In Sweden, we experience a surge of public CEO-dismissals. Board and owner opinions are more and more often aired openly and the trend is also consistent when we look at politics. These are all signs of broken corporate governance systems. Also the low average return of the venture capital asset class stems partly from the same issue. Lacking clear direction from strong owners, clarity on strategy and long term objectives, an empowered CEO and sufficient level of financial control, corporates will eventually fail.
To fix this we need to put more emphasis on board selection and evaluation. Our experience is that there is a strong correlation between a malfunctioning board and companies failing in execution. In focus therefore is the Chairman of the Board who should make sure the board fulfills its central tasks of governing the corporate strategy, making sure the right leadership is in place and that sufficient level of control is exercised. In addition and most importantly, the CoB must demand from owners a clear owner directive and a full mandate to execute on the directive. All too often, we experience owners mixing owner issues with board issues and operational items. In this category, we also find CoBs who only run owner’s errands and CEOs who expect the board or the owners to do his job. Getting the roles & responsibilities in place and building a platform of trust takes a CoB with strong integrity and a focus on creating shareholder value as well as on empowering the organisation and the CEO.
In our effort to succeed as an investor, we are strengthening our board recruiting process. On our wish list is CoBs with high integrity. CoBs who foster a culture of being open, inspired, well-prepared and driven by value creation. We wish for board members who are curious, bring knowledge to the table, dare to air a differing opinion and are prepared to really dig in and understand the business. We will be less enthusiastic about ‘yea’-sayers and representatives who only protect a specific owner’s interest or are there for the sheer purpose of being on a board. Let’s build the next generation boards. Boards who work with dedication, insight and courage to challenge known truths and traditions.