CHAPTER FIVE: DISCUSSION AND OBSERVATIONS
5.1 THE QUESTION RESTATED
The present study contributes to knowledge on how boards actually begin to work by viewing power and influences on the board agenda and asking who determines what corporate directors discuss . It covers some of that missing knowledge as to why boards of directors who are “at the apex of the control system” (Leighton & Thain, 1997, p. 1) appear to be largely irrelevant in “a void of direction and accountability.”
Data collection was based around a survey questionnaire of directors of publicly listed companies in New Zealand. The questionnaire required both quantitative and qualitative responses. Survey responses were then discussed by a focus group of publicly listed company board directors following a Delphi technique. With little literature on influences in the agenda setting processes available the questionnaire had to cover all anticipated aspects of agenda setting - within the context of New Zealand’s publicly listed companies. The questionnaire responses provide a wealth of information on content, process, review and influence. However, in terms of the research topic, the interesting section was that with the specific questions that looked at influence and issues of power in agenda setting. Comment on the issues by the focus groups who reviewed the results of the questionnaire is included in the analysis of results and, in general terms, these comments were aligned with the results of the questionnaire. The responses also identified questions for further research required in this aspect of governance.
The results of the research - however black and white these may appear - do not necessarily provide all the answers. Some aspects of power and influence, on the now visible key figures of chair and chief executive that emerged from the research (namely, the unseen second and third faces of power that may be a factor of influence on those people) could remain hidden from view. Although these additional faces of power were not identified as being a significant feature in this project such influences
may vary as a relevant force depending on individual and board circumstances. Insight to this might be further enhanced by undertaking in depth one-on-one interviews and observations over time, but even then this may not be openly or willingly disclosed and merely speculated upon. Confirmation of this type of influence requires factual evidence based on actual events. The reasons for suggesting this be reviewed in more depth revolve around why dissatisfaction with the agenda does not necessarily lead to remedy.
Obviously, there can be many different examples of this hidden influence which, as in the Bernard Madoff case, may not appear until after the crisis or collapse when a business is subjected to a full post mortem. For example, The Associated Press (2009) reported in the N.Z. Herald:
Bernard Madoff’s brother, sons and a niece used the family finance business like a “piggy bank”, a court-appointed trustee said as he demanded in a lawsuit they return almost US$200 million that fuelled their lavish lifestyle at the expense of investors. The trustee, Irving Picard, sought US$198.7 million from Madoff’s brother, Peter, who had worked at Madoff’s Manhattan investment company since 1965, and sons, Mark and Andrew. (p. B13)
Forces of influence such as family (as above), trusts, personal obligations or liabilities that are not disclosed may all be factors influencing a view or driving a power focus. One face of power that may have been expected to surface in this survey of publicly listed companies - and did not - is the indirect influence of investor analysts and commentators. That was not mentioned in response to the questionnaire or in focus groups and yet it could be surmised as a substantial consideration in the announcement of many board decisions and reports. For these reasons it is important to keep in mind the comment of Lewis and Considine (1999, p. 2) when they described agenda setting as a critical vantage point from which to “observe and explain some important aspects of the nature of power and influence” that allowed some subjects to emerge and others to never be fully considered. Obviously they were reviewing government processes and referring to the compromises political parties or sectional government interests are forced to consider when they legislate or operate inside the parameters of election promises and policy mandates. That is seen in the New Zealand political landscape in features of compromise necessary to obtain majority voting under our proportional system of party representation. The contention
is that the private sector is ultimately no different and that pressure, influence, or obligation may force eventual compromise.
The present research project is a first step in attempting to understand a mysterious process that is only very rarely reported on, and even more rarely observed (see Chapter 1). The origins of the agenda explain how boards identify what is to be discussed and what are its priorities and so it lays the foundations for board decision- making. It enables us to understand if they are beginning at the right place to “protect and create shareholder value” (Charan, 1998, p. 3). If that is the goal, as Charan states, the manner in which this agenda process is handled, and by whom, allows a first glimpse of directors in action on the decision pathway that determines whether the board has “released its competitive power” (p. 5) and is preparing to work effectively. Coming to terms with how items get on an agenda for discussion and who controls that space begins to prise open the window on how boards actually work, allows us to assess the strengths and weaknesses of the present process and the power factors that drive it so we can consider how it can be improved.
The research looked at how the board agenda was set and who dictates what directors discuss and in Chapter Three proposed a theory or concept of director abdication or omission. That discussion suggested failure to drive the process from the boardroom left directors without influence or power in setting the parameters and subject of their own debates. This omission or abdication would occur through either a lack of willingness to force change or a lack of knowledge about required change. The results suggest a need for change is recognised by a significant group of directors, but not effected, eliminating the concept of omission but leaving unanswered the question of abdication.
The research survey in this study adopted, at the onset, an assumption of a collective, single focus by directors as to whom they work. What emerged is a view of power cliques and sectional influences within the board that dispels any universal concept of a unanimous, collective board approach. This is clearly demonstrated by the result showing that 23% of the directors are dissatisfied with the manner in which the agenda is prepared
.
The results identify that different factions and views may exist within a board. These responses appear to be subject to the hierarchies of power (thatis, mainly chair and chief executive or a combination of the two). Those hierarchies may control the board and an acceptance of an inability to challenge that power by a sizable proportion of directors can be observed/interpreted as passivity and, therefore, labelled abdication.
A passive acceptance of the status quo was observed in the preliminary discussion with the small sample of focus group directors at the beginning of this project. The manner in which the agenda is prepared, who prepares it and what is included was treated somewhat superficially at first and shrugged off with comments that suggested directors regarded this as a process to be left to management, to the chair or just ignored altogether opting for the traditional convention their particular board has always adopted.