One Minute Governance

Well, we’ve made it. 49 conditions, why they matter, and a little bit about what to do about them. That was the headline of season 4 of OMG: what are some conditions we might cultivate as corporate leaders in service of making decisions. But there’s also an important subtext, at least for me. The subtext is this: “I was wrong.” To be fair, I’m pretty sure I continue to be wrong, but at least now I’m aware. If you’d played the last 52 episodes of this podcast for me even 5 years ago, I’d have basically just scoffed. “Who has time for any of that nonsense when there’s so much work to do, so much at stake, so many boxes to tick, etc.?” Is how I imagine I might have responded. But now, having gone through the work of conceiving, writing and recording this season, I’m more convinced than ever. Just think: 49 conditions and it barely scratches the surface of what’s possible. Even so, if we were interested in how they might affect our decisions and intentional about cultivating them for ourselves, for our peers, for those affected by what we do…just imagine. We’d show up and be more cognitively activated, better informed, more socially cohesive, more efficient. It almost feels like cheating, but I promise it’s not. I think we’re just finally zeroing in on what actually matters in corporate governance. I don’t regret being wrong for (ugh) 21ish years, but I sure am glad to be more right than I used to be. Thanks SO much for listening to OMG. I really want to know what you think of what we’ve done this season. PLEASE consider subscribing and, even better, leaving a review through your podcast platform. And don’t hesitate to reach out to me through my website mattfullbrook.com. See you again in season 5, whenever that is.

If there’s any part of my overall vibe, and of season 4 of OMG in particular, that you find a bit annoying or immature or naïve or whatever, I bet it’s that I’ve got this general optimism that the business of corporate leadership can be more fun and less formal. Actually, it’s not just that it CAN be more fun and less formal, but also that it SHOULD be! As in, the formality of the status quo is working against good governance. I really, sincerely believe it. Trust me, I’m not trying to undermine the seriousness of the jobs of executives and directors. This is not a joke to me, and there are very real and important consequences to doing the job poorly. But honestly, that just makes me more confident that we’re on to something here. We have absolutely no evidence suggesting that the typical solemn formality of boardrooms is any good. And we have plenty of evidence from the science of decision-making that we should be experimenting and socializing and finding ways to create space for a diversity of approaches and perspectives. So, I suppose what I’m saying is that a defining characteristic of a great board is its willingness to let go of formality – even in the environment of a regular board meeting – when doing so will serve the decisions at hand. Do me a favour, start thinking now about how you might cultivate the conditions for a bit of play or wonder or experimentation at your next board meeting, even just for a few minutes.

Because of the accidental bonus episodes I mentioned last episode, here we are at episode 200 (yay!) but we still have this one and two more to go this season. Here we go: Many of the boards I’ve met feel more than a little anxiety about conversations that happen outside of the confines of the on-the-record parts of board meetings. You know what I’m talking about. “Look at those three over there: always gossiping about something.” And it’s true! Side conversations can be exclusionary, faction-forming, and suspicion-arousing. But they’re also entirely unavoidable in a normal human environment. When people are together, they tend to group and hang out and chat. Can we all accept that it’s not an inherently bad thing. The problems come from information asymmetry, relationship asymmetry, exclusion – intentional or otherwise – of specific individuals, and the potential for inscrutable deal-making. It’s obvious how all of these things can impact decisions. The most important first step is to, like, actually talk about this stuff. Concerned about something? Say so – without accusing anyone of anything, please. Feeling left out? Say so – again, without accusation, please. Have some ideas about how to manage or bridge the potential problems? I promise you there are others in the room who want to hear them. Want some other ideas, check out the article Back Channels in the Boardroom by Gardner and Peterson in HBR September 2019. Just promise me you won’t let things fester.

Something weird has happened on OMG. I just realized as I’m recording this episode that I have too many episodes! That means you get two bonus episodes in season 4. Hooray? Anyway, I bet you’ve found yourself in lots of situations in your life where you had to make conversations happen. Maybe an uncomfortable lull at a dinner party. Maybe you’ve been voluntold to lead a meeting. Or maybe it’s just your job to get in rooms and get people going. No matter your approach, there’s a pretty high probability that at least *someone* in the room found you annoying or boring or corny or whatever. Why am I so confident? Because there’s NO way to facilitate a conversation in a way that guarantees universal adoration. Making matters worse, there’s quite a bit of evidence that the more we do to be loved, the less likely it is that our audience will learn and retain anything. In other words, edutainment is basically junk food: tasty but substance-free. It’s true! The more we do as facilitators and educators to provide our audience with shortcuts to immediate results or success, the better they will evaluate us, and the less they will retain in the long-term. So, in some ways, the best facilitators are willing to sacrifice the adoration of the crowd – at least a little – in favour of leaving them with the tools to succeed in the long term. Whoever is facilitating your boardroom conversations, and for whatever purpose, the greatest gifts you can give them are thoughtful feedback, patience, and a commitment to your work. There’s a hidden message here, though, which is that facilitation does matter because discussion matters. If you’re starting to feel like your board meetings are mostly info dumps, a bit of edutainment probably wouldn’t hurt.

I have feelings about governance education. On the one hand, the complexity and pace of change of external conditions that affect *every* organization means that basically every director and executive has their work cut out for them when it comes to staying up to date. On the other hand, education on those external factors – even when it’s designed for boards – basically never comes with guidance on how to, y’know, actually do something useful with that education once you’re back in the regular world of a board meeting. At least in my experience. Sure, they might say “here are some questions you could ask about, I dunno, AI and copyright or whatever,” but we all know that question asking does not a great director make. Maybe more concerning is that most education that has “corporate governance” in the title ALSO doesn’t make much of an effort to empower directors and executives to be more awesome at their job. It just seems to be obsessed with case studies of catastrophes, explosions, lurid affairs, and whatever. But understanding some worst-case scenarios is not the same as showing up and being a great director. Is there a moral to this story? If there is, then I think it’s to 1) make liberal use of your organization’s education budget by consuming every course, conference and publication that might give you new and useful knowledge, and 2) invest time and effort into imagining how you’re going to take that knowledge and use it in service of cultivating effective conditions for making decisions in your boardroom.

Spoiler alert: I’m a corporate governance consultant. Not only that, but I’m ultra cynical about the value of reinforcing “normal” corporate governance conventions. Back in episode 79 I tried to provide some guidance about when and why to engage governance consultants – I listened back just now and surprisingly don’t disagree with what I said back then. That said, I really don’t think most organizations are as intentional as they probably should be when engaging consultants for governance-related stuff. Like, what if we had big expectations? Maybe our financial statements should come with a side of audit committee coaching. Maybe our executive compensation advice should come with a heaping scoop of and leadership and team-building facilitation. Most of all, maybe our board evaluations aren’t complete unless we get a decadent dessert of dreaming and co-creation of an exciting boardroom future. What I’m getting at is that it’s not just boards and executives who are stuck in the status quo. Heck, governance consultants are largely responsible for DESIGNING the status quo, and of course reinforcing it, too. And there’s no reason for them to do anything different if they think their clients are happy.

Last episode, we talked a bit about stakes as a condition we can cultivate by just giving ourselves some stakes-free time to practice. In other words, just get rid of them. Stakes are a complex condition, though. Like, if there’s an emergency that threatens to kill your organization, that’s gonna affect the way you need to show up, compared to business as usual. Or if you’re my little corporation that can succeed or fail without affecting, well, anyone really. Compare that to, say, Silicon Valley Bank or FTX where their failure affected a LOT of people very seriously. In other words, sometimes we have no control at all over the ifs and hows of the stakes of our decisions. Sometimes the result of the decision has the potential to significantly benefit or harm a lot of people. But, honestly, this just reinforces the importance of intentionally cultivating the rest of the conditions that we *do* have control over. Ultimately, what we’re trying to do is set ourselves up the best we can to do the most good and the least bad through the decisions we make as corporate leaders. When the stakes are high, good governance matters more than ever.

For a few years now, it’s really stuck with me that we expect directors and executives to walk into boardrooms and just be awesome. But we don’t really tell them what awesome looks like, and we certainly don’t give them any time to figure it out. Back in episode 70 I talked about the fact that thinking strategically takes practice. And it’s true! Making matters worse, we don’t really give boards any time to practice – every moment is like game time. More than that, they only get to “play the game” once a month at most – often way less than that. I get it. Boards are serious business, and we recruit people who are SUPPOSED to understand how to get the job done well, even under sub-optimal circumstances. If we’re lucky, we get some great stuff done under those conditions. But who wants to leave governance to luck, when we could build and maintain our skills through intentional practice? So, what does practice look like? The most important thing is to take away the stakes. In other words, we’re not making a consequential decision or learning about a complex part of the business or assessing a critical situation. We’re just practicing! The next most important thing is to decide what you need to practice. Struggling to “be strategic”? Not asking great questions? Presentations too boring? Whatever it is, identify something you could stand to get better at, remove the stakes, and give your board and management team some space to play around and try some stuff. Whatever you learn, good or bad, take note and do things a little bit better when the stakes are back on the table.

Of all the things that have been turned on their heads since we’ve gotten used to virtual meetings, maybe the most significant unsung benefit is our ability to accommodate a variety of geographical locations in the same meeting. Remember how hard it used to be when we thought we had to choose between finding that elusive sliver of the calendar when we could get our board members from around the world in the same room at the same time, or else have the dreaded old school blended meeting of in-person and (gag) conference phone? Thankfully, we’ve embraced some better alternatives. But geography matters for other reasons, too. If you have directors in different parts of the world, for example, what if you tried bringing board meetings to them every once in a while? It would be a good faith gesture *and* potentially an inspiring change of scenery for the board. If you have operations or impact around the world, what if you planned board meetings in locations that enabled the board to witness what’s going on in real life? What about a short trip to cottage country or a bougie excursion to a tropical beach, or a subtle shift to the other side of town. New sights, new sounds, different restaurants, different stuff to do on break, new people to meet. And don’t try to pretend like this stuff is just boondoggles. A different environment, even subtly different, will have an impact on the way people show up.

Last episode I mentioned there are two things that directors tell me most affect their ability to stay engaged. The first was taking breaks. The second, related, factor is physical movement. There’s tonnes of research showing a positive relationship between physical exertion and cognitive performance. But physical movement means different things to different people at different times in different contexts. I, for example, am a fidgeter. Pen clicking, leg jiggling, playing with toys, anything. It just makes me feel a bit better. Other people really (really) hate sitting down for extended stretches. I can relate to that, too. Physical activity can also be a bonding experience. I was at an offsite earlier this summer with a client and the board chair organized an afternoon pickleball session (with beverages). It was AWESOME. Another client of mine, when talking through incorporating physical movement into the cadence of their board work, realized that they were all really into yoga. Now they had a potential physical outlet AND bonding opportunity. In a much more mundane sense, just encouraging people to feel free to stand up and stretch, maybe walk around a bit, can really help them to stay comfortable, engaged, and alert. Bonus points if you google “quiet fidget toys” and put out a few bowls of them at your next board meeting.

If you’re a regular OMG listener, I’m curious if you’ve ever wondered why I do the show in seasons. The honest answer is that at a certain point making the show – as fun as it is – starts feeling like a bit of a burden. I’ll be honest with you, here we are at the 42nd episode of season 4 and my energy level *really* isn’t what it was back in episode 151. But knowing that episode 200 is the start of an indefinite break does two important things. First, it helps me to stay motivated to push through and keep the quality high. Second, the break gives me space to step back and be thoughtful about what to do next, without the pressure of having to put out two more episodes next week. When I talk to directors about the things that most affect their ability to stay engaged and useful, they give me two related answers. The first is that they need regular and generous breaks. It allows them room to digest what they’ve heard and discussed, while also making sure they don’t get bored or distracted or too frustrated. I know our agendas are over-stuffed and it’s hard to find time for breaks, but…remember subtraction neglect? The second and related thing is the subject of the next episode. For now, let’s take a break.

Before we dive in, let’s differentiate between sound and noise. Sound is audible vibrations in the air of any kind – pleasant or unpleasant. Noise is sound you don’t want. Think about all the ways that noise and sound can impact conversations and presentations. Zoom board meetings are a perfect microcosm. Just think about it: jittery internet connections, bad microphones, feedback, real-life background stuff that sneaks in, your Bluetooth headphones disconnect. Compare that to the luscious tone of my voice in this pre-recorded podcast with carefully crafted and selected music in the background. In other words, we’re dealing with medium, content, technical quality, AND aesthetics here. All of these apply in a physical setting, too. My friend told me about a board meeting in an old hotel where the HVAC system was too loud for participants to hear each other, but it was the only thing keeping the room tolerably warm. How to choose, right? Either you can’t hear each other, or you freeze to death. They chose to ask the hotel for blankets. Clever, right? But noise and sound matter in more subtle ways, too. Another friend of mine recently bailed on a meeting because the person next to her was loudly and incessantly snacking on popcorn. I bet you can also think of gatherings you’ve been to where just a touch of background music transformed the vibe for the better. And I haven’t even said anything about the science. For that, check out the Freakonomics Radio episode called Please Get Your Noise Out of My Ears. In the meantime, trust me: sound can be a superpower and noise can be kryptonite.

You all know by now how much I like saying that good governance is intentionally cultivating effective conditions for making decisions. Every time I think about it, I wonder about new conditions that might impact decisions and how they might be cultivated to good (or bad) effect. But there’s a flipside to repeating a phrase ad nauseam, which is the risk that the words stick but the meaning disappears. People just say the phrase without thinking about it too deeply, or worrying about the impact they might be having. Corporate governance is *filled* with catchphrases. Maybe the most notorious is ”noses in, fingers out,” and its many variants. I criticized that one – pretty politely – waaay back in episode 13. The reason why “noses in, fingers out” is mostly nonsense is that directors sometimes just use it as a knee-jerk way to shut down conversations they don’t want to have, and feel like the popularity of the expression gives them permission to use it whenever they like. But it’s mostly just a catchphrase. Substance-free. The “did I do that?” of corporate governance. Another popular one in Canada is “directors owe their primary fiduciary duty to the corporation.” Seriously, next time you hear someone say that one, try asking them, “cool, what does that mean, though?” Bonus points if you have a copy of the Canada Business Corporations Act open next to you to compare their response against the actual law. Sorry, I’m not really trying to encourage you to be pedantic. Instead, think of catchphrases and other shortcuts as a condition to be conscious of, and a prompt to ask a simple follow-up question to make sure you’re not skimming over something that’s worthy of a deeper look.

Welcome to the final episode in the OMG urgency miniseries. I recently learned about a mindblowing – to me – cognitive bias that I’d never heard of before. It’s called subtraction neglect. Check out the HBR article “When subtraction adds value” by Adams, Converse, Hales and Klotz, which is based on their very cool research. If you’re more of a podcast person, check out the Less is More episode of Katy Milkman’s Choiceology show. Anyway, I’m pretty sure subtraction neglect might be the insidious heart of our urgency problem. In short, it basically means that when facing a challenge, our brains have a really easy time coming up with solutions that ADD stuff, and a very hard time accessing solutions that SUBTRACT stuff. If you’re anything like me, you’re already going “ohhhh snap! This already FEELS true!” And it is true! When we have a problem, we come up with all kinds of ideas about what we can add to the mix to make things better. The board’s feeling overburdened by the pre-reads? Let’s add an executive summary. We’re struggling to find time to spend on strategy? Let’s add an annual offsite. Makes sense, right? The ultra-weird thing about subtraction neglect is that all it takes is a simple suggestion along the lines of “by the way, you’re allowed to solve this problem by REMOVING something,” and suddenly we can imagine tonnes of new solutions that just weren’t occurring to us before. I won’t lead you too hard here, but think back to the board being overburdened by pre-reads, or the struggle to spend time on strategy. Chances are, you’ve already got some neat ideas about how to improve things through subtraction. And if we solve all our problems by adding stuff, what’s the result? Urgency! Well, by the way, you’re allowed to solve this problem by removing something.

I had a conversation recently with a great friend of mine who’s been on somewhere approaching 3 million different boards. He’s really not sold on my whole vibe when it comes to corporate governance, which is fair and totally fine. He explained a key part of his resistance like this: “Matt, when you’re in a board meeting all you’re thinking about is that Bob’s flight leaves at 6:45 and we have 13 complex agenda items to go, so how are we gonna just get through all of this?” Sure, we’re back to the whole urgency thing again, and it’s super obvious that what my friend described is basically the opposite of effective conditions for making decisions. And this isn’t a knock on him at all. Despite the fact that he’s unconvinced by me, he’s the real deal and then some. And I think he hit on something *hugely* important here. This hypothetical Bob character is a real person with a real life. I know it’s sappy, but the first thing that came to mind thinking about Bob was that he just really misses his spouse or family and that the board totally has his back. “Bob’s been on the road for two weeks. Let’s make sure he gets home on time to take his boo out for a fancy romantic dinner tonight!” And you know what? I’m completely supportive of directors looking out for each other like that. Understanding your peers as full human beings, and being empathetic toward the complexities of their lives and feelings. Hoo boy, that’s the stuff of board legend. But if every board meeting has the life crushed out of it because we’re cramming through all our important decisions just so Bob can fly to Topeka for his next board meeting. That ain’t it, bro. Song recommendation for the sappy version of the Bob story: “Your Side” by the Beths.

Some of you are tuning in to this episode expecting me to solidly dis the concept of regularly scheduled board meetings, and maybe even urge you to reject it. At the risk of disappointing you, I honestly just don’t feel that strongly about it. Let’s be real, most people have complicated lives with only limited tolerance for spontaneity, especially when it comes to something as fundamentally, um, boring as a board meeting. Having a regular board calendar and cadence matters! In part because it increases the probability that everyone will actually show up. It also adds some structure and predictability around which we can build decisions. Knowing when everyone will be together helps us to plan what information we will share and when, what conversations we need to have at what times, and when we hope to actually, you know, MAKE a decision on a thing. And let’s be fair, boards do bust out of their scheduled meeting flow every once in a while, but usually only because of an emergency or some other thing that forces us out of the gravity of routine. I just can’t help but wonder whether an extreme deviation from the norm might be kinda cool. Like, what if a board’s meeting frequency was something like “we meet once a week virtually for precisely 15 minutes (13 hours per year). These weekly meetings alternate between efficiently ticking some routine compliance box, and creative exploration of some important or zany question. Our quarterly, full-day in-person meetings will be informed by the creative exploration, and mostly free from compliance because that’s all been dealt with already.” That’s 56 board meetings per year, but actually somehow sounds less burdensome to me than a “normal” quarterly or monthly cadence. I dunno. What do you think?

It’s a bit of a mindf… what’s a polite way to say that? OK, I just googled it and it there really isn’t one. Someone suggested “mindception,” but I think that may be the actual worst word I’ve ever heard. Anyway, it’s a bit of a, ugh, mindception how similar most board agendas are to each other. Not just from one meeting to another, but from one organization to another. Quick aside, if you want a shocking dive into a quagmire of misogyny and racism, check out the Wikipedia entry for “hysteria.” Accordingly, you will notice me deftly avoiding that term in a second. Back to agendas. It’s like we’ve got some mass psychogenic illness that leads us to the false belief that a typical board meeting agenda is actually designed to get us the results we want. But that means that whenever we run over time, or fail to engage in meaningful dialogue, or spend inordinate amounts of time on mundane nonsense, or don’t end up hearing from every director, or whatever other not-great thing, that something is wrong with *us*. Because the agenda is totally fine, right? Why else would so many organizations use basically the same agenda for all their board meetings? And yes, a convenient counter-argument would be to blame the board chair. I agree that many chairs have a hard time managing meeting flow. But what if part of the problem is that they’re working with shoddy materials? I mean, what’s the worst that could happen if you cut the time allocated to presentations by 90%, or scheduled your strategic items at the very beginning of the meeting, or allocated 15 minutes for unstructured dream time? Whatever experiment you try, be sure to try it at least three times before deciding it doesn’t work.

There are lots of reasons why boards get fixated on policies and by-laws and other procedural guardrails. One of the most common and, frankly, justifiable reasons is that there’s just. so. much. Stuff. To. Do. So much stuff. Even just the list of backward-oriented compliance and oversight tasks seems endless and is *so* time consuming. Most organizations I know wouldn’t even permit themselves the privilege of *dreaming* of a board meeting that runs on time, let alone one that built in a bit of wiggle room for something extra. The time crunch is real. Another word for time crunch: “urgency”. So much to do. And even when things seem like they might be getting better, it never lasts. It’s like adding a new lane to a highway: we know it’s a bandaid, and *SUPER* expensive, but solving the actual problem just feels too hard. I get it. In fact, I decided I need to dedicate the next handful of episodes to stuff that’s related to this urgency issue. By the time we get to episode 187, we may actually have identified the real cause of the problem here. You know, like the boardroom urgency version of under-investment in changing driving habits, mass public transit and infrastructure for pedestrians and cyclists. Back to the policies and by-laws thing, though: in my experience, boards often feel like having lots of well-defined rules is a good way to make meetings and decisions more efficient. Here’s one jerk’s opinion: rules that define who should be making what decisions and when: those are your friend. Rules that try to define HOW those people should be making decisions: generally not going to work out the way you think. Real life is just too messy.

I don’t think I’ve said it out loud yet, but the most important theme of season 4 of OMG is that I’m trying to convince you that experimentation is at the heart of good governance. In fact without experimentation - and by extension, creativity – I’m not convinced that good governance is possible. One of the great tragedies of the past two-plus decades of corporate governance trends is how many organizations and governance professionals basically see corporate governance as precisely equal to crafting, deploying and adhering to policies and by-laws. Don’t get me wrong, I think it’s *really* important to agree on and enshrine important stuff into binding rules. A good and common example is setting a threshold, in dollars, for transactions below which boards will just trust management’s judgment. It saves a lot of drama and time. But it’s also a good example of a rule that’s gonna need to change as an organization grows and shifts. A threshold of $5000 might eventually become $5 million as the scale and materiality of transactions grows. And if we think about cultivating effective conditions for making decisions, this is a great example of a type of rule that can be a tangible illustration of good governance. But if you’re the type of person who thinks making decisions about policies and by-laws is the same as good governance, you and I have really different concepts of what effective conditions look and feel like.

Let me talk about Canadian boards for a second. We indoctrinate our boards with the phrase “you owe your primary fiduciary duty to the corporation.” It’s factually correct, concise and memorable. Problem is, on its own it’s substance-free. Think about it. What the heck does it mean to have a duty to the corporation? Whether you’re a Canadian or not, take a second to think about what it means to you. When asked, many people offer that they think it means you are responsible to look after the long-term survival of the corporation. Some people will say its about taking care of the people inside the corporation. Some people say it’s about keeping shareholders happy. But if we pause on any of those things it becomes clear pretty quickly that none of them are exactly right. For example, if we had to prioritize the long-term survival of the corporation, then we would never take any big swings that might have big downside, and if we went out of business or sold the company wouldn’t that mean that we were in breach of our duty? Anyway, what I’m saying is that understanding the actual spirit and substance of the law matters *a lot* in boardrooms. Not just to make sure we don’t mess up too bad, but also to give us clarity about what exactly it is we’re supposed to be doing. In the end, even though the law isn’t a condition that we can cultivate directly from the boardroom, it is a condition that should inform our cultivation of other conditions. Including the rules that we set voluntarily, which we’ll get into in the next episode.