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Questionable Corporate Behaviour: Ethics in the Boardroom
by Jim Matheson, Principal, Flagship Ventures
One morning over coffee on a recent vacation, I opted to reach for the day's business section, the first time I had done so in nearly a week of vacationing with my family in the historic hills of North Carolina and Virginia. After being instantly deluged with what have become all too familiar stories of questionable corporate behavior, I felt sadly disconnected from the hands-on research I had been doing on some of our Nation's greatest leaders, Thomas Jefferson, Robert E. Lee, and George C. Marshall, to name a few. While I am a relative newcomer to the corporate boardroom, the challenges and precepts of leadership are a familiar and important topic to me, and I found myself returning to my study of these characters and times with renewed vigor. It was now less for historical curiosity, and more as a well spring for inspiration and guidance for my role as a business leader.
Each company, and each business scenario, is unique. That said, there are some universal concepts which deserve reflection as we deal with what will likely be one of the major ethical challenges of this new century; the public's rapidly eroding trust in the Chief Executives and the Board of Directors of today's corporations. Like me, I suspect that you have the privilege of working with exceptional professionals working hard under a very challenging set of circumstances. But, as is often the case, a handful of hyperbolic events garner media attention and form popular opinion. Since perception, left unchecked, does in fact become reality, I believe it is incumbent on each of us to take a role in helping shift the momentum back towards a more trusting public by addressing the topic and challenge of corporate ethics in a straightforward, and proactive manner.
In the Naval Service, it is universally understood that a leader cannot delegate responsibility, regardless of the circumstances. Stories of ship Captains being relieved of command after running aground while they are fast asleep are frequent lore. Certainly, the prudent delegation of authority to accomplish a mission is a necessary component of any well functioning organization. While responsibility can be shared with the subordinate so entrusted with this authority, the ultimate responsibility, for both failure and success, lies with that unit's leader. This complex tension between the appropriate and effective delegation of authority and the sharing of responsibility have generated reams of material on leadership to be found in any book store, military training curriculum, or business school library.
While these various materials will highlight many dimensions and styles of successful leaders, the two ingredients that are absolutely necessary and uniformly present in great leaders are trustworthiness and courage. It is trust in a junior officer's training and judgment that allows the ship's Captain to turn over the helm to the young Officer of the Deck at midnight. In turn, trust is the element that forges the esprit de corps needed for young Marines to follow their leader into harm's way. There is also significant courage required in both of these actions.
Maybe these concepts sound fine to you in theory, and perhaps even in a military context, and you might argue that technical competence, managerial acumen and communications skills are more the fingerprint of today's successful leaders. I would assert that business people with these abilities are plentiful; it is the seeming lack of trust and absence of courage that is most disturbing in today's challenging business environment. How can we as corporate leaders put these ideals into practice on a regular basis? I would like to offer a few items that I have set as goals for myself:
Prepare, engage and stay engaged: There have been myriad articles written about the decreasing level of involvement of today's Boards, and questioning the efficacy of the Institutional and Independent Directors. Much of this stems from each of us being overextended and often ill Ð prepared for Board Meetings. Board Members; insist that you receive materials sufficiently early to review them carefully, to prepare questions and to come armed with opinions on the important topics. CEOs; leverage your efforts in preparing for the Board Meetings as a periodic check up on the health of your organization, and use the Board meeting as a forum for airing your strategic thinking to ask for specific support and advice from your Board. Everyone should be prepared, and willing, to provide timely advice aimed at avoiding any number of proverbial slippery slopes which today's companies face.
Make trust an explicit job description criterion: While we all have an innate sense of whether a job candidate appears trustworthy, make it a more explicit dimension of investigation. Research the candidates background and ask questions aimed at understanding their morale fiber and history more fully.
Build the culture from the first Board meeting: I deal with young private companies, which we hope will someday be large public companies. These concepts are no less important, albeit they are less complex, at a 10-person start-up than at a large public company. Much like a child, an organization's earliest influences will be its basis for dealing with challenges later in life.
Make sure the CEO understands the Board's directives: A frequent cause of trouble in challenging times is lack of clarity about what the actual directives are. We have all given edicts which we thought were crystal clear, only to have something entirely different be proudly delivered. Ensure that the CEO understands what was decided and which direction the company should be headed. Be prepared to reiterate and explain the rationale for any decision. CEOs, this also applies for your leadership Team. VPs, for yours, and so onÉ
Take the long view and don't shoot the messenger: One of the lamentations, and plausible reasons for current corporate behavior, is that the markets are near-sighted, and the CEO reign is shortening. These are both all too true. Ensure you are balancing the short-term necessities with the longer-term strategic mission. Absorb the good news, and the bad, with equal poise. So long as you trust your employees, believe they are inspiring the trust of their respective Teams, and your people have their hands fully on the wheel; aggressively support them. If any one of these items falls into doubt, it should be addressed immediately, and likely warrants replacement of the individual in question.
Stay informed on the current legislation and ethical debates and discuss them as a Board. Form an opinion and voice your concerns over accounting law, SEC resource shortages, stock options, corporate accountability, etc. Look for examples of leadership successes in a variety of contexts, and share your findings with others. These are important topics, and discussions around them will create a framework for dealing with your company's specific challenges.
I am certain we have not heard the last of accounting errors or insider trading scandals. Sales cycles will remain long, and public markets fickle. But we do have the responsibility, and yes, the authority, to turn the tide of public opinion, one challenge, one Board Meeting, and one company at a time. I would enjoy hearing your views, similar or different, on this topic or leadership and ethics in general.
Jim Matheson, Principal of Flagship Ventures, has been a principal at OneLiberty Ventures since 2001, after working with the firm as an associate in 2000. Previously, Jim served for 15 years as an Officer in the U.S. Navy and Fighter Pilot. His duties included being stationed on aircraft carriers flying combat missions in Iraq and Bosnia, as a TOPGUN Instructor, and as the Officer-in-Charge of the Navy's West Coast adversary training and evaluation squadron. Jim also gained broad experience in emerging weapons system design, testing and procurement, and was involved in many of the Navy's modern IT initiatives. He continues to serve as a Commander in the US Naval Reserves. Jim earned a BS in Computer Science from the U.S. Naval Academy and an MBA from The Harvard Business School.
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