Will 2022 be another year of painful and costly governance scandals or are there bright spots? Scandals are certainly coming. So what are the bright spots?
For example, this one: ‘One-sidedness is no longer possible’. Organizations are becoming increasingly intertwined with society. Profit and employment are no longer enough to be a successful organization. The key word is ‘social responsibility’.
The triangle of shareholder – supervisory board – board of directors has become a quadrangle with society as the fourth corner. Organizations around the world will increasingly be held accountable for their social responsibility. Facebook, Tata Steel, Schiphol Airport.
We may be lagging behind a bit, but this will also irrevocably happen in the Dutch Caribbean. Organizations will have to give up profit in order to fulfill their social responsibility. That is something else than supporting good causes. Donations and social services have been part of the social face of companies for many years. That’s fine, but the reward follows in heaven.
Now there is a tilt going on. Taking social responsibility is becoming a condition for the very existence of organizations. As a result, social stakeholder management has become part of rock-solid risk management. If you don’t do it, then as an organization and as a director you run a good chance of being judged for it in a heavy-handed way.
Where are the supervisory directors in this new ballgame? For supervisory directors, too, there is no more one-sidedness. They are not there for the shareholder. They are not there for the politicians. Nor are they there exclusively for the interests of the organization. They have explicitly also become the face and mirror of the social responsibility of the company. In this respect, they fulfil the role of gatekeeper and executioner simultaneously vis-à-vis the management. They must open their mouths during the board meeting and question the board critically and constructively about social attitude and strategy. This is different from checking whether the budget is being exceeded or not and whether the policy plan has been delivered on time.
This requires a new mindset for many supervisory directors. Dutch researcher Marilieke Engbers recently adapted her dissertation (defended in 2020 at the VU in Amsterdam) into a trade edition (“Among supervisory directors, how the unsaid in the boardroom influences decision-making”).
Engbers examined the “soft” side of deliberation within a supervisory board. Her inspiration was a sense of wonder that we here in the Dutch Caribbean also feel several times a year when another once wonderful company has gone to the wall under the eyes of the supervisory directors. What are these people doing? Are they sleeping?
It is very simple, as consistent scientific research shows. Most commissioners try very hard but they are only human. Being a commissioner is just really hard. It is actually impossible to ask much of them. According to Engbers, the ambiguous governance rules, among other things, ensure that the tens of thousands of supervisory directors in the Netherlands are often so busy maintaining good relations and complying with procedures and rules that they hardly have time for critical reflection on strategic and social challenges.
That has to change. How? According to Engbers, supervisory directors must be more aware that decision-making is not only (often: especially) rational. Dilemmas, emotions, and latent underlying conflicts must be made more explicit. It is important to create an “agree to disagree” culture. Try to understand team dynamics and make them negotiable. Dissenters on the council are necessary for good decision-making. Express your doubts, even if they are based on gut feelings and not on (often seemingly) rational arguments.
Guarding the human dimension in the boardroom is a condition for a successful board and thus for a prosperous 2022 as far as corporate governance is concerned!