By Bob Garratt
Effective Intelligence Associate
Developing Directors’ Thinking in Turbulent Times
Context
Globally directors are having to pause and rethink their role. Donald Trump’s reassertion American supremacy worldwide is having the unexpectedly beneficial effect of causing all Boards of Directors to reframe and reassert their organisation’s purpose and how they will use their scarce resources to achieve it.
A perversity of the human condition is that the public generally neither understands how, nor sees it as their duty, to hold to account those who direct their organisations. People may complain about directors, but usually feel powerless to influence them. At the same time, however, it is common that those who reach director level receive no training and development for the complex thinking necessary to deliver their role effectively. The common assumption that I have noticed, is this:
- directors have achieved the top of their managerial or professional career, so they must be able to assume the role and thinking necessary to give effective direction, that is to deliver the integrated governance of their organisation.
In my view this assumption is not proven.
Definitions
‘Governance’ is derived from the ancient Greek kubernetes. This describes both:
- the steersman of a ship (giving direction)
- and the feedback of the effectiveness of the prudent control of that direction (cybernetics).
I work with Companies in the Commonwealth of Nations*. Each Board of Directors in the Commonwealth is charged legally with ensuring that both steering and control happen simultaneously. Yet I have noticed that Governments are lax in ensuring that organisastions actually discharge their legal responsibilities.
In my view organisations, public and private, often have insufficient intellectual capacity or rigour to face the new and unprecedented upheavals in their external environments, or to accept that their current internal control systems are not capable of working effectively.
Can we think our way out of this mess?
The Legal Framework
I always get Board members to appreciate the long-established legal precedents across the 56 member countries of the Commonwealth. Directors are often amazed that such precedents have existed for hundreds of years and that they still form the legal framework within which they should operate and be publicly assessed. This Commonwealth framework applies to some thirty percent of the world’s population so it is worth taking seriously.
The USA operates on a different system from the Commonwealth, so I am making no comment on their approach to governance in this article.
What is this legal framework of which most directors and the public are unaware?
In its current operating form it is enshrined in the UK’s Companies Act of 2006**. The key one-and-a-half pages contain The Seven Duties of a Director and the Six Aspects of the Purpose of a Board. They are easy to remember yet few directors even know of them. I have listed the duties below.
The Seven Duties of a Director - section 171
1. To act within their powers - their constitution
2. To promote the success of their company
3. To exercise independent judgement
4. To exercise reasonable care, skill and judgement
5. To avoid conflicts of interest
6. Not to accept benefits from third parties
7. To declare interests in proposed transactions
The Six Aspects of Delivering Board Purpose - section 172
A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard to –
1. The likely consequences of any decision in the long term
2. The interests of the company’s employees
3. The need to foster the company’s business relationships with suppliers, customers and others
4. The impact of the company’s operations on the community and the environment
5. The desirability of the company maintaining a reputation for high standards of business conduct
6. The need to act fairly as between members of the company
Based on some forty years of observing Boards at work, one of my main discoveries is ‘futures’ aspect of most directoral thinking (for which I had assumed they were primarily paid) is too often subservient to the negative use of ‘critical’ thinking: that is, the immediate political points scoring and personal competition in executives and professionals appointed to the Board. These are destructive managerial traits and pervert the purpose of a Board.
When I introduce a Board members to the Colour-coded visual*** analysis of their thinking skills in Effective Intelligence, it has a remarkable effect in freeing them from their win/lose managerial mindsets****, thus allowing their positive, forward-looking thinking to flow.
When I introduce a Board members to the Colour-coded visual*** analysis of their thinking skills in Effective Intelligence, it has a remarkable effect in freeing them from their win/lose managerial mindsets****, thus allowing their positive, forward-looking thinking to flow.
* The Commonwealth comprises 56 countries, across all inhabited continents. 33 members are small states, including 25 small island developing states. In 2023, the Commonwealth had a population of 2.5 billion. The Commonwealth is the largest association of 'Third World' or 'Global South' countries.
The Commonwealth Charter
** Companies Act 2006 - section 171: Duty to act within powers and section 172: Duty to promote the success of the company
*** Effective Intelligence uses a Colour-coded visual display of the conceptual thinking tools of the mind that we all use.
**** Bob Garratt’s forthcoming book is - The Challenge For Next Generation Directors; Breaking The Social Silence On Corporate Governance Breakthrough Books 2025. It offers this straightforward axiom below for directors to develop their thinking:
Enterprise + Environmental Impact + Social Impact + Accountability = Effective Corporate Governance.
