Boards and the human factor

Book review of On Board: The Insider's Guide to Surviving Life in the Boardroom

This highly readable book is sub-titled “The insider’s guide to surviving life in the boardroom,” implying that board membership is so perilous that one needs advice on how to survive. This is partly true, what with board members’ increasing fiduciary accountability and because in enterprise boards, it is not easy to distinguish definitively among three types of business failure — entrepreneurial, implosive and fraudulent.

This book is focused on not-for-profit boards of organisations such as museums and art galleries. Initially, I thought that the experiences may not be relevant for business directors, but I was mistaken. The lessons are most appropriate and, luckily, the author has a smooth narrative style.

There is one view that corporate directors are unsuitable to serve on non-profit boards (“When a business leader joins a nonprofit board,” William G Bowen, HBR, 1994). Nonprofit boards are considered easier, though different from business boards. Former CEO of BP, John Browne, and M&S director, David Norgrove, are quoted to disabuse this impression. Mr Browne has said that the British Museum (BM) was 20 times more complex than running a business with an equivalent turnover “because of five layers of complexity in the running of a museum”. My experience of serving a housing society, club or chamber of commerce affirms that it can be more complex than running a business board. There is a universal way to run a board that is common to both company and nonprofit boards. The book illustrates this through real-life cases.

When the author was managing director of Barbican Centre he was invited to join as a trustee of the BM, which had been set up by an Act of Parliament in 1753. The 25 trustees were appointed by government (15), learned societies (4), the board (5) and the Queen (1). The reader can imagine how archaic and arcane the board must be! Mr Tusa soon realised that BM was running a £6 million deficit and that the scholarly departments, the heart of its existence, had become baronies. “It was time to make the BM’s governance work in a way that was true to its past but suited to the complexities of the museum world of the new millennium,” writes the author.

By 2005, the trustees attracted a hugely talented executive director (Neil MacGregor) and my old boss, Niall Fitzgerald, former chairman of Unilever, to chair the board.  The story is narrated of how two powerful leaders, with complementary skillsets, established an outstanding working relationship that benefited BM greatly.

In a chapter at the end of the book, Mr Tusa “reflects on his reflections”. It is worth mentioning a few that impacted this reviewer:

i. Good governance depends on good behaviour…. Governance sounds legalistic and bureaucratic, but it is an entirely human activity.

ii. Those with direct interest in an institution should not, as a matter of law and propriety, be involved in supervising its affairs. The ruling principle of good governance is that effective supervision and scrutiny can only come from those without a material interest in the results.

iii. All board members are equal and there are no questions that can be considered stupid. If board members wonder what is in for me, the answer is nothing, except the odd free museum ticket or board dinner.

iv. Boards don’t run the organisation —that is for executives to do. However, boards should not be treated like mushrooms, which are kept in the dark and fed horse manure.

On Board: The Insider's Guide to Surviving Life in the Boardroom

Author: John Tusa

Publisher: Bloomsbury

Pages: 235

Price: 779

Who can argue that these reflections don’t apply equally to business and nonprofit boards? That is the strength of the book. The agenda and context of a non-executive board involves “the human interplay, the rows and rivalries, the interactive psychology of behaviour among colleagues, the costs and consequences, the career casualties of board failures, whether caused by indecision, incompetence, misunderstanding, inadvertence or just plain simple rivalry.”

The subject of governance has acquired a centrality since the new millennium. The subject is perceived as technical, connecting three dots of accounting, legal, and regulatory. Not surprisingly, the field of governance thought leadership has been dominated by accountants, lawyers and company secretaries, who add great value.

A fourth dot, the element of human behaviour, is sorely missing in discussions about governance. As every director or trustee has experienced, and as this book has so vividly illustrated, human foibles dominate board functioning — ego, rivalry, not speaking up when essential, treating the appointment as a prestigious privilege and so on.

The field of economics was dominated by the rational decision-making perspective and quantitative methods. When Amos Tversky and Daniel Kahneman had their eponymous conversation, which led to their friendship and research into behavioural economics, the view of the field changed dramatically. Further, when concepts from neuroscience, psychology and even vedanta are applied to the subject, new vistas open.

It is time for corporate governance to be reoriented to take account of societal cultures and human behavioural predilections. This will happen when practitioners are willing to write and discuss real-life experiences, leading potentially to a new stream of behavioural corporate governance. John Tusa’s book may be the harbinger of such a movement. A very worthwhile read for all directors.