Being a board member is a responsibility, not a sinecure.

By Elmira Bayrasli

The possibilities of the boardroom, board director Lucy P. Marcus believes, should aspire to the ideals that legendary medieval English King Arthur created at his famous table. There, knights gathered in effort and equality to erect a vast empire that changed history.

Change is one of the incentives driving individuals to join boards. Armed with good will and intentions and a collection of applicable skills to help entrepreneurial ventures, multinational corporations and non-profits catapult to success. It is this intention that has taken New York-born and UK-based Marcus to throw her passion behind sitting on boards as well as writing about best practices for boards and advising entrepreneurs, corporations and non-profits on how to develop strong boards. Board development, Marcus notes, is surprisingly something many entrepreneurs, who are so focused on their respective innovations, treat as an after thought. The situation is similar at non-profits. As a life-long member of this field, that caught my eye.

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It’s time to get tough on repeat corporate offenders.

By Bob Monks

As we pass the one-year anniversary of the Gulf Coast disaster, I am reminded of the earlier BP disaster at the Texas City oil refinery in 2005. I’m still astounded that a leading company previously charged with numerous felonies for a major environmental disaster was allowed to have another major disaster just five years later. In the same country. In the same state.

Following the Texas City disaster, I was retained as an expert witness by the plaintiffs in an action brought by injured parties. The extent of the damage was impossible to ignore, and it was clear this couldn’t simply be brushed under the rug and huge monies paid to make it go away. The problems were far too pervasive for that. It really was a question of the culture of British Petroleum. 

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Boardroom diversity is about more than affirmative action.

By Lucy P. Marcus

I recently gave a Q&A interview to Liftstream on the benefits of not only more women in the boardroom, but also the need for far more diverse representation in the boardroom, and indeed in business more generally. To me the benefits of diversity in the boardroom are obvious, be it in a public or private company, or indeed in a non-profit organization, but it seems that isn’t yet the case for everyone.

With Liftstream’s permission, I’m sharing the Q&A here. I’d welcome your comments below and via Twitter @lucymarcus. The conversation is as important as the outcome.

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Can better water governance between citizen, state and business solve the scarcity crisis?

By Philip Monaghan

Water is essential to our survival. It makes up between half and three quarters of the human body weight, needs to be topped up on a regular basis and we cannot go without it for more than about week. As well as drinking it, we also use water for cooking and sanitation, not to mention industrial processes. But more often than not in the West, we treat it with disdain, a fact reflected in its low price and how the developed world fritters it away (you may leave the kitchen tap running into an unplugged sink at home but you would not pour petrol from the station pump down the drain).

What makes matters worse is, despite 70% of the Earth’s surface being covered by water, only 2.5% of the total volume is freshwater resources and fit for human consumption. Coupled with the facts from the WBCSD and FAO that in 60% of European cities with more than 100,000 people, groundwater is being used at a faster rate than it can be replenished. By 2025, 1.8 billion people will be living in countries or regions with absolute water scarcity, and two thirds of the world population could be under stress conditions.

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Using social media can help boards be better on sustainability.

By Martin Brown

I’ve got a question for you:who on your board is championing sustainability and the low carbon agenda?

Board members, as Lucy Marcus reminded us at construcTALKs, need to balance continuity with change, to embrace the changes in technology.

From my experience in (small-medium) construction organizations, boards are too focused on looking back at performance, rather than forward; and when looking forward, tend to do so with the risk-eye of past problems. And sustainability is often only discussed when necessary, as part of an ISO 14001 project or incident issue. Too often, as 14001 sits with Health and Safety, sustainability takes a back seat. Rarely do construction boards view sustainability as a critical strategic, opportunity issue, rather than simply one to be dealt with at project level.

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The tide is turning against injustice in Ecuador.

By John Perkins

The Middle East, Wisconsin, and now the victory of Ecuadorians over the oil giant, Texaco (owned by Chevron)! We the people are taking back the reigns of power!

It really started in Latin America where, during the past decade, 10 countries democratically voted in presidents determined to stop the corporatocracy from ruthlessly exploiting their people and natural resources. Every one of these countries was ruled by ruthless CIA-puppet dictators for most of my life. Now that has changed. Perhaps it is fitting that among all the victories occurring today, the one against a single corporation, an oil giant that epitomizes the corporatocracy, happened in Latin America.

When I was writing Hoodwinked, the $27 billion class action environmental lawsuit filed on behalf of 30,000 Ecuadorians against Texaco was still in full swing. It alleged the company had dumped more than 16 billion gallons of toxic wastes into rainforest rivers (compared to BP’s 210 million gallons of oil in the Gulf and the Exxon Valdez’s 11 million gallons in Alaska) and that these wanton actions had destroyed fragile Amazonian environments and killed hundreds of people. The suit, at the time, was the largest environmental lawsuit in the history of the planet.

Ecuador is a classic case. In the 1970s its people were targets of predatory lending. Unscrupulous international banks promoted billions of dollars in borrowing by Ecuadorian dictators who blew most of the money on projects that made them and their cronies – as well as US construction/manufacturing consortiums – wealthy. After the transition to democracy, Ecuadorian people were stuck holding the bag. Ecuador’s debt has risen to more than $3.9 billion today. In 2007, the Ecuadorian government paid $1.75 billion in debt service, more than it spent on health care, social services, the environment and housing and urban development combined. For the corporatocracy, debt is one of its most powerful weapons.

Unfortunately, Ecuador is just one of many examples. Over the years, unelected dictators have been placed into power through the clandestine efforts of multinational corporations, international banks, the CIA and economic hit men throughout Latin America, Africa, the Middle East and Asia. Citizens were not involved in making or accepting deals these leaders signed that left their countries awash in debt and their lands, air and waters poisoned by toxic wastes.

The good news is the tide is turning. The Ecuadorian judge awarded an $8.6 billion fine against Chevron (plus another $8.6 billion in punitive damages). Less than the amount sought by victims, it is nevertheless a huge victory. Like the uprisings in the Middle East and Wisconsin, it is also symbolic of our changing world, one that we the people are determined to take back.

Yet we must all participate. The corporatocracy will fight back. In Ecuador, Chevron-Texaco has already stated that they do not intend to pay and, since they have sold all assets in that country, the plaintiffs have no leverage. What that means is you and I must continue to pressure Chevron and other oil companies. We must not purchase their gas. We must battle against toxic dumping everywhere.

I urge you as well if you have not yet seen the movie “Crude” to watch it and to support the Ecuadorian battle via your social networks. Here’s the link for the movie.

We must stop the spread of predatory capitalism. We must all reject the social and environmental costs that this mutant virus spreads. The defining goal of the corporatocray – that the only responsibility of business is to make short-term profits – must be replaced by recognition that corporations have to serve the public interest.

CHECK THIS LINK I urge you today to support the fight against Chevron at this site.

I also urge you to support the battle in Wisconsin by going here.

And continue to support the people of Egypt by going here.

Remember, we can ALL change the world for the better.

About John Perkins

John Perkins is the author of bestsellers Confessions of an Economic Hit Man, The Secret History of the American Empire, and the new book, Hoodwinked: An Economic Hit Man Reveals Why the World Financial Markets Imploded – and What We Need to Do to Remake Them, among others.

Perkins is a founder and board member of Dream Change and the Pachamama Alliance, nonprofit organizations devoted to creating a stable, sustainable and peaceful world. He has lectured and taught at universities on four continents. He tweets as @economic_hitman.

Check his website for upcoming events – JohnPerkins.org. 

Talkback Readers: Do you have stories to share of victories of the people? Contribute them on Talkback!

If you were going to advise the king…

By Hank Boerner

Assignment: Fly over to visit the Middle East and provide advice on how to handle the events in the Arab streets. Responsibly. Using good governance practices. If you got such a call from one of the region’s leaders, all odds being from a dictatorial ruler, what advice would you pack in your kit as you winged off for the meeting? This is delicate, for sure – not like giving advice to a CEO or board chair. This is a high stakes meeting with the potentate – who has the power to make your life quite miserable. (Remember the Queen in Alice-in-Wonderland: Off with her head, was the cry!)

What do you say to a firmly-entrenched dictator, probably wearing a general’s stars or at least surrounded by generals? Are you direct and to the point—or, do you carefully build the case and let the facts speak for themselves? You are entering the fear zone – what do “they” in the streets want? Expect? Who are you to say? Make believe you are entering the realm…of a CEO!

First, consider the setting and culture: any talk about “responsibility” will likely be in our Western context of responsibly serving the needs of the country’s men, women and children, and future generations. Some Middle East countries do that in an organized way, such as Kuwait (with its Future Generations sovereign wealth fund, created with oil revenues in 1954). “Sharing” the wealth beyond that may be an uncertain and unwelcome suggestion to the ruler.

Talking about “governing” styles is tricky – in the US and other Western democracies, power is given over or power yielded to the ruling class by the governed. Hard concept to wrap your mind around if you are a dictator. A government “of, by and for the People” rings of respect in both directions – we expect no less. But a government of the monarch’s ruling class, in all likelihood with power seized by them, and maintained by forceful means (and fear) is not quite “of, by and for” – and the suggestion to follow US example will be filled with challenges, most uninvited and unwelcome. (In my experience in the region, the example of the US maintaining an official system of slavery until just 146 years ago is brought up. The Wild West days of penning Native Americans on reservations is another example mentioned.)

“Freedom” is another tricky concept for this ruler you will be advising – what kind, how much and for whom? Freedom to openly criticize the ruler? Look at Egypt; don’t want to go that way, do we? (In 18 days the dictators’ rule is over.) Is that what you are suggesting? The lesson of another Eastern regime may be instructive here. China had its Tiananmen Square showdown with the demanders of democracy. The brutal crackdown was followed by an easing of rule and a tentative bargain between rulers and citizens. Entrepreneurship and capitalism of a short flourished; freedom to make money was granted by the communist rulers; just don’t get involved politically in threatening the regime. 

The US has a long-standing respect for freedom. President Franklin D. Roosevelt set out his famous “Four Freedoms” as a global war was spreading, in his January 1944 State of the Union speech to congress: “In the future days, which we want to make secure, we look forward to a world founded upon four essential freedoms…” These were freedom of speech and expression; freedom of worship; freedom from [economic] want; freedom from fear. This would require a new world order, the president said – the moral order. “That kind of world is the very antithesis of the so-called new order or tyranny which the [current] dictators seek to create with the crash of a bomb…”

We are not quite there yet – but we have come a long, long way. Former empires are fragments of what they were for France, England, Italy, Germany, Holland and other Western nations. Across the world, freedom has rung out since 1946 and the end of WWII. There were a dozen or so democracies “united” in opposing the dictators in 1942. Today there are 75 or 80 different forms of democracy in the world – constitutional, representative, liberal, participatory, socialist, majority rule, democratically-elected and so on. Within the global community of 200+ nations, more than a third has some kind of democratic process. A long way to go, yes, but a long way has been traveled since January 1941. The words of the US president still ring across the frontiers of earth to inspire people yearning for freedom.

Perhaps the best advice is to offer an observation: the winds of freedom are blowing and change is inevitable. As the business philosopher Lee Iacocca commanded: Lead, follow or get out of the way! The time has come: act responsibly and prepare your people for change. They are certainly preparing change… for you! Act responsibly. Serve up freedom. Not easy!

About Hank Boerner

Hank Boerner is Chairman of the Governance & Accountability Institute in New York City and is co-author with Mark W. Sickles of the book, Strategic Governance: Enabling Financial, Environmental and Social Sustainability (published 2011 by the Institute). In the volume the authors explore links between culture, risk management, strategies and corporate responsibility.

Talkback Readers: What CSR advice would you give, if you were advising the ruler of Libya, Bahrain, Yemen, Iran, etc.? Share your thoughts on Talkback!

Where were the boards of the banks and trading companies?

By Hank Boerner

What are we to make of the comprehensive report by the Financial Crisis Inquiry Commission? This detailed post-mortem of one of the worst financial markets debacle in the modern era contains characteristics that jump off the page (or screen). Reckless risk-taking by corporate management at many levels and a hands-off board that often did not have a clue as to what was going on led to disaster and outright failure at too many firms. The intense focus was short-term reward – “immediate,” if that qualifies – without regard to the consequences for shareholders and stakeholders. Who provided the capital for our capitalistic democracy?

The result: trillions of trusting investor dollars lost and onset of the Great Recession with many millions of jobs lost to layoffs, downsizing, rightsizing, outsourcing and the unending quest for greater worker productivity (more output, less cost). We might characterize the outcome of the 2007-2009 financial crisis as one of the greatest wealth transfers in the modern history of the US. Yes, money was lost by investors – and gained by “the house,” which on Wall Street almost always wins. (One of our favorite financial and business authors signs his books, “Stay Away from Wall Street!”)

But this is not a practical answer or piece of advice. We all participate in some way in the US and global capital markets. We regularly see projections 100 million and more Americans are “in the market,” through their 401-ks, profit-sharing plans, personal investments and through reliance on state and municipal pension funds. So the solutions to some of the most vexing issues the nation faces are not going to be solved by doing the Wall Street Walk (avoiding the markets). Too late for that.

As the boards and senior management of commercial banks and trading companies (often now combined) climbed on the big yellow bus and headed (willingly) for the looming financial cliffs, the question that kept popping in people’s mind was: Where was the board?! Fair question (read the FCIC report for chapter and verse). So the “reform” effort– for corporate America and Wall Street interests – should focus on the need to recognize the importance of board and managerial stewardship – and yes, “corporate responsibility” in its finest form – for using OPM – Other People’s Money.

This is not a new topic for societal debate. In the early 20^th century one of America’s most respected jurists – Louis Brandeis – authored a series of penetrating commentaries that carefully assessed the impacts of enormous changes taking place in corporate America, and on Wall Street. These were gathered in a 1920s book – Other Peoples Money – that greatly influenced the regulatory framework of the 1930s (the 1933 and 1934 acts). Brandeis later became a Supreme Court Justice.

In the corporate sector, founders – smart and autocratic leaders such as Henry Ford and Thomas Edison – were giving way to boards elected by the growing base of public shareholders; on Wall Street, in time, the partners (who had all of their money at risk) took their firms public. Result: the capital markets are today all about Other People’s Money. So, it seems simple – and maybe I am being simple-minded here – the highest order of business for boards and corporate executives is to think about OPM and discharge their responsibilities accordingly (to all stakeholders). That is the ultimate demonstration of corporate responsibility, I think. What are your thoughts on this?

About Hank Boerner

Hank Boerner is Chairman of the Governance & Accountability Institute in New York City and is co-author with Mark W. Sickles of the book, Strategic Governance: Enabling Financial, Environmental and Social Sustainability (published 2011 by the Institute). In the volume the authors explore links between culture, risk management, strategies and corporate responsibility.

Talkback Readers: Hank Boerner asked the question; tell us what you think on Talkback!

Striking the right balance between continuity and change.

(See Part One here.)

By Lucy P. Marcus

The boardroom agenda is going through a reformation. To ensure we are helping organizations future proof themselves, what are some essential things boards and board members need to think about, no matter size, location or sector of the organization? Five areas need an update in the way we as board members think about them: infrastructure, technology, internationalization, communication, and balancing continuity and change.

Infrastructure

Boards must embrace the political, economic and social reality of the way the world is operating today and tomorrow. One of the areas that needs a real rethink is building organizations that can operate effectively in a low-carbon economy. The main issues here are about energy consumption and integrating clean tech and sustainability. They apply to all facets of the business: from facilities to building stock and rolling stock; from changing work patterns and practices to the ways in which companies engage with their stakeholders and the local communities where they are based. It touches everything an organization does, how it behaves and how it invests. It means board members need to be asking the questions about how these decisions will impact business five and 10 years down the road. Most importantly, it isn’t about green washing or perception; it is fundamentally about how the organization does business.

Technology

At the heart of many issues on the modern board agenda is technological innovation. Technology, thus, is not a stand-alone issue, but an integral part of how effectively and successfully a company can be run. It is not an end in itself, but an instrument that can only prove its worth if it serves a concrete purpose. Coupled with that is the speed at which new technology comes into play and the level of disruption it creates in the process of integrating it into the daily running of a company. For all the importance of disruptive innovation, if ‘old industries’ and the tech sector communicate effectively, understanding each other’s needs and coming to grips with the significant benefits that today’s technology offers, innovation can be enormously helpful in future proofing companies.

For this potential to be fulfilled, boards must make sure their organization is flexible enough to recognize important technological developments and incorporate them into existing business models.

Internationalization

Regardless of a company’s main business or where it is located, its success will ultimately depend on grasping the internationalized environment in which it operates. The world today is politically, socially, and economically inter-connected.

This offers opportunities and poses risks at the same time. Board directors need to be able to think outside the walls of their own corporate boardroom. They need to speak their own language as well as the language of the markets where they want to be; for while the world gets smaller and in some respects more similar, local cultural difference remains and understanding it gives companies a distinct edge.

Corporate boards need to set an example and help implement an agenda that is focused on attracting the best people from anywhere and put them in a place where they work most productively for the success of the company as a whole.

Communication 

No corporate board will be able to implement its modern agenda without effective and dynamic communication, both with its stakeholders (customers, staff, investors, etc.) and within the boardroom.

Within the boardroom, this is about asking the necessary questions and being open to hear the answers, however uncomfortable they might be. Outside the boardroom communication is about the image and strategy of the company; it is about the methods used to communicate this message, and increasingly so.

A board that sends out a message of a forward-looking, socially and economically responsible, and politically aware strategy and does it by old and new forms of communication also sends a message about the right balance between continuity and change, about the unity of word and deed, demonstrating in action to which it rhetorically commits.

Balancing Continuity and Change

Embracing new ideas and ways of thinking does not mean completely disregarding the old. Boards will only succeed in their task of future proofing their organizations if they see the connections between the old and new.

This requires casting a critical eye on the old, innovating where fruitful, and integrating new technologies and items on the corporate social responsibility agenda into the tried and tested business practices of corporate governance, risk assessment and finance.

Corporate directors need to understand the purpose, strengths and limitations of existing practices and be willing and able to take steps to address them. The modern board agenda does not disregard ‘old issues,’ it is not driven by short-lived ‘flavors of the month’ or temptations of every disruptive technology or idea that comes into the room, but is rather guided by the needs and vision of the business. This need for balance requires boardrooms to have a mix of people to ensure a comprehensive and complementary diversity of approach, background and skills.

Stargazing is most effective if it is done from a strong foundation where the nuts and bolts of the company work, and where they are grounded in a solid foundation. This is nowhere more obvious then when it comes to a company’s financial stability and sustainability. Past, present and future are a continuum when companies seek opportunities for investment and expansion, when they carefully assess risks connected with either, and as they determine the right level of (not only monetary) compensation for their directors and staff.

About Lucy P. Marcus 

The founder and CEO of Marcus Venture Consulting, Lucy P. Marcus currently serves as the non-executive chair of the Mobius Life Sciences Fund and as a non-executive director and chair of the board audit committee of BioCity Nottingham. She is a fellow at the University of Cambridge’s Judge Business School and a member of the board of IE Business School. She is a prolific writer on global economic trends and best practices for corporate governance, venture capital, entrepreneurship, biotech, cleantech and women in business, and regularly speaks on these topics to diverse audiences around the globe.

Follow Lucy P. Marcus on Twitter: @lucymarcus

Talkback Readers: What challenges have you seen boards confront as they seek to balance continuity with change? Share your stories on Talkback!

Is your company’s board “grounding” and “stargazing?”

(See Part Two here.)

By Lucy P. Marcus

The role of modern corporate boards is the juxtaposition of grounding and stargazing.

Grounding is about making sure the company fulfills all its legal requirements, manages risks properly and does business in a responsible way. It is about all the vital things we associate with board oversight tasks in corporate governance, compliance and corporate risk.

But with that comes an equally and perhaps even more important role: grounding needs to be complemented by stargazing. This is where a board demonstrates its mettle in making sure their organization is ready and able to expand its horizons, strive to achieve more and stretch itself to become the robust and resilient business that is capable of responding effectively to the unknowns in its future. Stargazing should be a big component of the strategic work a board does.

Both grounding and stargazing require asking questions, looking beyond the obvious and the comfortable, and actively engaging with the organization.

The emphasis these days seems to be on the tick-boxing of risk management. In speaking with fellow board members from around the world and across a wide variety of sectors, I’ve found that concern for risk exposure coupled with a desire not to appear too meddlesome and the time commitments required to do the job properly means they sometimes leave too little time room for discussions of strategy.

This is a real loss for organizations of all sizes, as part of the purpose of having independent directors with a broad range of skills is to draw on the knowledge and understanding around the table and the broader perspectives they bring to help propel the organization to new heights.

Grounding is a big part of the vital role of directors – ensuring that companies are managing their risk, fulfilling their requirements, “playing by the rules” and being good corporate citizens. But even when fulfilling that role, strategy needs to play a part. In every audit committee and compensation committee, there must be room for considering what the company can do to push itself that much further to achieve more, and better, things for all its stakeholders.

Most importantly, getting the balance right between the two functions of grounding and stargazing helps to ensure the company is doing what it needs to future proof itself. It requires board members who can think outside the box, and who also know when to get back in the box.

In Part Two of this post, Lucy P. Marcus will spell out some ways board members can both “ground” and “stargaze” in five key areas: infrastructure, technology, internationalization, communication, and balancing continuity and change.

About Lucy P. Marcus 

The founder and CEO of Marcus Venture Consulting, Lucy P. Marcus currently serves as the non-executive chair of the Mobius Life Sciences Fund and as a non-executive director and chair of the board audit committee of BioCity Nottingham. She is a fellow at the University of Cambridge’s Judge Business School and a member of the board of IE Business School. She is a prolific writer on global economic trends and best practices for corporate governance, venture capital, entrepreneurship, biotech, cleantech and women in business, and regularly speaks on these topics to diverse audiences around the globe.

Follow Lucy P. Marcus on Twitter: @lucymarcus

Talkback Readers: Share your stories of corporate boards “future-proofing” themselves – or not. Tell us on Talkback!