Asian boards renew focus on collective leadership and accountability.
A recent study has considered the evolution of board leadership in Asia. ‘BOLD 3.0: Future Fluent Board Leadership in Asia’ – led by the Center for Creative Leadership (CCL) in partnership with the Sri Lanka Institute of Directors (SLID), Confederation of Indian Industry (CII), Institute of Corporate Directors Malaysia (ICDM), Institute of Corporate Directors (IDC) Philippines, Singapore Institute of Directors (SID) and Vietnam Institute of Directors (VIOD) – is based on 350 survey responses and in-depth interviews with over 100 directors across Asia.
We spoke to Sunil Puri, the Center for Creative Leadership’s Head of Research (Asia Pacific), who pointed to the following key takeaways from the study:
- Asian organisations are trying to strike a balance between stronger governance processes and tools and the ‘human’ element of governance. Most countries in Asia have witnessed corporate governance breakdowns over the past decade. In response, governments have led efforts to strengthen regulations and governance codes. However, even that has not prevented corporate governance issues from arising, leading to a realisation that organisations need to take a closer look at boardroom leadership. The evolution of board leadership in Asia happened in three distinct phases. Phase one, when leadership was mainly exercised by the promoter, family, or close group of shareholders. Phase two, when governance codes were tightened, and there was a push for independent directors. And, phase three, what we are now seeing is a focus on collective leadership on Asian boards (joint accountability to lead the organisation).
Several ingredients need to come together for collective board leadership to happen. Effective leadership on Asian boards is akin to building a ‘leadership house’ with three distinct elements. The foundation constitutes the context in which boards operate – corporate governance processes, ownership structure, country jurisdiction, and national culture. The strong foundation must be supported by resilient pillars—individual drive and motivation of board leaders; functional, technical, and leadership expertise; clarity of roles; and board composition. Finally, board culture (akin to a ‘roof’ in the house), which may be defined as ‘the way things are done at the board level’ is often the difference between having individual brilliance on boards and a ‘brilliant board’.
Effective boards are different: Boards must play supervisory and stewardship roles, which translate into fiduciary, strategic, and ‘new frontier’ responsibilities. There are four behaviors that outstanding board directors in Asia display: (i) asking questions; (ii) speaking their mind; (iii) displaying mature judgment in evaluating decisions; and (iv) developing trusting relationships. The top five skills board leaders in Asia must have for sustained impact include (i) trust and credibility; (ii) sound judgment; (iii) strategic intent; (iv) having a long-term view; and (v) the ability to do strategic planning.
Asian board leaders must focus on individual and strategic skills. Capabilities on Asian boards have traditionally centered around functional and technical skills—understanding the governing law of the land, regulations, governance codes, financial savviness etc. Most boards are quite content with these capabilities. They rarely look at nurturing, leveraging, or developing individual and collective leadership skills and capabilities. As Asian board leaders prepare to take their organisations forward, they will need to further develop their individual leadership and strategic skills.
Culture differentiates average and brilliant boards. Boards in Asia must develop the ‘right’ board culture, comprising five key elements. Board dynamics must display a culture of ‘4Cs’: collaboration, candor, challenge and commitment. In addition, the level of trust among board directors, between board and management, and between the board and CEO is often a critical element of board culture.
Making collective leadership happen is a multi-step journey. Organisations in Asia and their boards must undertake a multi-step journey towards collective leadership. They must start by evaluating the existing governance framework. Boards must reflect on the individual and collective intent of board members (asking questions such as: What drives individual board members and the collective board? How to measure the performance of individuals and the collective board?), and the skills and capabilities relevant now and in the future. Finally, boards and shareholders must align to create the right board culture, that of collaboration, candor, challenge, and commitment, all deep-rooted in trust.
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