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In one of the many tapings I did about five years ago, one stuck out. It was a director who sits on several boards and made statements along the lines of – we figure out what is legal — and then we know the sphere of action — everything else is fair game.

I was shocked — but was so much so that I was speechless -  and didn’t  respond verbally as such on camera.

What caused this to come to mind was a group email I received with a similar theme this weekend — morality is defined by legality. It read “What ought to be is compliance with the law.”

Of course, if you have considered this idea before you recognize that requiring legality to define morality requires many laws. Ever since that incident about five years ago, I have wondered: is that what directors really want – enough laws and their sufficient enforcement to ensure that directors know what the moral lines are?

What happened to the idea of moral principles which go beyond the law? And law that was circumscribed to the fewest number possible that allow for a civil society and the preservation of rights?

I think we have entered a difficult passage if we are to accept that the law can proscribe all that is right and wrong. I think that we have lost our bearings if this is what we believe.

I like the idea of the fewest laws necessary — but if we insist that the law define our morality — we will need many more indeed.

The Value Alliance and Corporate Governance Alliance www.thevaluealliance.com

Eleanor Bloxham www.eleanorbloxham.com

Copyright 2010 The Value Alliance Company. All rights reserved.

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I remember I gave the opening talk/keynote at a conference in 2004 in which I discussed the important role of the board with respect to corporate culture.

Here David Nadler and I very much disagreed — as on a later panel at the conference he said that corporate culture while critical was not the board’s responsiibility.  He also said that the largest influence on the culture is company leadership. http://www.allbusiness.com/corporate-governance/222157-1.html

But who is responsbile for the largest influence on culture i.e.company leadership? 

Who hires and fires the CEO? The board is responsible, of course.

Who decides if the CEO has done a good job with respect to the culture of the firm and in the choice of the top management team? The board.

How much can boards really do about this influence and thus culture? I think they can actually do a lot.

It’s very easy for boards to turn aside and hope for the best in the face of a CEO turning in results shareholders admire or seemingly turning around a company’s fortunes. In the HP case, the subsequent commentary by HP staffers about the culture is worthy of note.http://blogs.wsj.com/digits/2010/08/06/live-blogging-h-ps-announcement-to-investors/tab/comments/

Can boards be proactive in understanding the culture of the organization and the way in which the CEO views and uses his/her power?  I think a board can do a lot by evaluating the CEO’s context, interactions with staff, etc.

It isn’t that difficult to pick up on issues if you are socially aware. Addressing those issues is what is much more difficult.

CEOs need the board to oversee – and boards need to to ensure the power of the position is not corrupting  the individual in it. They need to also ensure that their own actions do not make it more difficult for the CEO to create a culture that mirrors the values of the firm, as many unwittingly do when they set short-sighted objectives and focus on the short term.

Boards need to provide independent, objective counsel and help the CEO stay grounded and able to make wise choices. Failure to address personality and cultual issues in the executive ranks create huge risks for the entire firm.

Who else but the board can address this?

This is another reason boards must control the agenda. Some of these are issues the CEO is likely not to put on the board agenda. But the board must in strategy sessions, executive session with and without the CEO and in performance review updates with the CEO ensure these issues are addressed.

To do this well requires directors with insight, dipomacy, tact and courage. Sometimes directors have the first three but the fourth is lacking.

Holding executive sessions at every board meeting that are more than perfunctory and cover these topics including ”what could our CEO use coaching on?” and “what is the culture of the organization and how is it evolving?”  and “have we provided the right goal and performance structure including the importance of how?” provide ways for the board to handle these issues early on.

Shared values such as HP espouses at its company including “We work together to create a culture of inclusion built on trust, respect and dignity for all” “each person’s contribution is key to our success” and “We effectively collaborate” if they are to be written must be lived.

It’s the board’s job to determine if these are the right values.

If they are, they must ensure the CEO’s actions reflect them. They do that through oversight of the human resource practices of the firm (including compensation) and oversight of the manner in which the CEO and his/her team go about reaching their goals and objectives.

If it’s not the board’s responsiblity that sees to the CEO’s behavior — and by extension to his management of the culture — whose job would that be?

Footnote: Fortune invitied me to write about HP. You can read the article here. http://money.cnn.com/2010/08/10/technology/HP_post_Hurd_board.fortune/index.htm

The Value Alliance and Corporate Governance Alliance www.thevaluealliance.com

Eleanor Bloxham www.eleanorbloxham.com

Copyright 2010 The Value Alliance Company. All rights reserved.