Governance, Schmovernance

 

“Those who know that the consensus of many centuries has sanctioned the conception that the earth remains at rest in the middle of the heavens as its center, would, I reflected, regard it as an insane pronouncement if I made the opposite assertion that the earth moves.”

                                                --Nicolaus Copernicus

I was thrilled when Cameron posted that April’s theme was governance, because I just love railing against the conventional wisdom on this topic. I’m channeling my inner curmudgeon, and he’s had three Red Bulls in the past hour.

First off, I would like to remind my readers of one of my March blogs, Here's a Communication Strategy -- Don't Communicate Your Strategy! In it, I took on the notion that anyone who has even the most tenuous claim to being a “stakeholder” ought to have access to any and all organizational information involving strategy or tactics. Under the eat-your-peas-style axiom that management must “engage stakeholders,” a plethora of dopey business decisions are made based on adherence to this cliché, making the owning organization weaker, not stronger.

Consider what the push towards better corporate “governance” has brought us, at least in the United States: Sarbanes-Oxley, that mish-mash of corporate “guidance” brought to you by the same type of people who are going to “improve” the medical industry via Obamacare. How a given organization’s management interacts with its shareholders (or, by extension, how its board interacts with “stakeholders”) is their business, and no one else’s. I would bet real money that, if successful managers and board members were to be shot full of Sodium Pentothal, and placed in front of stakeholders (and bloggers who insist the latter must be engaged more often and more fully, don’t you know), they may very well blurt out (in unison), “we would realize a lot more success if you guys would just shut up and let us run the organization.”

“But what about Enron?” the pro-governance crowd would insist. Well, what about it? I’m fully aware that that failed organization is the poster-child for the perception that some sort of authority is needed to ensure shareholders’ (yeah, stakeholders’ too) goals are not being subverted by rogue management teams. But, prior to Enron’s spectacular crash-and-burn, what were they doing? As I discuss in my recently-released, must-have book, Game Theory in Management, they were making money hand over fist off of California’s poorly-conceived energy regulatory environment.  I must ask the pro-governance crowd: at what point should Enron’s management stopped the profit meter from spinning at its dizzying pace to “engage stakeholders,” and get their opinions on what they were doing? Immediately prior to the illegal stuff? Well, for one, Enron was not found guilty of anything illegal during the California Energy Crisis run. Two, the point that management veered into error is easy enough to see in hindsight, but a bit trickier in real-time. The latitude of management to make timely decisions based on the market conditions in front of them is severely curtailed by the need for stakeholder consensus, and this curtailment can be detrimental, or even fatal to the organization.

Also consider that much of what passes for proper corporate governance is predicated on the establishment and observation of some sort of consensus derived from all those under-informed stakeholders. It is simply inescapable that many of the organization’s stakeholders are purely passive – they may be shareholders who wouldn’t recognize their own retirement portfolios if they were placed in front of them, yet hold shares in the organization. Should their opinions be culled, and integrated into corporate strategy? They’re stakeholders, in the truest sense, aren’t they? Taken to its logical conclusion, doesn’t the conventional wisdom on proper corporate governance demand that these people’s opinions – ignorant as they are – weigh significantly in the process of developing the organizations’ strategies?

Yeah, I know I’m the minority opinion here; but, like Copernicus, that doesn’t mean I’m wrong.