The Right Corporate Governance
The Right Corporate Governance
This book was written for practitioners, in particular those in charge of the overall governance of organizations, who are determined to carry out their task with diligence and to manage correctly and well. These can be practitioners in any function: members of administrative and supervisory boards or executive officers and their shareholders. It is intended, above all, for those who will not content themselves with fulfilling legal diligence duties, but who strive for entrepreneurial success, nothing less.
Current corporate governance practices are far from achieving that. In my view, virtually all business failures since the mid-1990s have been caused in one way or another by the kind of corporate governance that emerged at that time. Owing to the current corporate governance theory, wrong corporate management has been legitimized as 'best practice' and disseminated through negligent consulting practices, executive searches, governance ratings, as well as through Wall Street marketing, MBA programs, and a host of business media. I use the term 'negligent' because, contrary to widespread opinion, it is very well possible to define what right corporate management is. My understanding of it is laid out in this as well as my other books.
Successful companies are successful because in essential points - and without violating any rules - the way they are managed is altogether at odds to what today's corporate governance standards suggest. Therefore, a right and sustainable way of doing business requires radical reforms: the present corporate governance theory needs to be turned around by 180 degrees, specifically when the interests of real shareholders - not those of investor-type shareholders - are to be protected and high returns are to be achieved.
I would not venture such statements were I not able to base them on many years of personal experience as a member and chairman of several top management and governance bodies, where I have been able to see what right approaches and what wrong ones are, what is feasible and what is not. From an outsider's point of view, it is impossible to make a reasonable judgment of the professionalism and effectiveness of such panels; much less is it possible to form an accurate opinion based on the numbers in published accounts. External ratings are therefore presumptuous. But even supposedly scientific surveys, though they may be based on interviews with experienced individuals, do not permit an objective, fact-based judgment.
It is my contention that, in the absence of any personal experience, it is impossible to acquire a sound knowledge of how top management bodies and corporate governance function and that, consequently, it is just as impossible to judge them or make workable suggestions for improvement. The information required in order to do so - not to mention the necessary theoretical knowledge - can only be gained in many years of active participation in such bodies in a responsible function, preferably not only in good times but also in periods of crisis. I have repeatedly experienced such crises, and there have even been cases where the problems were beyond solution because earlier mistakes and failures had done too much damage.
It is only in situations like those that one will truly experience the reality of corporate governance, and that the true nature of those in charge, their skills, character traits and personalities will be revealed. This is where courage and cowardice, competence and failure come to light - and where it is made very clear what true leadership is, as opposed to the naïve and deluded theories that have become fashionable; for it takes a crisis to prove true leadership. It will become evident what works and what doesn't when there is maximum complexity, dynamics, and risk. In circumstances like these, people learn to appreciate the value of knowing the laws of science, which reliably help us to master