Let’s take a group of people who are tasked with oversight and decision making. For that group to operate optimally and effectively they would constructively challenge each other, include the variety of ideas and opinions generated and, most importantly, be brave enough to really listen – not just to hear.
Currently the world is at war with Coronavirus COVID-19. Who would have thought that a civilised, sophisticated society could not have been better prepared for such a crisis?
We knew pandemic this was coming – five years ago.
Bill Gates is one of the most esteemed business men in the world, with huge resources, power and influence. His Ted Talk has been viewed by an estimated 25 million people. And yet, the governing bodies of organisations that could have acted on such an articulate prediction, did not listen hard enough or act well enough.
The global pandemic is altering all aspects of how we live – and we are still in the early days, with no clear idea of what the future holds. Even though we are in the midst of the storm, it is important to reflect along the way on the valuable lessons that should be learnt. One that we can ponder, is the crucial importance of collective groups of people, really listening deeply and not to merely hear.
And we knew from recent history.
There are, disappointingly, many corporate analogies. While they are not as dramatic as our current global crisis, I would suggest that the root cause lies in something similar. Take the Boards of Enron and BP as examples.
- In Enron’s case the seventh largest corporation in the US with a valuation of $70 bn at one point then became bankrupt due to a toxic concoction of accounting trickery, risky decision making and insiders cashing out.
- In BP’s case, in April 2010, an oil rig explosion resulted in numerous deaths and one of the worst environmental disasters in history. BP executives were convicted of fourteen criminal charges.
In these two corporate scandals there was evidence of wilful blindness. In both cases, and numerous others, including Bill Gates’ predictions about pandemic, there was a clear opportunity presented for knowledge to be acquired and a clear responsibility to be informed. However, in these examples, information is provided to people with sloping shoulders and is not given due attention or care.
National health ‘stress tests’ told us what we needed to do.
In the UK, national ‘stress tests’ in 2016 showed the National Health Service would fail to cope with demand, and provided a clear shopping list of the supplies that would be needed when the real challenge came.
So why don’t leaders listen?
This wilful blindness, or selective perception, flies in the face of the fundamental duty of a Director; which is a “duty to exercise reasonable care, skill and diligence”. This duty is rooted in common law, is common to all Directors and was included in the significant codification of Directors’ duties in the Companies Act 2006 (S. 170 – S. 181). These duties are owed to the company (meaning to present and future shareholders as a collective). The effectiveness of a Board hinges largely on the form, timing and quality of information that it receives and that exclusive reliance on information which is volunteered by management, is not likely to be sufficient. Further probing and enquiry should be made by the Directors.
So, a lesson we can all learn from the crisis, is to listen and not to merely hear; to actively seek out relevant information and to challenge that which is presented and not accept it superficially.
- All Directors should ask themselves, right now, how actively they listen and challenge?
- And a question for all Boards is how effective are they at diversity – including diversity of thought – to ensure they don’t fall into the wilful blindness trap?
An important tool to help Boards to ensure they remain effective, is to review their performance regularly. The UK Corporate Governance Code 2018 (the “Code”) recommends there be a formal and rigorous annual evaluation and that the Chair should consider having a regular externally facilitated board evaluation. For FTSE 350 companies, the Code recommends this be conducted at least every three years. Good practice dictates that the independent review should include, amongst other things, observations of board meetings, interviews of all directors as well as a review of the quality and supply of information.
We are all living through a global crisis and period of huge uncertainty.
- Let’s hope lessons are learnt.
- Let’s commit to sharpen our focus to become a more actively listening society, at all levels, from Governments to board rooms.
- Let’s really listen, and not merely hear, here.
You can hear more about our approach to Board effectiveness and good governance in this short video: