In this first in a new blog series, IoD Chief Executive Kirsten Patterson looks ahead to what could be an aggressive election campaign.
One of the things about great governance is that its power, at least from the outside, can be invisible. Like a well-maintained motor vehicle, it’s only when you have to look under the hood that you realise how much happens, sight unseen, when things are running smoothly.
But when something goes awry, it is amazing how quickly it reverberates out into the organisation and the community, as media interest takes hold and an array of perspectives are shared, discussed and debated. Last week there was intense media scrutiny and debate around a high-profile director and IoD member, Rob Campbell CFInstD, being dismissed from two Crown entity board roles for speaking out on social media platform LinkedIn.
Some of the issues at the fore are: what the role of a public-sector director requires; what political neutrality actually means; the importance of codes of conduct and codes of good governance practices being real – having teeth and not just being motherhood and apple-pie general statements of intent. And perhaps it has also underlined the importance of all parties doing their due diligence, understanding the operating environment – and being very clear about shared expectations.
There is also an ethical debate concerning freedom of speech. When I use that term I’m referring to what speaking out looks like, whether it’s via private or public channels; and what might be deemed appropriate – such as ethical issues – as opposed to personal political views. All parties need to agree on what topics there may be freedom to provide an opinion on, while staying within the guidelines of their operating environment. There’s also the pertinent question about whether the chair of a board is ever off duty.
This live example has also raised issues about relationships with appointing “shareholders”, how directors are “disciplined” or removed, and how we deal with things when they are tricky and difficult.
For the first time in our 2021 Director Sentiment Survey, we asked our members for their views on whether boards should speak out on social issues. 54% said the board should speak on social issues beyond the business of the organisation, 34% said they shouldn’t, and 12% were unsure. The question here is whether that “speaking out” comes from an individual or collectively from the entire board.
For directors, speaking out comes with risk. Directors need to assess this risk in the context of their environment – which in reality must include “shareholder” expectations. This applies directly to governance across every type of board, whether it be a listed company, Crown entity, not-for-profit, or otherwise.
There is no doubt that directors are often at the table because they are driven by purpose. Many come with a great deal of experience, they often have strong personalities, and equally, even stronger views. Illuminated in the story is the need for robust debate, and that’s also a critical role of a board. But that debate needs to be in the best interest of the organisation.
All organisations have to operate within applicable laws, regulations, constitutions, policies and charters. In the public sector the board is accountable to the relevant Minister. It is in the best interests of a Crown entity, and the public they serve, to have the capacity to work with different ministers and various political stakeholders across the spectrum both in the current environment and in the future. For the public sector, political neutrality is one of the foundation stones of New Zealand’s democratic system.
Many of us are aware that political commentary will only go so far at a dinner table (and you need to be aware of who you’re dining with!) let alone in the public sphere. A director stating their views on social media has the power to influence, and in doing so, may unintentionally undermine their duties and responsibilities to the entities they represent.
Boards and directors need to be cognisant of whether their own personal values align with the organisation and those of the “shareholders". And all parties need to be clear on the expectations they have of one another and on the organisational strategy being pursued. The relationship between the board, its directors and the respective organisation should also be built on a foundation of trust. Once that is broken, it can be very difficult to repair.
Increasingly, the expectation is that directors must “always be on duty” and this raises an interesting question about whether it is appropriate, necessary or even possible, for directors to share their views publicly in their roles.
The director concerned has a habit of oft quoting songs in his speeches and articles, and I wonder if Bob Dylan’s Maggie’s Farm is resonating about now: “Well, I try my best to be just like I am, But everybody wants you to be just like them”.
Governance is not easy, nor is it or should it be static. But change, challenge and how we arrive at it can take a personal toll. Perhaps a small but important reminder in all of this is that “context is everything”. Due diligence shouldn’t just be on the practical pieces but should, for all parties determine the right fit. For the director a deep exploration of “is this right for me?” must be had. In this case for the appointing Ministers it may well have been a case of “be careful what you wish for”.
Let’s hope that the end result doesn’t lead to less courageous Ministerial appointments or less desire from senior directors wanting to serve on public boards because New Zealand’s public sector and our communities will be the poorer for it.