If you are or have been an independent member of the board of directors or trustees of a for-profit or non-profit private or public corporation in the Philippines, you may likely have witnessed a scenario wherein the handpicked directors of the principal owner would generally be not too participative or oppose propositions of non-independent directors appointed by the main principal during board deliberations and would just assent to motions for approval by the director allied with the principal or chairman who would typically be either the main principal or his scion.
This penchant for docility seems to be particularly prevalent in family-owned or tightly-held corporations. Is this trait born of our Pinoy “hiya” culture or our predisposition to not confront or be combative, particularly in an open meeting? Is this just unique to the Philippines?
For our local good governance adherents, particularly the main actors in governance, meaning the board and management, how their views compare regionally is a topic that has not been covered in any forum, written or otherwise, that I am aware of.
Well, the good news is that we now have a report that can serve as a benchmark for the future focus on good governance. The Institute of Corporate Directors recently released survey results on the current thinking across the regions as of November 2023.
ICD collaborated with Malaysia, which took the lead in the study. The study had 335 participants composed of board members and management, the majority (83 percent) of whom have revenues of $200M to $500M.
Apart from Malaysia, which accounted for 37 percent (%) of the survey, other participating countries included the Philippines, which constituted 12% of the respondents; Vietnam 11%, Singapore 4%, Indonesia 3%, Thailand 15%, Myanmar 9%, Brunei 6%, and Cambodia 1%.
And what were the findings? Surprisingly, most board members' mindsets are still premised on yesterday’s focus, and they have not really crafted more current strategies and priorities relevant to the key risks and issues confronting organizations presently.
More particularly, there is a perceived widespread lack of prioritizing, managing, and mitigating identified threats. In other words, it's still a business as in the past of “as usual” mindset. To be effective corporate stewards, however, boards must have the ability to constantly reassess and realign strategies, moving from the traditional to a more futuristic-oriented approach to strategies in a Volatile, Uncertain, Complex, and Ambiguous environment marked by a depressed global economic environment and potentially highly explosive geopolitical flashpoints.
The survey also highlighted a high incidence of misalignment between the board and management on key operating issues due to inappropriate board architecture and outdated culture, which resulted in a lack of open and objective discussions of strategic priorities.
Equally pressing is a call for boards to be more progressive and forward-looking, able to identify a rapidly shifting business landscape that necessitates diverse skills and broad knowledge, and cultivate a culture of open dialogue among directors and with management to provide effective and credible oversight.
To achieve this, boards must submit themselves to an objective evaluation of skills gaps analysis, board deliberations, and decision-making processes, preferably by professional third-party evaluators.
In this regard, constant retooling of directors through further education is imperative. Critical as well as directors is the organization’s talent recruitment, management, development, and preservation policy to ensure the non-disruption of business operations.
Finally, in an era of heightened awareness of Environmental, Social, Sustainability, and Governance concerns, boards must be fully aware, suitably educated, and have deep knowledge of these issues. The ESSG agenda should be clearly reflected and critically integrated into an organization’s strategic planning and must go beyond empty lip-service gestures such as greenwashing or greenhushing.
Until next week… OBF!
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