In recent months, we have witnessed failed leadership more often than we have success stories, for example Boeing, OpenAI, Peloton and Pioneer Natural Resources. While each organisation faces different challenges at various phases of commercial evolution, having sound leadership practices in place across the board from inception substantially increases the likelihood that the company will be able to weather the storms – from both internal and external forces – of any magnitude.

Tone from the top

Choosing a board leader (chairperson) who has laser clarity about the company’s vision and direction is the first order of business for success and corporate longevity. He/she leads by example, guiding and carrying through various aspects of governance to ensure the company stays on track. How board leaders work with senior management and committees to arrive at optimum solutions should demonstrate that they consistently make well considered decisions that match the company’s central vision, strategy and long-term goals.

In addition to the need for a board leader to possess core leadership and professional capabilities, personal qualities such as openness, transparency and collaboration will foster a healthy corporate culture. Walking the talk on all these attributes marks out an inspired leader. It is a warning sign if board directors or senior management find that the chair avoids making tough decisions or strays off the company’s strategic course.

Confidence and support

The chief executive and board leader helm the organisation, charting the course for growth and prosperity together with senior management and board directors. Because these roles carry with them the weight and fate of the enterprise, it is imperative that the individuals in these positions have the continued confidence and support of their teams. Erosion of confidence and support due to underperformance or misalignment with strategic goals is a sure sign that the company is in trouble and may need a leadership shakeup.

Decision protocols

Directors and senior management should follow clear decision protocols so that individuals know their areas of responsibility and purview. This will help to make meetings and communications more efficient and effective. It is expected that each director should know what specific issues to bring up in board meetings, primarily leaving operational items to the CEO and his/her team. Delegation of decision-making also lessens the threat of micromanagement. Once a culture of micromanagement creeps in and becomes the modus operandi, it is difficult to reverse without messy consequences.

Leadership evaluation

How the CEO, board leader and directors are selected and consistently evaluated to identify under- or non-performance demands a systematic, rigorous approach – so too for succession planning. These are paramount to preserving a successfully functioning team. Clearly outlining qualifications for professional capabilities and personal qualities, along with maintaining a scheduled review process will increase the likelihood of choosing the right people with the best fit and diversity of skills for creating value. It will also ensure that the company regularly reviews how it is being run and managed in the context of everchanging risk factors.

Performance evaluations can take several different forms, including peer reviews, surveys and internal or external independent reviews. One method that may promote candour and trust without jeopardising the fabric of the board is confidential 360-degree and/or anonymous reviewing. The objective here is to achieve continuous improvement of board governance without attributing results to specific individuals. Whatever the size of the company – a family-owned business, an SME or a listed enterprise – a systemised board review is standard practice. Without it, companies run the risk of sailing adrift into perilous waters.

Committees

Committees form the ballast of the company. Some committees are mandatory under various listing jurisdictions, including those dedicated to nominations, audit, remuneration and corporate governance. Depending on the reporting requirements and the size and nature of the company’s business, some organisations form dedicated risk, ESG and leadership committees to address specific areas of potential material risk. The board leader is obliged to work with each committee chair to ensure that all core areas of the company are on target.

Committees are effective mechanisms for covering research, analysis and reporting, and can serve as checks and balances. However, these can become bureaucratic and waste a significant amount of time if there are too many of them, leading to overlaps of information. A proliferation of committees can confuse activity without actually providing strong oversight.

Empathy and active listening

Leaders who succeed possess essential personal qualities and qualitative skills to create strong bonds. A collaborative and resilient demeanour coupled with forthrightness will earn trust, build team spirit and earn respect. Genuinely listening to contrasting viewpoints can turn potentially divisive situations into enlightened growth opportunities.

Empathy is often viewed as a weakness when in fact it is a considerable strength. It illustrates that a leader is completely comfortable with themselves, is open to differing opinions and wants to have a good understanding of others’ ideas. Ignoring or sidelining team members’ input can lead to board members feeling alienated, potentially resulting in a fractious group. Every board member should be heard, including the independent non-executive directors – that’s why they are there, to bring up issues that may not necessarily make it to prime-time consideration.

Communications

Communications is one of the most important core functions of corporate governance. A leader who recognises that it is imperative to proactively engage with all relevant interested parties, both internal and external, will encourage open exchange and transparency. Companies that continually engage stakeholders are less likely to find themselves exposed to reputational risk.

Communications is a strategic and deliberate practice. It is key to be clear about what information needs to be communicated and to whom. Equally, not communicating is a form of communication that can bring doubt, distrust, confusion and sometimes unwanted attention.

In the crisis management business, especially public relations, when the fire brigade is called, the blaze is often already out of control. This is where we come full circle – back to the board leader and the CEO. If they, together with their aligned teams, include reputational risk in the mix of assessing overall material risks, then they are well positioned to handle whatever squalls or headwinds hit them.

Common causes of leadership failure

1. Lack of vision or clear direction. Leaders who lack a clear vision or goals for the organisation may struggle to inspire or guide their team effectively.
2. Failure to make tough decisions. Avoiding difficult decisions can lead to inaction, affecting the organisation’s progress and success. Inaction can be as devastating to performance as poor decisions. Both erode trust and confidence in leadership capabilities.
3. Inability to delegate. Leaders who struggle to delegate tasks or empower their team members can become overwhelmed and limit the organisation’s potential. Micromanagement stifles creativity, innovation and motivation within the organisation.
4. Lack of empathy. Leaders who do not demonstrate empathy towards their team members may have difficulty building strong relationships and trust.
5. Lack of integrity. Leaders who exhibit unethical behaviour or who lack integrity may lose trust and credibility with their team and stakeholders.
6. Poor communication. Ineffective communication often leads to misunderstandings, conflicts and lack of alignment within the team and stakeholders.
7. Resistance to change. Leaders who are resistant to change or new ideas will hinder the organisation’s ability to adapt and thrive in a dynamic environment.
8. Lack of self-awareness. Leaders who lack self-awareness generally fail to recognise their own strengths and weaknesses. This inhibits their ability to grow and develop as leaders.

Conclusion

There are many issues that should be considered by governance professionals in their role of facilitating board leadership. These include helping to establish clear decision-making protocols, maintaining good transparency, and aligning board, management and stakeholder communications. Equally important is ensuring an active, demanding and diversified board, as well as a systematic leadership evaluation process.

In addition to the sound leadership practices discussed above, strong corporate leadership also requires that the individuals involved have an empathic consideration of diverse viewpoints. When board members and executive management create, lead and foster a healthy corporate culture, they will be in sync with both their teams and the interests of stakeholders. This synergy lays the foundation for a thriving enterprise that delivers results.

Karin Malmström, Co-founder and Managing Director

Corporate Governance Reality Check