Sri Lanka Equity Analytics Markets, News 7 December 2009 108 views No Comment  Print This Post  Email This Post

A Technical Specialist with CIMA UK, and also formerly of Nat West Bank, Gilian Lees said boardroom ‘yes men’ could damn a company.

She was addressing the Technical Symposium 2009, ‘Reshape your Business’, and sort of jerked up the entire talk session when she said boards of directors are usually packed with ‘Yes Men’, who shrug away responsibility and blindly agree with the chairman or CEO, or whoever it is who chairs board meeting.

Usually, she said, board meetings are pre-planned, encouraging partisan agreement with the chairman. Such companies fail.

The argument is that better decisions are reached when they have been properly debated and subject to minute scrutiny.

The worst insult that can be hurled at a board is that it is guilty of ‘Groupthink’. More often directors fail to ask tough questions, and current consensus is that board meetings are stage managed. Non-executive directors find it increasingly hard to ask awkward questions, and be labelled ‘stupid questioner again’.

Family companies usually fall into this category, and although such companies have boards of directors, such are usually only nominally termed with not free thinking powers and are usually bound to accept what the chairman dictates.

In the Sri Lankan context, we have already witnessed the debacle of one such company, as much as there was one other in India too that had to suffer the same fate.

Difference in that context was that although the chairman apologised, ‘Sorry’ was not accepted for mismanagement and large scale fraud. The Chairman was jailed., and his assets subscribed to a huge compensation package to pay off debtors.

To off set such Board room cowardice, is establish challenge culture where constructive critique is encouraged

Accepting there needs a challenge culture, the necessity to create one is essential.

Ingredients needed are high quality information, diversity of skills,. Perspectives, and experience, mutual respect between players

Also discussed was impact of environment issues on business which also included the tea industry. Ravi Fernando, on Boards of LOLC, World Vision, and environment Foundation of Sri lanka, said just 40 per cent tea exports are value added. Balance exp[orts component has not changed and its composition is still bulk exports.

Not changing this strategy, means that someone else benefits from such bulk tea exports. Millions are made by those who import tea produced here exported in bulk, and others who add value make all the money. This, he said, demands immediate attention of those involved in tea marketing and production.

At issue was also that Banks irrespective of the recent financial crisis, continued to make substantial profits.

Explanation for this phenomenon was cloudy and veiled inconclusively in technical jargon.

By Steve A. Morrell

Auto sourced from Sri Lanka Equity Analytics. Go to source

Related posts:

1. Grooming Directors
2. BOI gets new Board
3. Kotelawala no more on Ceylinco Directors Board
4. Ratnayaka appointed chairman SL Tea Board