Some dos and don’ts of governance

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By Denzil Doyle

In my last article I wrote about the role that a board of directors can play in the success or failure of a company and how to go about recruiting one. In this article, I will give an example of a board model that shareholders could feel good about and one that had danger signals written all over it right from the beginning.

A rough ride for RIM

I will start with the one with the danger signals. About four years ago, when Research in Motion was flying high, I attended a talk by a seasoned CEO who was very critical of many aspects of corporate governance at RIM, but particularly about the existence of two CEOs. It was the strong consensus of the meeting (which took the form of a panel discussion) that a dual-CEO system does not work and that the RIM board was negligent in allowing it to happen there.

Many articles have been written on the subject, but most of them end in a comment about the jury being out. It doesn’t seem like the corporate world is going to wildly embrace the concept any time soon. It has been tried more in Europe than in North America, but it has not met with great success. Incidentally, one attendee interrupted the talk with the following comment: “There is only one CEO (at RIM); the other one is busy trying to get a hockey team into southern Ontario.” The RIM board got a rough ride in that meeting.

The rough ride didn’t stop with the hockey business. It was at about that time that one of RIM’s directors, Roger L. Martin, Dean of the Rotman School of Management, was putting forward the argument that directors play a role in the corporate world similar to the role judges play in the legal world and that business people should be prepared to devote some of their time to serving on boards just as lawyers should be prepared to serve as judges from time to time.

It was a concept that required some experimentation and the general consensus of that particular audience was that RIM should stick with proven governance techniques since it already had enough on its plate in the form of product experimentation. The concept is certainly very different from what I put forward in my last article: “it is not unreasonable for board members to look upon themselves as a committee of shareholders who have been asked by all the shareholders to run the company and to do so, they are expected to recruit a management team that will carry out the various management functions.”

It would appear that the RIM board was prepared to do a lot of experimentation (dual CEOs, dual chairs, hockey promotion, the role of the chair as a judge, etc.) and as we all know, this takes time and effort. If the company had time to spare, that time would have been better spent on such things as product migration strategy, mentorship to senior management and key account management.

Clear signals at IDC

As for companies that seem to have put a lot of thought into the constitution and functionality of their boards, International Datacasting Corporation stands out. (I declare my interest as a shareholder and a former chair.) It has experienced a great deal of turbulence in recent years, but it has emerged with a strong CEO (one only) and a board made up of seasoned executives who are deeply involved in the planning, budgeting, and forecasting functions as described in my last article.

While the IDC board is careful not to get into the kitchen, it is expected to have a good understanding of the company’s technology, products and markets. All major projects that fall outside the scope of the company’s annually updated strategic plan must be documented in business plans that are subject to board approval. The result is a planning and forecasting culture that encourages innovation at all levels of the company, which has made IDC a fun place to work again. And that is probably the most important role that any board can play.

Image: learningpool

Denzil Doyle’s involvement in Ottawa’s high technology industry goes back to the early 1960s when he established a sales office for Digital Equipment Corporation, a Boston-based firm that had just developed the world’s first minicomputer. The Canadian operation quickly evolved into a multi-faceted subsidiary. When he left the company in 1981, Canadian sales exceeded $160 million and its employment exceeded 1,500. In his next career, Doyle built a consulting and investment company, Doyletech Corporation, that not only helped emerging companies, but built companies of its own. In recognition of his contributions to Canada’s high technology industry, he was awarded an honourary Doctorate of Engineering by Carleton University in 1981 and a membership in the Order of Canada in 1995.

 

/// COMMENTS

One Comment »
  • Ben | First Flight

    January 19, 2015 9:35 am

    I must say that you make a convincing case for IDC and the benefits of their corporate structure. The question is really how they managed to end up in this envious situation? And how can other companies emulate these processes for a more robust future?

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