The idea of a board coach

To improve governance, can a coach help by holding a behavioral mirror to a board?

Could responsible Indian companies experiment with having an experienced and wise leader sit in at board meetings as a fly-on-the-wall? He or she would function as a behavioural mirror, reflecting board dynamics rather than commenting on the content or substance of board transactions.

 

Such a practice does exist, though it is rare. I have worked on a board where, by turn, one independent director would play this role. I have also experienced a board that recruited such a coach to attend three board meetings and offer suggestions for improvement. To have any chance of success, the board must wish to improve continuously, and the action must be voluntary, not mandated by regulations. My uncynical self says that it is worth airing this suggestion.

 

My cynical self thinks it is a laughable idea. Chief executive officers and boards are prone to several behavioural aberrations because the board is an ongoing battle among niyat, niyam and neeti.

 

Here’s one example. Readers may recall the story of Eike Batista of Brazil, reportedly a self-made and wealthy Brazilian. He counted among the richest in the world around 2012, making his fortune while building Brazil’s infrastructure. He was reported to be close to key powers in Brazil. With a change of regime in 2016, his fortunes collapsed. Another example. Just as a tiger’s nature is to hunt for prey to survive, hedge funds expose contradictions in a company and short sell. It is their role. In 2019, Hindenburg exposed Nikola, the overvalued American battery manufacturer. In January 2023, Quintessential Capital exposed the UK’s Darktrace.

 

Managements and boards are under glaring public scrutiny. Controversial companies view governance as a chore. This article is not for them. This article is for companies that truly value governance and seek to improve their board performance continuously.

 

In team sports like cricket, there is a coach for the individual player, and another coach for the team. In individual sports like tennis, each player has a whole team of coaches. Promising executives have a coach. There is a thriving market for trained and certified executive coaches. To be successful, the player or executive not only needs technical skills, but also mental or psychological (= behavioural) skills, which a coach might provide. I wonder why a board should not consider a board coach!

 

Though still riddled with weaknesses, corporate governance has advanced significantly in the last 30 years. Governance interests all those associated with leadership. After all, human foibles and behavioural flaws are common, whether in boardrooms, public administration, sports, or political organisations. All of them are rooted in social and psychological soils. In several corporate failures, hindsight reveals that the root cause is traced to behavioural factors, the most common one being ignoring early warning signals. There are others like the overpowering influence of some directors, board members’ inability to disagree without becoming disagreeable, and so on.

 

In the discourse on corporate governance, there is a valid emphasis on the visible and cognitive — legal, accounting, risk, cash management and so on. Apart from the visible, the invisible behavioural aspects merit more attention. We tend to ignore or overlook the invisible, because the visible factors demand immediate attention and action. The pandemic highlighted that an invisible virus can seriously threaten people, societies, and nations. In governance too, invisible threats are very important.

 

Directors are human beings and are prone to subjectivity and behavioural bias. Directors can learn, or be trained, on the technicalities. It is far more challenging for them to learn or be trained on behaviour. Behaviour is self-taught. For example, most frequently, nomination committees recruit new board members for reputation and skills, with perhaps insufficient emphasis on healthy attitude and constructive board behaviour.

 

It is human nature to seek power, prestige, and status. Hence, our behaviour is in line with aspects that can bring us respect, approval, admiration, and status. We intensely desire to fit in with people like us, and, once we are in such a group, we intensely desire to be prominent. This is why we tend to emulate behaviours of those whom we admire or aspire to become like. Newly appointed directors on boards display this tendency in spades. We generate strong internal pressure to belong within the group. The benefit of being accepted is far greater than the benefit of being right, or cautious. These natural drivers and habits direct our functioning as board members. That is why behaviour trumps the regulations and laws that define the role of independent directors, the board chairman, and the myriad dos and don’ts.

 

Corporate India needs wise directors. Some wisdom may be found among independent non-executive chairmen and former directors, who are no longer on boards. They can observe the group dynamics and coach on what is working well and what is not. A fly-on-the-wall, experienced advisor can counsel boards just as an executive coach offers behavioural counsel to ascendant executives. Needless to add, such a person will not be a permanent attendee, will have no statutory responsibilities, and must sign the required ethics and confidentiality agreements.

 

Where niyat is missing, it would be useless. Where niyam and neeti dominate, it might help. Are there any boards that want to improve, year after year? Might this idea help?

The writer is an author and a business commentator.  www.themindworks.me; rgopal@themindworks.me