in Toronto or Taipei as in Tauranga or Timaru?
  • We urgently need to re-invent our tourism industry – not bringing back the swarms that have destroyed the charm of our greatest attractions, overloading their infrastructure and fouling the footpaths, while spending as little money as possible. How instead do we attract the high-end traveller, who will pay for what New Zealand uniquely offers – wide empty spaces, a pure, clean and sustainable environment, and that warm personal welcome that draws people back time and again?

Underlying all these is the need to re-direct New Zealand towards becoming a high value export-based economy, rather than racing to the bottom competing to be the lowest cost producer – a race in which there are no winners.

New Zealanders are looking for someone to paint a believable picture of a brighter, healthier, wealthier future and to give us confidence in how to get there. So far, we’ve seen little beyond messages of doom and short-term remedies, most of them requiring billions of dollars from the Government. This is never a recipe for long term success.

The Leader of the Opposition, Simon Bridges, has the best opportunity of all to shape this vision and convince us that he’s the person to guide us there. He has the luxury of being able to generate the thinking and lead the debate, without the distraction of running a country. 

He’d serve us all well by asking some of these bigger questions, and proposing some fresh answers, rather than wasting breath over whether we should have gone from Level-3 to Level-2 a week earlier. That’s irrelevant detail: the Prime Minister made her decision and nothing the Opposition said was going to change it. Consequently, we ignored him.

If Mr Bridges has the wisdom and courage to seize this moment, to capture New Zealanders’ attention and ignite our dreams for this country’s future, he may just find he’s given the opportunity after September’s election to make it happen.

The Wisdom of Wimbledon: Covered Are We

After the SARS outbreak of 2003, someone on the board of the All-England Club (or, more correctly, the All-England Lawn Tennis and Croquet Club), which runs the annual Wimbledon Tournament, asked exactly the right question: ‘What if …’ ‘What if we had another event like SARS and had to cancel?’

As a result, the Club has been paying a reported $US2 million a year (over 17 years – say, about $US35 million in total) for Pandemic Insurance cover.

Not surprisingly, Covid-19 has forced the cancellation of this year’s Tournament (in line with almost every major sporting event on the planet) and the Club will receive more than $US140 million in compensation. Not as much as it would have earned if the Tournament had gone ahead, but enough, I assume, for the Club to survive a year without tennis.

In our boardrooms, directors so often ask for more data and greater detail (I think of these as the ‘What …?’ questions). These tend to draw us into operational, tactical discussions, frequently with a rearward-looking lens.

To be effective, boards must ask two different and future-focused questions:

  1. What if …?’ What would be the implications for our business if this event occurred? Think about the consequences, rather than simply about what’s happening or has happened. As the board of the All-England Tennis Club did. I can imagine the debate at the board each year: ‘Do we really need to keep spending this money … what if it never happens?’ Fortunately for them, prudence prevailed.
  2. The second question is ‘So … what?’ What does this mean for our strategy? As the late Jack Welch put it: ‘Accept reality as it is, not as it was, or as you’d like it to be.’ For a vivid example of a decisive response to a dramatic change in business conditions, look no further than Auckland International Airport Ltd, which last month realised that the world of air travel had changed, possibly permanently. The board didn’t dodge the issue, or try to delude themselves about an early return to ‘normal’. Instead, the board cancelled the company’s multi-billion dollar expansion programme, including new terminals and a second runway. I’m sure it wasn’t an easy decision, and it must have hurt, but it’s hard to argue with the wisdom or the hard-nosed business logic.
  3. These two questions lead to a third: ‘What next?’ What are we going to do about it? That’s when you make the decisions that can change the direction, and even the fate, of your company.

When you come out of Covid-19 Lock-down and hold your next board meeting, what questions will you be asking?

Chairing in the Time of Physical Separation* – Six Tips for Chairing Remote Board Meetings

Chairing a board meeting is hard work and you feel tired at the end of it, right? 

I’m the same. It probably means you’re doing your job properly – actually your three jobs as chair:

  • First, you’re managing the process of the meeting. To most people, this is your main role.
  • Second, you’re still a director – not just a facilitator. 
  • Third, as chair, you can’t afford to miss a beat: you need your antennae up the whole time, to know who should speak, who shouldn’t, and when to move on. 

Once you’re chairing your meetings over Zoom, Skype or Teams, in the era of ‘social distancing,’ the intensity of concentration moves to yet another level. Instead of sitting in a room with people around you, you’re looking directly at your screen and everyone else is staring back, or more likely just past you, since their camera and screen aren’t in quite the same position. 

Probably most differently, you can’t make eye contact with any one individual: a raised eyebrow towards one becomes a raised eyebrow at everyone.

Here’s what I’ve learned in the last few weeks – six ideas (and one observation) that I hope will help you get the most from your video board meetings.

  1. You need to run your meeting slightly more formally than when you’re together. When you’re around the table, people can sense who’s about to speak and as chair you can decide whether to allow it or catch their eye to indicate that you want someone else next. In the virtual meeting room, it’s helpful to say at the start that you want all microphones off (cutting out barking dogs, beeping phones and electronic echoes) until someone is about to speak. Then you have a better chance of saying who you want to hear from next, rather than several people speaking over each other.
  2. Not everyone’s concentration will be as sustained as yours, so it’s all the more important that as chair you summarise each resolution exactly, immediately before the decision. This is a good discipline for chairing generally, as well as helpful for your minutes secretary, who may have been trying to follow a wide-ranging debate. 
  3. Video meetings are intense and tiring, and people can’t shift in their seats as easily as when they’re all together in a room. I think it’s important to be aware of physical comfort and wellbeing, so try to keep your meeting shorter than you might otherwise. (I’ve found that most people are willing to meet more frequently in this way, if you need to.) And most people welcome a 5-10 minute break at reasonable intervals, so they can stand up, refresh themselves and pour some more coffee.
  4. I like morning board meetings, before people are involved with other matters during the day. With virtual meetings, especially under lockdown, when almost every business in the country is using video instead of flying or driving, the nation’s bandwidth can come under pressure at peak times. This can result in fuzzy sound or a frozen picture, which is distracting at least, and at worst you miss a crucial comment or question. Most people have no more than a 20 metre commute right now, so why not use that and meet at the start or end of the day, during ‘drive time’?
  5. At the end of any board meeting, as chair I like to check in with our CEO: did they get the decisions they needed; are they feeling motivated by the discussion; did they fully understand directors’ intentions? This is particularly important after a difficult board meeting. It’s also helpful to check with your other directors at such times: have egos been bruised, or relationships strained, in the desire to get to the right decision? This takes a bit more effort after a virtual meeting, when you have to phone each person separately, but it pays dividends every time. 
  6. When you’re looking into your screen, remember that your colleagues are staring at you continuously much more than when you’re sitting next to them. They’ll notice what type of shirt you’re wearing, and it’ll be obvious whether you’ve attended to your personal grooming or shaved (as applicable). You may be sitting in your kitchen or your children’s den, but you’re still presenting yourself to business colleagues: your choice! As with TV newsreaders, what you wear below your waist is entirely up to you … until you stand up.
  7. Finally, I’ve discovered one unanticipated benefit of remote meetings: you need feel no guilt about that garlic you had in last night’s dinner!

I don’t think video conferencing will replace all physical meetings, even after isolation ends, but they’re all we have today and I’m sure we’ll be using them more. Recognise how they differ, make the most of them – and good chairing!

*  With apologies, on behalf of every blogger on the planet, to Gabriel Garcia Márquez for reducing his novel’s evocative title to cliché of the month – beginning with an email from our erudite board secretary, ‘Meetings in the Time of Covid.’


If you’re reading this post on LinkedIn and want to follow my blog, you can do so at my site chairingtheboard.com

The three things we talk about in Board-alone time, and two that we don’t

Board-alone time – paradoxically known in some jurisdictions as ‘Executive Time’ or ‘Executive Session’ – is that part of our meeting exclusively for the non-executive members of the board, those members who don’t work in the business day to day. In my experience, it’s the most debated and probably most misunderstood part of a board meeting.

Some chairs tell me they don’t believe in board-alone time because it shows a lack of trust in the CEO. Others use it ‘as needed,’ if the chair or a board member calls for it. I don’t agree with the former, and I’ll explain why, but I can easily understand how the latter approach, ‘as needed’, could lead to the former.

Let me start with two rules I have on what board-alone time isn’t:

  1. It isn’t normally a part of the board meeting itself, but rather an informal discussion among the non-executive directors. Therefore, with one exception that I’ll mention later, we don’t use if for making decisions that belong in the board meeting.
  2. More importantly, it’s not – as some directors and CEOs fear – an opportunity for the board to ‘beat up the CEO’ behind her or his back.

Why then do we hold board-alone time, and how should we use it?

I like to hold a brief session with the board alone at the start of each board meeting, as the board’s ‘pre-match team talk’. I’m fairly sure most smart chief executives hold ‘management-alone’ time in the days leading up to a board meeting – agreeing how they’ll approach it, and what decisions they want from the board. This seems to me good management. In the same way, board-alone time is our chance to prepare ourselves for the discussion and decide how we want to spend these next few important hours. 

We don’t spend much of our total year in board meetings. Yet this is when we need to make the most important, often most contentious and difficult, decisions the company faces … the decisions that only the board can make. Not surprisingly, I want us to be as well prepared as we can. 

  1. What do we need to talk about today?

The first thing we need from this session is to agree how we’ll prioritise our time over the next few hours, so we can add as much value to the business as possible. This is the board’s meeting, not management’s, so the board must have the final say over what we discuss. 

Most of the time we’ll know what our chief executive needs from us – strategies to adopt or capital expenditure to be approved – but in our role of oversight and testing management’s thinking, the board may decide that one or more other matters, not on the formal agenda, need raising or simply that we need to change the order of today’s business. 

2. What’s happened since we last met?

The second thing I like in our time alone is a brief update from the chair – and other directors if appropriate – on what’s happened since our last meeting, say, meetings between the chair and CEO, external stakeholder discussions, and so on. It’s also the chair’s chance to comment on how the chief executive performed on those occasions. As far as practicable, I want all directors to have a full picture and the same information about where things stand.

3. Does anyone need to raise any concerns?

The third use for board-alone time is as a safe forum for board members to raise any concerns they have. These may be relatively minor, the form or delivery of board papers for example, or – as I recall vividly – one board member asking, ‘Has our CEO run out of ideas?’ That would be a tough question to ask if the chief executive was sitting in the room. 

In the case I’m talking about, the board member had done a lot of background analysis before raising it. It became the trigger for a series of further questions, culminating several months later in a change of leadership. Importantly for the organisation, it led the board to face this difficult situation several months, possibly a year, earlier than it might otherwise have done.

This leads of course to the one crucial time when you do make a formal decision as the board alone: the critical and usually extremely difficult decision that our current chief executive is not the person to lead the organisation into the future … and what we need to do next, how and when. 

Finally, to avoid the suspicion of ‘behind the bike shed’ secret discussions, I follow our board-alone time with a board-plus-CEO-alone session, where we share with him or her all we’ve talked about, including the difficult bits. But, to keep it from becoming personal, I’ll phrase any concerns as ‘The board has a growing concern about …’ without naming directors individually.

As for how long these sessions are, I usually aim for no more than 15-20 minutes and I try not to allow discussions that should include the CEO. On most occasions, I’m keen to bring the chief executive into our discussion as soon as possible. 

After all, as the legendary, Jack Welch (who has, sadly, died as I write this) once put it, if you have confidence in your CEO, the question remaining for your meeting today is ‘What can we do to help our CEO achieve the company’s objectives?’ That’s not the same as giving her or him everything they want from the board, but what we agree they need – among which should be clarity of direction from the board and, when we leave the meeting, confidence that they have the board’s support. 


If you’re reading this post on LinkedIn and want to follow my blog, you can do so at my site chairingtheboard.com

Radio New Zealand and the Ansoff Matrix

Radio New Zealand announced last week that it was considering gutting its Concert Network, moving it from FM to AM, dismissing all its presenters, replacing it with an automated music stream and allocating the frequency to a more youth-orientated FM channel.

Many people better qualified than me have taken to the ramparts to protest this loss of New Zealand’s only serious music channel and I imagine some Ministers are receiving a lot of feedback.

But I do have many years of experience sitting in boardrooms, asking hard questions and formulating corporate strategies. So I’ve taken a different approach from most and have looked at this opera-in-real-time as I would in the boardroom. Of course I have only the information available to a member of the listening public and I assume the board has considered a lot more.

As a director, I’ve found a tool called the Ansoff Matrix (see below) a useful way to guide our thinking:

Let’s assume that Radio NZ’s board has decided it’s no longer its preferred option to stick with what is usually the least risky of these four strategies, ‘market penetration,’ in existing markets, with existing products. We can accept that as the board’s problem definition.

So, what now?

In most organisations, you might decide to move into a new market or launch a new product. But it’s generally thought very high risk to try to do both at once.

Yet this seems to be exactly where Radio NZ is heading:

  1. They want to attract a new, younger audience – something they’ve tried previously without much success; and
  2. They’re proposing to launch a new product, which they hope will appeal to that market.

As a director, I’d want to understand two things before we started:

  1. What gap in the market are we proposing to fill, and
  2. What competitive advantage do we have with our proposed new product?

When an organisation expands into new markets or new businesses, one of the fundamental rules you normally follow is to keep your base business strong and look after your existing customer base, because another essential component of any board decision is to identify the risks. In other words, to ask, ‘What if:’ ‘What if this plan doesn’t work; what’s Plan B?’

As I understand it, this proposal not only destroys irreversibly one of Radio NZ’s core products – a ‘product’ for which it is New Zealand’s sole provider (in commercial terms, 100% market share). Imagine if Coca-Cola had destroyed the formula for its original product when it launched New Coke. When that failed, what could they have done?

In addition, this move alienates – is already alienating – possibly irretrievably one of its most loyal customer groups – many of whom are among RadioNZ’s strongest promoters.

If the new strategy doesn’t work, the board seems to have left itself nowhere to turn, and they can’t unwind what they’ve done. Game over?

But wait: there’s more. We learned on Friday that the government has announced it’s reviewing a proposal to merge the two main crown owned broadcasters, Radio NZ and TVNZ. During reviews like that by your shareholder, you don’t usually make strategic changes to your business: it makes the shareholder’s job of analysing the data almost impossible.

  • If Radio NZ didn’t know this was coming, does this give cause for pause?
  • If they did know it was coming, I’d expect some very pointed questions from the shareholder to the board about how they allowed it to proceed.

Just this morning in fact we heard the Responsible Minister, also our Prime Minister, saying publicly on radio that the government had indeed asked Radio NZ to pause while the government looked at other options. It went ahead anyway.

I do hope the board has been asking the types of question I’ve talked about above. If they have, I’d be even more interested in the answers – and data supporting them.

If they haven’t, today would be a very good day to start!

In the old BBC series ‘Yes, Prime Minister’, senior public servant Sir Humphrey would refer to a decision he considered flawed as ‘A bold decision, Prime Minister.’ This was always enough to strike terror into the PM and lead to an immediate reversal. On the face of it, I’d call Radio NZ’s current proposal ‘a very bold decision indeed.’

Six Steps to More Meaningful Minutes

As I write, I’ve just finished reviewing the draft minutes for a board meeting we held last week.

Why do many chairs and directors see this as largely a chore – and do they give the minutes the attention they really need? Are they ensuring that the minutes reflect accurately the decisions the board took, and the tone of the meeting; or do they spend their energy – and feel triumphant – uncovering the trivial typo or incorrect use of punctuation (we all know one of those, don’t we)?

For me, the minutes need to satisfy two needs:

  1. First, when approved by the board, the minutes become the formal and legal record of what the board said and decided – a record that becomes permanent. 
  2. Secondly, the minutes are a reference point for board members who need to look back, perhaps years later, at how they got into a particular position. 

Here, then, are my Six Steps to More Meaningful Minutes:

  1. When signed off by the board, the minutes become the formal, legal, record of the meeting, so they need to be accurate and complete. This will be important if there is ever an argument over what the board did or didn’t do. I’ve provided expert evidence in several court cases. In almost every case it would have helped everyone if the board minutes had been more comprehensive, clearer about the board’s decisions, and written with greater care. In some instances, well written minutes might even have prevented legal action from going ahead. If you doubt me, take a look at the Report of the recent Australian Royal Commission on Misconduct in the Finance Industry: if something’s not in the minutes, it may as well not have happened.
  2. The minutes should capture not only the decisions the board made, but also the options the directors considered and why they made the choices they did. If you ever find yourself in Court, you may need to demonstrate that you applied the care and diligence required of a director and that you believed in good faith the decision you took was in the best interests of the company. The minutes need to record in at least some detail the board’s discussion and the main questions asked – the implication I took from the Royal Commission was that the minutes should record every material question and answer. 
  3. Quite often, we refer to our minutes several months or years later – sometimes to ask ourselves why we reached a particular decision. Minutes showing only that we made a particular decision aren’t much help … we know that, which is why we find ourselves in the situation we do. What’s helpful, therefore, is knowing why, at the time, the board thought it was the best decision.
  4. In general, the minutes shouldn’t refer to directors by name: ‘the board asked,’ ‘directors discussed’ is usually enough: it’s consistent with the principle of collective responsibility. It also avoids deterring a director from asking what they might think is a contentious or stupid question – with their name against it for all time. Occasionally, a director may ask to be recorded by name, but usually when they’re dissenting and voting against a resolution.
  5. In a similar vein, our minutes often refer to members of management by name. Nothing particularly wrong with that, except that things change with time. If you refer to the minutes several years later, a manager may have changed roles since the meeting. I prefer therefore to refer to managers by their title, such as CFO (Chief Financial Officer), to avoid any confusion. Of course, the list of attendees at the start of the minutes will show their name and the position they held.
  6. Finally, directors should be able to review the draft minutes while the meeting is fresh in their minds – while they can recall the discussion and tone of the meeting, as well as what was actually decided. As chair, I like the draft to come to me within four or five working days, and I’ll try to turn them around, with any edits, within a couple of days. (As board secretaries I’ve worked with will tell you, I don’t always meet this standard, but they’re usually polite enough to send me a gentle nudge if I haven’t responded.) Then the draft can go to the rest of the board for their review, preferably within a week of the meeting. 

I hope that’s prompted a few ideas to get you thinking about your own board minutes. You may not agree with everything I’ve said, but these principles have generally worked for me. Good luck in your next meeting – and in coaching your minutes secretary!

Where was Boeing’s Board of Directors?

I’ve just returned from a few weeks’ leave and one of the first stories to catch my eye related to the departure of Boeing’s CEO, Dennis Muilenberg, following the company’s inept handling of the aftermath of two fatal 737-Max crashes that killed a total of 346 people.

What surprised me was not that Mr Muilenberg has finally been dismissed, but that, in doing so, he takes with him a payout worth $US 62 million. 

There has been a lot of debate in recent years about the astronomical salaries of large company CEOs, and whether anyone actually merits such amounts, or indeed whether someone will really be motivated to work harder for $50 million than they would for, say, $5 million – even that relatively miserly sum being more than most employees are likely to earn over an entire lifetime.

But this payout is on another level again. Usually, when we discuss executive remuneration, we’re thinking of a CEO leading their company successfully and there’s an argument that, as the leader, the CEO should share in some of that success. However, since the second 737-Max crash in March 2019, Boeing’s order book has fallen to a 16-year low and its share price has fallen by about 20%, stripping $US 50 billion off the company’s market value. 

Where is the accountability for this destruction of value? More significantly, where was the Board of directors that set Mr Muilenberg’s remuneration? 

In most CEO employment agreements, there’s a clause saying that, if the CEO acts in a way that brings the company into disrepute, the Board may use this as grounds for dismissal, usually without compensation. Was nobody willing to stand up to Mr Muilenberg when he led the company into and through arguably the worst reputational crisis in the company’s history? 

Perhaps part of the answer is that, until October 2019, Mr Muilenberg was both Chairman and Chief Executive of Boeing, so we may assume that he had considerable influence over his Board. 

Part of the role of a Board is to ask ‘What if …’ In other words, when they were setting his remuneration, they should have asked themselves about some of the possible – if at the time unlikely – circumstances under which they might need to dismiss their chief executive. And, if they did so, what reputational issues might they need to consider?

If nobody did this, how can the directors argue that they were fulfilling their duty of care and loyalty to the company?

When we see more and more that even unsuccessful CEOs depart with what I can only describe as obscene pay packages, it’s no wonder that people become not only disillusioned with big companies, but sceptical about the value boards provide in general as a check and balance on executive behaviour and pay.

To make the specifics of this case even worse, on the very day that Mr Muilenberg departed with his nest egg, one of Boeing’s major suppliers announced that the recent shutdown in the 737-Max production line had forced it to lay off 2,800 of its employees – 2,800 people who will no longer receive a salary or wages, whose careers may be destroyed, and some of whom may no longer be able to meet the mortgage payments on their house.

Looking at it differently again, if Mr Muilenberg were to have a rush of conscience and pay $150,000 from his own pocket to every family of the 346 people killed in the two crashes, he would still be left with more than $10 million to cover his retirement – more than adequate reward for a CEO who has brought one of the world’s leading companies to its reputational knees.