Governance Cliches #1

Max Kraynov

If you’re on Clubhouse, my # is @maxkraynov . Feel free to add me. I do want to have a Q&A session with you, my best buddies, at some point. Please advise in the comments if this should be in Russian or English.

MK: I love reading, but sometimes authors (hopefully for the sake of brevity and not intellectual shortcuts) are making statements that are dubious, questionable or misleading. I hod a firm opinion that all observations leading to recommendations must be as precise as possible listing the limitations in a way that a reader will understand. Again, I’m looking for the most suitable format to express my thoughts, and a gentle criticism of banalities seems to be my strong side. One can argue that I’m guilty of the straw man argumentation technique. Please voice it out in the comments, but I believe the statements I’m going to destroy are quite ubiquitous.

Let’s start.

During the COVID crisis people will look to leaders for answers.

It’s a wonderful and completely useless statement. There’s nothing wrong with it on the surface, but too many bones to pick when you dissect it. Let’s try to get a peek into what may be wrong with this single-sentence revelation:

  • Who are the “people”? Internal stakeholders (employees)? Financial stakeholders (investors, lenders, employees not sure their stock options are not underwater all of a sudden)? Value chain stakeholders (suppliers)? End-product stakeholders (customers)? Hysterical stakeholders (media)? Governing stakeholders (the Board)? GR stakeholders (government, regulators)? Competing stakeholders (looking to acquire a cheap asset)?

  • Who are the “leaders”? The C-suite? The Board? Immediate managers (for staff)? Government leaders (for the unfortunate or GR employees)?

  • What “answers” are expected? Believable or ambitious? Action plans or future projections? Revenue guidance (investors) or layoffs roulette rules (employees)?

I can go on and on. Things being said for the sake of pointing attention to the obvious things must never be framed as an outcome of situational analysis.

In this COVID crisis for Boards stepping in may be uncomfortable but stepping out is not an option.

This is such a powerful statement! I can’t think of anyone in their sane mind to argue with this cliché. But let’s dissect it, shan’t we?

  • What is the problem being solved? Is it that the Board is trying to put off the bushfire? Or maybe Board members shall manually process client refunds for the services not delivered? Or maybe the Board want to handhold the Cx people?

  • Of course, we all get what this means: the Board is talking to the CEO and the Cx suite to change the course and actually focus on the company’s financial sustainability (believe it or not I’ve seen people who wanted to put it into the E letter in ESG). This has a few assumptions behind it: a) the Cx people are idiots living in an ivory tower with no windows or internet access; b) the same Cx people are so obsessed with their LTIP (long-term incentive plan) that they choose to ignore the reality for the sake of attempting to hit their targets; c) the Board has more experience in similar crises making it more important than the agility of the Cx team.

  • Let’s also not forget that the Board is bound by an uncomfortable thing commonly called the “fiduciary duty”; this pretty much absolves (encourages?) anyone shooting in the back of the retreating/fleeing Director of any possible sins.

Indeed, I’m quite critical of the Boards that don’t seem to add value, and this is fine because most don’t. I apologize in advance to those doing their best and actually having productive relationships with the management outside the “challenging the greedy management” paradigm.

Should I continue?