Control, service and strategy: why boards are more important than ever, and how they need to change to add value, with Professor Andrew Kakabadse

🎙️ You can listen to the full podcast interview with Professor Kakabadse on Apple Podcasts and Spotify.

Professor Kakabadse, one of Harvard Business Review’s most influential management gurus, has spent a lifetime working with boards, publishing 45 books and 250 scholarly articles on the subject. Tune in to his conversation with Nurole CEO Oliver Cummings to hear his answers to:

• How do you define and measure the board’s role and effectiveness? (0:57)
• Can you unpack the meaning of “board stewardship”, with examples? (5:07)
• How can boards build requisite psychological resilience? (11:35) 
• How can Chairs manage domineering board members? (16:14)
• What can board members do where they feel impeded by governance?(19:23)
• Where can boards deliver the most value today? (24:25)
• Which forms of diversity do boards need to add more value? (29:42)
• What can UK boards learn from other systems? (41:10)
• Should Chairs play a more dominant role for boards to be more effective? (43:09)
• What are the respective roles of CEO and Chair? (46:21)
• How do Non-Execs slot into a close Chair-CEO relationship? (48:51) and
• ⚡The Lightning Round ⚡(53:05)  

*This is an AI-generated transcript and contains inaccuracies*

Oliver Cummings: [00:00:00] Hello, and welcome to another episode of Enter the Boardroom with Neurol, the business podcast that brings the boardroom to you. I'm your host, Oliver Cummings, CEO of Neurol, the board search specialist and market leader, bringing science to the art of board hiring.

Today's guest, Professor Andrew Kakabadze, is a Professor of Governance and Leadership at Henley Business School, and the Chair of Invisia Business School. Ranked as one of the world's most influential management gurus by the Harvard Business Review, Andrew has consulted for numerous governments and multinationals, published 45 books and over 250 scholarly articles.

Most recently, he has co authored Bilderberg People, Elite Power and Consensus in World Affairs. In 2021, Andrew launched the MA in Board Practice and Directorship at Henley Business School, the world's first program on how to professionalize the role of the director on the board. Andrew, a huge welcome and thank you so much for joining us today.

Andrew Kakabadse: My pleasure. Thank you for inviting 

Oliver Cummings: me. So Andrew, I wanted to kick off by [00:01:00] talking to you about a framework that you introduced me to through one of your articles around the role of the board. And you wrote that board effectiveness relates to the performance of certain tasks by boards and that the most critical roles that the majority of boards are expected to perform are number one, the control role, i.

e. monitoring or challenging the executive. Number two, the service role. So providing networks with the external environment to the company and counsel to the executive. And number three, giving strategic direction to the company. Now that was written in a piece you did in 2019 based on research you'd done before that.

I'm interested to hear how your thinking has developed since then and whether that's still a fair reflection of your understanding of the board's effectiveness and role. 

Andrew Kakabadse: It was [00:02:00] a reasonable understanding and that piece was written after considerable research for quite a few years Where we really had a better market situation than we have now.

So the control role that's always been there 1925 Harvard Business School a major recommendation as to how the Anglo American economies were going to control the shareholders investment and trust the management through the board the service role the Support care concern and care that was there and the strategic role what has happened since then is we've almost gone back into him and we now have two primary roles and these were no different three and a half thousand years ago when the first governance systems were set up in Mesopotamia.

The systems are compliance. and stewardship. We have gone overboard on compliance. So one legislation after another, one [00:03:00] recommendation after another, the accounting bodies coming up with a view that we've had a problem in the past and complying to this procedure is going to help us. It never has. So if we go back to Enron, all those 30 years ago, or Morconi, or HBOS, Halifax Bank of Scotland, or Carillion, you will find months before those organizations collapsed.

In the press were great compliance reports. What was the problem? The stewardship and the stewardship in a sense combines that sensitive care that we talked about, the strategic oversight and the clever thinking about strategy that was also there before, but into one. Now, if you don't think strategically and you don't engage with your management team and the stakeholders, your strategy is worth little.

The reason I've put these two together is because of the overemphasis on compliance and the [00:04:00] lack of understanding or sensitivity towards stewardship. That has led to one outcome. And that is every corporate collapse that I've seen, every merger and acquisition that I have seen go wrong. The board. And the management team knew it and the average period of time that they had sufficient insight to act was 65 months before the place went bankrupt.

And what happened in those 65 months, for many organizations, nothing. So how can we have a situation where on boards Genuinely, we have bright people. We do have some of the cream of society on our boards. How can they become so inhibited that they're unable to act when they have all the insights concerning what's the problem now, what will be the problem in the future, if we don't take the steps we should, how are we slowly going to find ourselves in this difficult circumstance, and why didn't we take those steps?

So today, [00:05:00] the stewardship challenge is overwhelming. And we might want to explore what does that stewardship challenge really mean 

Oliver Cummings: Fascinating and that resonates so much with what I see and hear from the chairs and non execs interacting with us Can you unpack exactly what that stewardship does mean maybe bring them to life with some examples?

Andrew Kakabadse: Basically, at a board level, even in the C suite, we have roles where, to state the obvious, it's up to you. So it's up to you as the CEO to determine the direction that we're going to go. Doesn't that seem such like an obvious statement? Well, it actually isn't, because the role... has a very high discretionary component.

You're being paid two or three million to determine strategic direction, structure of organization, stakeholder relations, how you're going to see and keep shareholders happy. It's up to you. Now, where you have a number of roles, which have very high discretionary content, [00:06:00] there is nothing called right.

What is right is the manner in which we engage with each other. And if the psychology of engagement is destructive, most people find they can't cope. So imagine that we have in front of us a flip chart. And I just draw a continuum at one end. Are all the things board members should know, finance, legals, roles, responsibilities, strategy, and so on.

So a big list of things we should know and do. What's at the other end? Just one word, psychology. And the handling of the psychology of large, big, extensive, unstable, potentially unstable relationships is now critical. Now if you've lived a life like that, You may find that after a time you get worn down.

It's difficult to maintain the same energy, robustness, resilience to cope. You may equally find that it's [00:07:00] just not on a board as in real life. You come across somebody that makes you feel bad. You feel as if you can't make a word. You can't say anything. Uh, you sometimes feel inadequate in their presence.

That also happens on a board. Take something like a marriage. A marriage is where two people are working things out together, and you can see some marriages work out well, and the psychology between the two people has been manufactured to be good, and with others it doesn't. With those that doesn't, what's the common feature?

They can't talk to each other. So there are all sorts of tensions in the relationship and people are trying to skirt their way around them, hoping that tonight, in this tension, we don't have to face it. And at least tonight, I don't have to face up to this uncomfortable encounter. What happens tomorrow is another matter.

And the best example I can give you for uncomfortable psychologies on the board is marriage. It is the same intensity for good reason. [00:08:00] In your hands are the futures of God knows how many hundreds or even thousands of people. In your hands, as a parent, are the futures of your own kids in front of you.

You know it. You know what you're doing wrong and right, but handling and confronting that difficult, uncomfortable psychology is a major challenge. I've seen this from China as a phenomenon, from Russia, United States, right across European, African, Arabian countries. And the one thing that we do not still respect and train people in order to handle their circumstances better is how we handle uncomfortable psychology.

and how at the same time you build up people's resilience to continually handle uncomfortable psychologies. We underrate resilience and because we do that. We have some of the problems that we've had from Marconi in the past, from HBOS in the past, from Enron in the past, [00:09:00] from Carilion in the past. Why didn't we face up to particular issues?

Let's take Carilion. Carilion was a company which had very good engineers, and government loved them in many ways because they were coming up with engineering projects that were of quality. There was another problem. Government wasn't paying on time and these are big capital projects. Government then wanted, you know, one department, I don't know, education wanted this, but treasury wasn't paying on time.

So what happened was this debt built up and almost became part of the fabric of the company. You know, this is what it means to deal with government. No. But this is what it meant for Carillion to deal with government. And ultimately, the cash flow problem turned so negative, the company collapsed. I know the C suite and the board were blamed, and I know some of them regretfully are facing prison sentences, but I never heard the role of the minister.

The role of Treasury, the role of a case [00:10:00] under a Secretary of State, and their influence on the budgeting and payment process behind the Carilion financial structure. All I heard was. The chair and the board were inadequate. Oliver, they may have been because a good board should have said enough's enough.

But imagine, and this is why I've got some sympathy with those correlated individuals, imagine you and I are on the same board. We've built up an expertise of engineering quality that's great. We've built up a trust in government that most people are completely envious of. Would you straight away? So you had a board that was trying to balance.

Circumstances that reach the point of being out of balance and could not be controlled any further. Yes, perhaps the board should have acted, but for me, if we're going to really look at. The stewardship side of the board, I really would [00:11:00] like to look at also the key external stakeholders and their influence on the board.

Press and media we can cope with, suppliers we can cope with, but what if it's government? And what if your key customer is government? And what if you're doing such a great job that if you try to divert, you actually will do two poor jobs, with government and with somebody else? So I would like to see much more attention given to that stewardship side.

And for me, Carillion is the one example that we should be looking at more intensely and not blaming people. 

Oliver Cummings: I love that. There's so, so much in there. I want to dig down a little bit more into that psychology piece. And I've lost count of the number of people on the podcast who've talked about the importance of building psychological safety in the boardroom.

So it's something people are very... Conscious of them and ensuring that the board team are functioning well together and you've got people [00:12:00] who know how to build teams What is it about this that is so difficult and goes beyond that in your mind? And if you're a chair listening to this or a board member listening to this is thinking well, we've got psychological safety But I'm not sure we've got the thing Andrew's talking about here.

How do we go about building that? resilience You 

Andrew Kakabadse: do have to have a deliberate strategy on the board to number one, identify what is your psychological safety or no safety concern. What's really happening on this board? And the second, you do have to have a deliberate strategy for this board. What does resilience mean?

For this particular board, I can't mention the company or the person, but there was one outstanding example of where one individual that was a member of the executive, but also sat on the board wasn't the CEO on this person had a wonderful mind. Uh, really fertile capacity to [00:13:00] debate and discuss, uh, a photographic memory, uh, uh, a capacity for detail, and again could talk about the bigger picture.

So here you've got somebody that could talk about ancient Athenian architecture and art and then switch to finance and the particular strategy for this murder and acquisition that we're going to go through. Great brain. One of the nastiest personalities I've ever met, who also took pride in making you feel small.

Now, imagine you're a well intended board member, you have to ask a question, and then you're made to feel so low through the questions that you've asked. And there's other board members looking on to this. So the psychological safety thing is not just me feeling good. It is my credibility, and that's much more serious.

So if I am put in a position where I can no longer put a case forward convincingly [00:14:00] in such a way that at least the board would listen. They don't have to agree. My credibility is destroyed because of psychological safety. We now have a non functioning board member. And slowly, you could have a non functioning board.

So it's psychological safety with credibility. Now, you continue living in that environment for a while. What else becomes a target and a casualty? Your reputation. So you may have had a wonderful social reputation before you came on the board. You may have had a very good professional reputation when you came on the board.

Twelve months into the board, People are thinking, who is this guy? So psychological safety, if you don't handle it well, undermines the two elements of top level conversation. Credibility and professionalism. Now, who can create that? The chair. So we see the chair as a sort of administrative business type thing.

Note the chair is also a [00:15:00] coach. Not a coach of people, but a coach of the quality of conversations that we need. Now, what if the chair can't handle this executive member and the chair starts to feel bad? Every one of us is human. Well, now we have a board in total crisis because here's a board that is now so restricted in their capacity to respond.

It's an emotional issue. They know it. Their feelings of their credibility and their value in terms of contribution to the board meeting is now so diminished. Do they always know it? Always. I've never, ever known a situation where the board members don't know it. Admitting it is another matter, but knowing it.

And we're talking here, China to San 

Oliver Cummings: Francisco. That's interesting. I've just been reading a book called The Elephant in the Mind, which talks about how we delude ourselves both consciously and unconsciously. Is that one where people are deluding themselves? Consciously, would you say? 

Andrew Kakabadse: No, they're not deluding themselves consciously [00:16:00] because they know what's happening.

What they are doing is they're deluding themselves that the problems that they face today will somehow be better tomorrow. And they never are. And you know, underneath it all, they know that too. 

Oliver Cummings: That's interesting. I can recognize that problem of a difficult individual in the boardroom that wears others down and others just simply lose the resilience to continue challenging them.

But there strikes me that there's another scenario, which my sense was you were also referencing, which is the boiling frog. syndrome where something starts as a little scratch and people tolerate it and then it just gets that little bit bigger and people tolerate it because there wasn't that much change.

If I'm sitting as a chair on a board thinking, what do I actually practically do to help my board counter that and think about countering that? What do I do? What's on my action list? 

Andrew Kakabadse: Well, first of all, it's very important to come to terms with the fact that are you also being are [00:17:00] negatively influenced by the dynamics in that boardroom.

So you do at least have to come to that honest conclusion. Then you come to the conclusion, what is it that I can really handle? Now let's at least think about that. Now you can't do that at the split second where those dynamics are taking place. You have to go away, you have to discuss, you have to go to a coach, a mentor, somebody, and that's why coaching for chairman is so important.

We can discuss them. Then the strategies that you can adopt are multiple. You could basically say, our dynamics are wrong. And let me give you an example. We had this discussion yesterday, weren't they so interested in the way? I should have said that. It was me that was wrong. Apologies, dear colleagues.

It's not going to happen again. Well, that's immediately changed everything. You could have a private meeting with that individual who is over dominating the dynamics, and they're negative, and basically saying, you are really talented. But the contribution you're making to this board is destructive. I need you to change.[00:18:00] 

And the other person says, I'm not. I'm providing all the inputs. People don't speak. I'm doing this and that. And the response from the chair is, yeah, they don't speak. Because they can't. They don't know how to. So, unless we have a better dynamic on this board, I'm going to be in a position where I'm going to ask you to resign.

So there's two strategies. Or you can slowly build the board up, and instead of having one person dominating the situation, you can say, Each person has an input of three minutes, five minutes. Then I'm going to go around the table and ask what you think. So I'm going to force everybody to speak. And when I'm not satisfied with what you say, I will then ask you even more, more penetrating questions until I get a satisfaction from what you're saying to me.

So now, all of a sudden, the dynamics of the board are taken away from a focus on this individual that is overdominant to the chair. And that is what's needed. Ultimately, it is the chair that must be the center of all of the contributions, because it's [00:19:00] up to the chair, because the chair is accountable for how this board effectively dealt with a merger acquisition, a strategy acquisition, a whatever sort of let's enter into a new part of the world type of strategy, whatever it happens to be.

So there's many things a chair can do. Thank you. But if they don't think about how they're being impacted by those dynamics, they can't 

Oliver Cummings: do it. Really interesting. So I guess you've touched there on some of the risks and issues. With individuals and how their psychology can affect boardroom. But you also touched earlier on the systemic issues, and you've talked about this and written about this, how many of the problems encountered by board members don't actually stem from the kind of leaders they are or their leadership style, but from the governance system itself.

And I really recognize that I had exactly that issue raised in a mastermind. Earlier this week where [00:20:00] someone was caught between what they felt was a rock and a hard place There was the right thing to do for the business and they were giving a nod to the shareholders And there was the right thing to do by the stakeholders And they didn't feel like there was a middle ground.

It was an eye the raw So what can board members in that situation where they feel that they are effectively impeded by the governance system? First 

Andrew Kakabadse: of all, to go on a board, the experience that you've outlined should be normal. The board is the ultimate place where issues are at the resolve, at least discussed, even perhaps not perfectly, but at least there is a forum for some sort of resolution practice.

Imagine we didn't have a world with boards. Can you imagine the number of court cases that would ironically jump up, that the courts couldn't cope. So the boards are the last place that we can go to, to do something good. [00:21:00] In that circumstance, the dilemma that you outlined is a key dilemma. I've got a shareholder issue.

I've got a stakeholder issue. I've got an issue with compliance says this, but the intricacies of the market in some sort of Eastern European country says something else. Where do my responsibilities lie? Where do my ethics lie? That is why there has been such an emphasis on ethics. The emphasis that we have pursued so far is being unethically right.

It's impossible. The emphasis we should pursue is being how we handle and work through an ethical dilemma. Now, simply that you become conversant with the language of ethics. Doing the right thing. Do most people do the right thing? Well, if you look at the ethics and the philosophy of ethics, the answer is no.

Because doing [00:22:00] the right thing... thing is in ethical terms called deontology, so the Ayatollah Khomeini, not in a way a religious statement, but Jesus Christ. These are the right things to do. Well, how can you do that when you're negotiating multiple deals across countries all the time? So there is another ethical base called teleological, and that actually came from Britain.

Greatest good for the greatest number. We know all this. What's good for me, what's good for you, and so on. So we live in a world of greatest good for the greatest number. Oliver, just to have that language and to explain to people, do you understand what is the real situation we've got? We have a governance, governments and a governance system above above us that is deontological.

This is the right thing, right? We have an entity. And the company is driven by a board and a C suite below that, which has to take account of the deontologies, but then has to look at what are the nuances in our situation that will make [00:23:00] for a successful company, people having a future, suppliers trusting the company, good quality products coming.

We're going to be caught permanently between these two models. Now you have a different discussion on the board. Because the answer could be in the example you gave of shareholder versus stakeholder. The answer is, let's take a long term view. Let's go on a campaign for the next year to educate our shareholders about what is the ESG right thing, the sustainability right thing, or just with these people in this environment, in this country, we have to treat them differently.

Because if we don't, Ethically, we are accountable, and most of all, reputationally, we could lose so badly. So, there are things you can do, but because I find so many board members and C suite members are trained in what essentially came out of [00:24:00] America, which is you do the right thing, deontological, not recognizing that business cannot function that way.

You're caught. Of course you're caught. And I felt that, at least in, on the program that I run, I don't teach people ethics. I train them in the use of language and how that language can actually work for them or not. So 

Oliver Cummings: how do you see the role of the board in this sort of changing world? My sense is you still think they have clear value in today's world.

What's always interested me is one of the stats around how execs... Rate their boards where I think it's less than A quarter of them rate their boards as good or excellent which you know Listening to you talk making me think actually it's a reflection of that complexity and mixed Goals that uh boards are trying to [00:25:00] achieve but how do you think about that that role of the board?

Today and where does it have? 

Andrew Kakabadse: Today, boards, for me, are more important than they've ever been. We are living in the world of governance. What does governance mean? It means oversight. I have a set of values, and for most of us, boards have a hierarchical view of the world. We look down. We look down on the management team and we look down on the organization and fundamentally ask one question.

Can we develop or encourage greater value from these assets than has been the case to date? So it's an oversight function. And today we have whittled our lives down to two fundamental levers. The compliance lever and the stewardship lever, which we've discussed. Now it's up to you. To sort out how you're going to balance those two levers in relation to the value delivery that you [00:26:00] wish to achieve.

And you'll note from that, I've gone away from the term value proposition, which is in those textbooks. I can propose any value I want. No, no, no. Boards today, you please go into sufficient detail to show that you know what value should be delivered. That is one of the reasons why we are getting such negative comments about boards.

The guys are good, the nice guys, I'm sure they try very hard, but you know what's their problem? They're out of touch. That was the one phrase from China to Russia to Germany. To the United States. The board is out of touch. What that actually meant when you broke it down is that the board, interestingly, was distinctly aware, but what they were working on was a concept of value proposition.

I propose that we're going to pursue this value. They hadn't broken down the strategy or the ethical steps or the [00:27:00] stakeholder relationship steps that they should be generating to the point where they could more consciously say, this is the value that's going to be delivered from this board to the rest of the organization and the other key stakeholders.

Can 

Oliver Cummings: you bring that to life with me, for me, with an example, because I mean that, that makes sense, but I'm just struggling to relate that back to a practical example. Cool. Met 

Andrew Kakabadse: finance director who was having a hard time with their CEO on board. And this was an ethical person, socially skilled, appallingly, but a great brain.

Became CEO and also had a seat on the board. And the first statement he made as CEO to the board, respectfully, and then to his own management, was we all know the problems we had in the past. Oh, and by the way, I was part of that problem. We all went with the direction of the former CEO, [00:28:00] including the board, that we shouldn't have done, and we all know that.

And the first recommendation he made is I'm going to ask for an investigation into the practices of both the board. And the C suite, and I want that independent group to include me in that. And the second thing he said is, when the report's written, I'm going to share it with everybody. There's no secrets here.

Well, out came the report. He was criticized, it was him. The board was criticized. What was going wrong and how that embedded itself in the organization that came out. But at the meeting, when he shared the report with middle management, senior management, and the board, do you know the view of him by the whole meeting?

He was wonderful. He was wonderful because he did two things. He introduced honesty. And secondly, the problem we all [00:29:00] shared, he shared it with us and stated where the accountability was. Now, after that meeting, the middle management and the board called him visionary. You know, all the sort of Alexander the Great type terms that show you've got all the social skills.

Actually, the guy was the most miserable sort I've ever come across. You know, he couldn't smile, he couldn't look at you, he couldn't do this, he couldn't do that. In that situation where he said, if we're going to deliver value, the first thing we do is we uncover the truth about ourselves. So all this has gone away.

So now we have a platform for value delivery right through the organization, everybody appreciating that. Okay, very 

Oliver Cummings: powerful. You have also talked about the role that diversity of. Board members plays in discussions like [00:30:00] that and how you've seen as disproportionate representation of board members with expertise in finance related matters.

You've also talked about what are called the over indexation or focus on visible diversity. Have you built up a sense in the data of which. Areas are most underrepresented that where most value would be gained from a more balanced 

Andrew Kakabadse: It's in the asking of the question that you have just posed which is where is most value to be gained The value imperative is critical because every board I know has to periodically ask the question What value are we providing to the organization?

the shareholders and the stakeholders. Every board member has to ask of themselves the same question. So the term value is changeable. It's a bit of a [00:31:00] moving feast. It doesn't change overnight, but as a three to five year period evolves, the value that this board should now be providing is, and we should at least have some sort of reasonably shared view.

What is the value that still is not sufficiently embedded in boards, and that is the value of diversity of thinking. We need a diversity of perspective. Now, where they have a board of all men, a board of all women, a board of all this, a board of all that, and they genuinely provide that. Fantastic. I don't know if you recall, there was an organization run by women.

It was called F International. Steve Shirley, who was a second world war. Survivor started it, it was in the IT area. Well, her board, and they had one guy who was the finance director. And funnily enough, it worked brilliantly. And even the women were saying at times, I worked [00:32:00] with them for a while, women were saying at times, we need another man.

I said, well, What do you need in another man that is not here? Are you sure you mean you need another type of input which is, I don't know, somebody with legal skills or this for the merger that you're going to pursue or the sale you're going to pursue, but you don't need another man. So I have seen boards work fantastically and they are all women and they are all men.

They're the minority. My concern is when the diversity strays too much into imagery and political correctness. And believe you me, I have seen boards which are counterproductive. And on that board, the negativity of input can become as much from a man, a woman, somebody from a religious background, somebody from an ethnic background.

That's a chair problem again. I've seen to my regret. Too many chairs saying, Oh, [00:33:00] we need a woman. Oh, we need a black woman. Oh, we need this person from that particular ethnic minority. No. Who do you need by role? On this board, we've got six roles. Do you still need six roles? It could be seven. If it's seven roles, what sort of inputs do we need?

And once we've clarified the inputs that are needed on this board by role, now let us go and search for the appropriate people. And what's likely to happen, you will end up with a diverse board. There could be more than one man, more than one woman, more than one religious representative. You're starting a business in Pakistan from London.

Well, if you'd looked at the elements by role, Professionally, you're now looking for the competence that's needed in those roles. 

Oliver Cummings: Okay, and you suggested that, based on the research you did on improving corporate governance, and certainly with functional diversity in [00:34:00] FTSE 350 boards, that diverse functional competencies were considered, by the sample of the directors you surveyed, to be the most significant component of an effective.

What I've always wrestled with is, is how you can figure that out for sure, because you've got so many variables. You can't run a control test. How do you think about that challenge? 

Andrew Kakabadse: Yeah, you're absolutely right. You can't, you can't run a control test. What you can do is get sound engagement and positive alignment between the board members and if necessary, between the board members and the C suite.

That's the best you can do. Well, let's take one airline. They were looking at their board, and the view was, we're going to go much more into Eastern Europe. We're cut price. We want to maintain our price of tickets. We want to increase our routes. We're more expensive than our direct competitor. How can we still be more expensive and grow?

And they came up with a [00:35:00] very interesting conclusion about the diversities that were needed on the board. And one of the diversities is, we need to have somebody who not only knows strategy in Eastern Europe, they have all the networks and contacts with government, with this regulator, with that, with that.

So who did they appoint? A Swedish filmmaker. Why? Because that person had such a range of contacts with all those networks. The easiest thing for that person to develop with a little bit of help was the strategy for this LM, but how that strategy was going to be delivered in that area, they could talk to you for hours and open up doors that this board could never have imagined could be opened.

Now that was a professional step by step approach to finding out what we need on this board. And then a second step by step approach to finding the right person. Who's on this board? Well, number one, it's multi ethnic. Number [00:36:00] two, almost the same number of women as men. And number three, because of the religious concerns in that area, they found somebody who was able to negotiate through that.

Didn't have to be of the same religion, but had credibility. Now when you go on this board, do they think we got too many men, too many women, too much this, too much that? No, what you have on this board is respect and that is the ultimate aim. Do we have sufficient respect on this board based on the diversities we need to introduce?

It's really 

Oliver Cummings: interesting. So do you think, I mean, boards have come under, and chairs in particular, have come under huge pressure recently, often from interest groups to Diversify in whatever particular um direction the the interest group represents Is that an area where you think boards to do? What's best need actually to become more?

Tenured and insulated to that or how does [00:37:00] a chair know? when to stand their ground because I can think of examples where chairs have stood their ground and then the tidal wave has built against them and they've just been knocked over despite their best efforts to do what they thought was right. I mean it's a really difficult thing to ask a chair or a board to do that because we live in a world where often you get judged by the court of a public opinion which is not always right.

Absolutely 

Andrew Kakabadse: right. We've reached a point. Where the chair, I believe, is now more important than CEO. Because of the governance, reputational risk, stakeholder concerns, exactly the court of public opinion, that build up of opinion that can actually undermine confidence in your share price, and all those sort of factors, the chair is important.

Now, if we look at just the history of chairs, there's a number of different sort of assumptions. How did the term chair come to be? And if you think about it, Oliver, isn't it strange that the most important institution in the company is [00:38:00] a board? It's a piece of wood. So what I will recall, the most important institution in our company, a piece of wood, and then the person who leads that is just sitting there.

Just the chair, you know, a vacant chair, nothing active about it. Well, one of the sources, historical sources, is 1740, and in 1745, a lot of entrepreneurialism began, the growth of the Americas, money going into the Americas, and what happened then was, a lot of that entrepreneurial funding was found to be illegal when you wanted your money back, you were a shareholder, you're an investor, you go to the person, The person's done something with your funding and you can do nothing.

So in 1745, the first compliant explained, if you're going to have an investment that's substantial, you will sign that document in on the premises. of the person who's going to lead it, the person that you're giving the funding to. Now most of the [00:39:00] people who wanted to do that were not with the countryside, they weren't lords and ladies, they were hard working artisans.

So you can imagine a successful person who's manufacturing pots, who's creating pots, the table's full of pots. So a board of wood was taken off its hinges, and usually that was the and put on two supports, and on this board the contract was signed. And in these premises, which could be hard working, there may be only one chair.

The person who sat in the chair was the guardian of the country. And all the others sat on stools or sat on the floor. So that is one origin. The implication of the story is, it was always the chair, never the CEO. It was the person with the oversight. Not the delivery that was prime. Where the CEO became prominent is we have to go to 1970.

Lee Iacocca, pay me a dollar, and I'm going to turn this car company [00:40:00] around. Chrysler. And for a period of 30 years, we've had the hero CEO. I suspect you and I have been brought up in that era. But it was only 30 years. And then came the dot com crash, then came the global financial crash, then came other problems.

So what we've had is we've had a small window of time where the strategy delivery accountability was prime. But before that, it was oversight. And now it's oversight again. So the role of chair is really important. You've raised the question, where do chairs go? And at the moment, it's unclear. They may go for one or two breakfast meetings, there may be a sort of chair group around, I don't know, EY or McKinsey's or KPMG, but is there a place which has given considered attention, research, and really delved into what are the continued problems chairs [00:41:00] face?

Is there a way through this? Is this a practice that's just in the UK, or is it right across the world? There is no such place. I'm deeply conscious of that. And that's our next move at Henley. 

Oliver Cummings: I love that. And I love that origin story of the board and the chair, which I've never heard before. You've touched there on the international ranges of practices.

I'm curious to hear what you think outside of the UK. What do you think are the best bits of other systems that you would bring in to the UK system to improve it? 

Andrew Kakabadse: What I would not like to see, I would not like to see the American system of the president, chair, CEO, We don't get the sufficient balancing.

We don't get now this urge for at least tell me what sustainability means. Tell me what you're doing with ESG. You may not even be able to do anything, but tell me something because shareholders might panic and reputation might lose a little bit and so share [00:42:00] price goes down. And to have all that on one person.

He's going to be wrong. Why did the Americans go for that? Well, it reflects their presidential system in politics. And the American board, traditionally, has been concerned with share price. So, who makes the final decision? You see that in many, sort of, gangster movies and so on, or, uh, movies about corrupt business in America.

Who makes that final decision? Actually, that's a very real question. Because that then determines share price. But what if you have more? Concerns and just the share price of today. The reputational concerns. How would you operate in Eastern Europe? How do you operate in Russia? All the sort of corruption that takes place there.

You mean this company is exempt from that? Impossible. Every company says we don't bribe. Well, how do you explain yourself from Uzbekistan to Kazakhstan to wherever else? All you have to do is look at the Economist Corruption [00:43:00] Index and look at the top 10 companies and most of them are Western. So they don't do anything?

Of course they do. So what we have now 

Oliver Cummings: is complexity. Just listening to you talking there, I've heard a spectrum of ways of thinking about that chair and CEO relationship. And at one end of the spectrum, I was talking to a CEO recently who was saying a chair had said to them Look i'm the boss here and it made them feel very uncomfortable as a ceo They felt that role should be very much a partnership role That partnership role would be the sort of middle end of the spectrum I think you've got one end of the spectrum.

You've got chairs who would see it As the ceo's role to set the strategy of the organization and they as chair gently nudge challenge Help them along, but ultimately they are going alongside them and then As i'm listening to you [00:44:00] and perhaps i've misunderstood this but it seems to me you're advocating there a much stronger level of leadership from the chair who is really then orchestrating the direction Of the organization with the ceo perhaps as much more of a an executor.

Have I have I got that right 

Andrew Kakabadse: or you have You've got it. Absolutely, right the worst chair in my books is the one who says i'm here to support the ceo They're not thought through their role. They're not thought through the strategy implications of what they're pursuing. They've probably not thought through sufficiently the strategy implications as far as it affects the board and the board's duties.

At the other end of the spectrum, equally wrong, I'm your boss. It is that somewhere in the middle Whether that is a partnership or not, I don't know, but I do know it's a negotiated outcome. It's a clarity between us. Actually, Oliver, I've got this problem right now in another country with a very good [00:45:00] organization where the chair has said, this is a CEO driven and CEO led organization.

And I have to say, having conducted an analysis of them, you've got a fantastic CEO. That's great. But what about if the public get hold of the fact that you've had a problem, the board is somehow seen to be sleeping, the CEO takes everything on board, and like any human, they just make one error, one comment to the press, to the television that goes wrong.

Everything collapses. Where is the board's role in risk and reputational defense, even of the CEO? And the chair didn't want to hear it. So you're right. It's that middle point. Partnership probably means very high quality relationship. And from our research, there's probably no more than about 18 percent of chair CEO relationships.

Negotiated outcome is we don't have to like each other, but gosh, we respect each other. We know exactly what we're supposed to do. [00:46:00] We know our roles. When the overlap, we just talk about it. When we've got to slightly change the circumstances of change, we talk about it. But We have an engagement that leads to alignment, and that's the aim.

Can we engage even on the most difficult of issues so that we are aligned continually? Listening 

Oliver Cummings: to that, it, it makes sense, but it feels woolly. And it reminds me a little bit of the sort of the co CEO role, which I've always, as, as an investor, whenever I've been exposed to that, I've never seen it work well, but there are, it seems to be an increasing number of companies, especially in the tech space, but that does work well, but one of the hallmarks.

Of those is they're very clear about where the responsibilities are in that sense of single threaded leadership and direct directly responsible individuals. The way you've described that chair CEO partnership, it sounds incredibly nuanced. Is that unavoidable or is there a way that, you know, if I'm a [00:47:00] chair or a CEO listening to this and aspiring to reach that, how would I write that down on paper?

What that means for each of us? 

Andrew Kakabadse: Well, very simply, there is another way, and that came out from the Cadbury report, and Cadbury stated very specifically, this is the role of the CEO. So the willingness that you refer to would not be with Cadbury, and many people prefer to pursue the Cadbury approach. This is it, and that's it.

However, we're in a, we're say we're in the pharma business for all, you know, not good, but we're in the arms business. We are in an entertainment business. We are in an educational business. We're working in different parts of the world at the same time. And we have to sit together and discuss how does our governance impact on the governance in each of these countries?

And if we don't sit together as a chair and CEO and discuss that, how can the CEO go ahead and deliver a strategy? that the chair is comfortable with. [00:48:00] So I would argue that where you can have chair and CEO really clearly set apart, do it. But what happens if you can't? What happens if the situation that you're in has such complexities that you could upset a certain number of stakeholders without intending to out of naivety?

It's there that the role of chair and CEO need to be balanced. If out of the conversation comes a woollyness, Oliver, I totally agree with you. The conversation is redundant. But the fact that you need to go into a complexity of conversation, which at times may feel woolly while you're talking, but the outcome is very distinct clarity.

That's success. And I'm just seeing the need for conversation on roles increasing because of the complexities of the different governance regimes that any company faces when it trades internationally. 

Oliver Cummings: [00:49:00] Really interesting. One, one of the other things that came out for me with a renewed emphasis from reading some of your work preparing for this was the distinct roles between chair.

And non exec in as far as it relates to the executive. And that more of a mentoring role that the, the chair might play versus the non execs. And, and curious to know if, if again, I think you referred to various pieces of research, drawing that distinction, but curious to know if, if that's still how you think about it in, in all of this and how.

How does that dynamic play out between those three in your mind when you're talking about that close chair CEO relationship? What is the the non exec as the third leg of that group? 

Andrew Kakabadse: Absolutely, we go back to the basic principle is complexity. That's why I have to have the discussion. It's not an easy answer.

The answer will come from our discussion. Now, the [00:50:00] role of the non exec in that is now interesting, because is that person who at the board meeting gives their wisdom, their experience, whatever, to the particular issue in front of them. And through that discussion, out of it comes a good decision, or is the non exec.

A source of information. Now, increasingly in the smart boards, the non exec is a source of information. So, I know with one international parcel company, the chair asks the non execs to sign a contract that they will undertake three international visits a year. If it's done on the behalf of this company, fine.

If they're working for another company, and for all I know, they're in Singapore or Hong Kong, could you spend a couple more days in Singapore, and we'll pay for the expenses. What does that person do? Well, they turn up to the general manager of Singapore and basically say, unannounced, uninvited, I need to see this and this and this data.

I need to see how you came to these [00:51:00] conclusions. I need to see your customer base. Could you introduce me to some of your suppliers? So one minute, one hour, one day, three days, whatever it happens to be, I want to know. I actually went in this company to the general manager of Singapore, which was the biggest hub.

I said to him, aren't you fed up with the fact that you could have board members coming to you unannounced, uncoordinated, and causing you continual effort and concern, and the individual's answer was, It's fantastic. Do you know what I have learned from this experience? Whatever data is requested, I provide it.

And I know that my opinion and my actions go to the board unedited. 

Oliver Cummings: Really interesting. So that really reshapes a little bit. One way that one can think about it, where the way you're positioning it there is that relationship between chair and CEO is much closer than between [00:52:00] chair. And non execs, and they are the sort of at the heart of it, that chair CEO, and the non execs are, as you put it, a source of information rather than necessarily part of that core team.

And then I'm sort of slightly taking it to the extreme 

Andrew Kakabadse: there, but... It's very true. That is the case. As a board member, you need to maintain an independence, an independence of opinion, and an independence of data extraction. Then how the chair and CEO coordinate together is fine. As a board member, I would even like to comment on that relationship.

But I'm not going to interfere, I'm going to comment. So the more you have a professional board, which has brought its board members together by role analysis, we need somebody who's got strategy, understanding, and stakeholder influence in Eastern Europe. The more you have a board member that is basically asked to go out there and inform the board of what's happening.[00:53:00] 

The more you have then an independence of mind and an independence of opinion 

Oliver Cummings: very powerful Andrew, I could keep going for hours. There's so much to explore here, but time has flown which means it's time to go on to our lightning round where i'm going to say a Short statement and ask you for a quick response if you're ready Yep, sure, go ahead.

So first up, the boardroom behavior that irritates you most? Silence. Your most significant professional insight? 

Andrew Kakabadse: The most significant professional insight was when I was working with government, and it was in the peace process in Northern Ireland, and it was... But we internally got it wrong, and we've got to face up to it.

And everybody in the room knew their careers could be over. We spoke. 

Oliver Cummings: The worst professional advice you've ever received. 

Andrew Kakabadse: You're welcome here, when I know they don't want me. 

Oliver Cummings: Love it. [00:54:00] What have you changed your mind on? About the board in the last 20 years 

Andrew Kakabadse: in a big way I never quite concluded 20 plus years ago that the board could be so important I had not foreseen that we are now in a period of governance where the oversight for the sake of reputation, for the sake of trust, and for the sake of building credibility is going to be so important, probably more important than the product or services offered by the company themselves.

So my view is that boards are really so critically important. Please respect that. 

Oliver Cummings: And last but not least, three things listeners should take away from this, if they take nothing else. First, 

Andrew Kakabadse: if you're going to go on a board, what value are you going to provide to boards? Make sure that your due diligence is excellent, and I'm not talking about talking to board members and c suite.

Go one level below, the management don't like [00:55:00] it. See how governance is delivered in the company, because you then have a second value question, which is, what value can I provide here? That could be a very different thing. To give you a view, I probably now reject Eight out of ten requests because out of due diligence.

I know I cannot provide value and three Have the humility to listen to especially comments about your contribution and your dynamics 

Oliver Cummings: It's vital. Love that. Andrew, you have the most amazing blend of the insights on the academic research and practical experience, and it's just been an absolute joy listening to you weaving those together.

Thank you so much for taking the time. I can imagine that your new course on board practice and directorship is going to be brilliant. But thank you so much for taking the time to share your insights with us today. Oliver, 

Andrew Kakabadse: it's been an absolute pleasure. I really enjoyed this conversation. Thank you for inviting me.[00:56:00] 

Oliver Cummings: And thanks to all of you listening. We've been blown away by the incredible feedback about how this podcast has been helping you get board roles and become better board members. This podcast is for you. So if you'd like to suggest guests, topics, difficult challenges, or you'd like to share stories about how the podcast has impacted you or have suggestions on how we can improve, please email podcast at new role.

com. That's podcast at new role. com. And let me know. I'd love to hear from you. Otherwise, thanks again for listening and look forward to having you back here for the next discussion.

🎙️ You can listen to the full podcast interview with Hamilton on Apple Podcasts and Spotify.