Corporate boards must change with the times
CORPORATE boards needed to change with the changing economic climes, an internal audit conference heard on Tuesday.
Change specialist Michael Jackson told delegates at the conference that clinging to "old and familiar, yet outdated" patterns and formulas would not work in a rapidly evolving and changing business landscape.
Mr Jackson’s change strategies have been used by Microsoft founder Bill Gates and billionaire entrepreneur Richard Branson. Former president Nelson Mandela has even called him a national treasure (Mr Jackson is based in South Africa).
Mr Jackson proposed that boards embrace change, and move away from traditional ways of thinking.
"You need to look for the new, the different, the unconventional, yet we are taught to expect patterns. We need to break down that conventional wisdom," he said.
"Why did nobody see the Enron manipulation happening? Because it’s not a regular pattern to us," he said.
Mr Jackson’s view is that the road to 2020 would be paved with difficulties if businesses and individuals did not harness change strategies.
In his view, $173bn worth of business is up for grabs daily.
"Who’s up for it? Probably those who understand change and did not look for familiar patterns," he said.
While Mr Jackson was not against standards and procedures, he was opposed to standards and procedures "etched on tablets".
"You’ve got to look at new ways and challenge yourselves to deliver," he said.
The "gorillas" in society were increasingly the things people were turning a blind eye to, or did not notice.
"We’re stuck in repetitive patterns. We have become reactive and are no longer pro-active," said Mr Jackson.
The 2008 to 2009 global financial crisis brought about a greater need for transparency, with investors seeking more information and knowledge.
This was, however, raising the bar for boards to manage their time better, and zone in on what stakeholders and regulators need.
Sriram Padmanabhan, head of auditing for Africa at Standard Chartered Bank, said that running a corporate board has become extremely complex since the onset of the financial crisis, adding that boards now faced unrealistic expectations.
While the King 3 Code of Corporate Governance and the requirement of triple bottom-line reporting was already in effect in South Africa, discrepancies existed across African markets on governance and other processes, and shareholders remained too timid to intervene.
"Many institutional investors are still not playing an active role and are acting in a mechanical manner when they need to vote at shareholder meetings," Mr Padmanabhan said.
While shareholders should not be discouraged from taking co-ordinated action, all stakeholders needed to be cautious if this led to a takeover.
"Boards have been ignorant of risks and the key is the alignment of the corporate strategy with the risk profile," he said, calling for more linkages between audit and other committees in an organisation.
"Boards need to think deeply, thoroughly, and on a continuing basis about their tasks. Key is the leadership of the chairman and the support given to the CEO," he advised.