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Article published in Les Affaires.
Was BlackBerry the victim of poor governance? Perhaps. In 2007, a share in the Canadian telecommunications darling was worth over $200 on NASDAQ. Everyone had a BlackBerry phone. The business seemed destined for greatness. That was before Apple launched its iPhone.
BlackBerry failed to foresee nor adapt in time to Apple's arrival on the smartphone market. In a panic, the company brought in a new CEO, Thorsten Heins, in 2012 to “save” the company from disaster. He raised some eyebrows, however, when shortly after his appointment, he announced that no “seismic” changes would be made to reposition BlackBerry. He bet everything on the new z10 model –a mistake– and caused the company's shares to drop another 60% during his short 22-month reign.
So, throughout this period, “what was the Board doing?”, asks Walter Moschella, Partner, Enterprise Risk, at MNP. “Essentially, there were probably some things in BlackBerry's culture that made the Board feel inadequately equipped to ask questions or warn management. They allowed the CEO to go down a risky road, without putting adequate controls in place.”
For A Board Taking Its Place
Could the worst have been avoided had there been an integrated governance culture at the top of BlackBerry? Perhaps.
The term “integrated governance” refers to a business model that has been long-established but not always applied within Boards of Directors.
“In some Boards”, explains Walter Moschella, “the people around the table feel more comfortable asking questions about the past. Why have sales declined? Why did management take that action? As a result a lot of importance is attached to the past and not enough to the future.”
“The Board often finds itself in a position of being asked to approve strategies developed by management”, continues Lucie Chouinard, Senior Manager, Consulting Services, with MNP. “As a result Board members sometimes have the impression that everything has been decided, and that they haven’t been involved enough in the strategic planning process to verify the validity and consistency of the approach.”
To give the Board its rightful place, therefore, the integrated governance model focuses on three elements that are treated as a whole, namely:
1. The Strategy
Board members should actively participate in the strategic plan. The Board should improve upon and validate the directions and actions to be implemented. “The strategy should not be on the Board's agenda just once a year", says Lucie Chouinard. “Best practices call for an annual strategic plan and regular follow-up on the progress in implementing it.”
2. The Risks
The Board of Directors should be discussing these in order to ensure that the strategy selected is consistent with the company's risk tolerance. “If, for example, the company were deciding to enter the American market, there would be major risks associated with the exchange rate or local competition,” says Walter Moschella. “Is the company ready to take on that risk?”
3. The Controls
Finally, when it comes time to execute the strategy, the Board should address the various control elements to be put in place in order to ensure a tolerable level of risk, and thereby enable a prompt response should the strategy fail to produce the desired results.
Given that in 2015 businesses are becoming more complex and markets are evolving at increasingly faster rates, a company can no longer settle for a Board that does not monitor the strategy, risks and controls in a “holistic” manner. “A Board of Directors”, says Walter Moschella, “is like a parent with a child. It must give advice that will help it determine what action to take, the obstacles it may face, and the best means to deal with them.”
No better way than that to sum up integrated governance!
Categories:Enterprise Risk Services
Related Topics:Corporate Governance; Board
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