The Hindu Business Line : Is your company over-managed and under-directed?

GOOD corporate governance is not simply complying with the Act and the Rules, but it is about the board's performance. Bob Garratt's Thin on Top is about why corporate governance matters and how to measure and improve board performance. He argues against the deification of CEOs and bets on the supremacy of the board. And as the blurb puts it, the majority of organisations are over-managed and under-directed. "Many of the current corporate disaster cases are caused by a toxic mixture of directorial ignorance, strategic incompetence, and personal cowardice." There is more:

In good times both the cream and the scum rise to the top. Very few people are willing to blow a warning whistle when everyone seems to be winning in a rising market. When the market turns and the cream curdles, however, the scum becomes only too obvious. What looked to the public like marvellously engineered marble palaces turn out to be two-dimensional lath and canvas film sets, loosely held together by `creative', EBITDA accounting. It is only after the downturn that most directors and senior executives begin to realise the difference between being clever and being wise.

In ancient Chinese and Irish Celtic societies the trader was rated so low as to be only one rung above the night-soil collector and common labourer. The doubtful reputation of business people as shifty, indolent, greedy, amoral, cold, and unfeeling has been reinforced frequently in literature.

Directors are never executives. The term `executive director' is a legal nonsense, as is `non-executive' or `independent director'. A director is a director. Directors should be paid and treated equally. Because this is not understood by most directors or owners and, therefore, rarely acted on, the corrosive processes of board under-performance usually start here. This is particularly true if the board is dominated by executives who also have a director functional job title, for example, finance director or marketing director, but who do not understand nor live out their proper directorial responsibilities.

The majority of boards still tend to be so profit-centric and share-price-centric that a set of frequently disconnected numbers has been used to create the illusion of business progress. The illusion is sustained by increasingly complex software that can capture and mine such data, often without the realisation that garbage in still gives garbage out, especially on the revenue-generation side. It is a rare and often unpopular director who persistently questions the source of value capture and the utilisation of assets in delivering value.

If many boards are lax in their information-codification processes, they are even weaker in ensuring the security of the information collected.

You can schedule the next board meeting with a single item on the agenda — to read the book.

N, B and C in WMD

NEW warfare is in the realm of NBC, which is not a TV channel, but nuclear, biological and chemical variety. What are these weapons? And how seriously should we take the threat of their use?

Robert Hutchinson answers these and more questions in Weapons of Mass Destruction, a no-nonsense guide to NBC, cutting through military jargon. Weapons are available today not just to `rogue states' but also to well-financed terrorists and criminals, frightens the back-cover of the book. There is more:

Delivery is everything. No matter how powerful or awesome is a weapon of mass destruction, it is totally worthless in deterrent value, or in strategic war-winning terms, unless it can be accurately brought to its target to fulfil its grim role of dealing out death and obliteration.

In a stunning intelligence coup, India apparently first learned of Pakistan's programmes by analysing the hair samples snatched from the floor of barber shops near the Pakistani nuclear research facility at Kahuta.

India's external intelligence agency, the Research and Analysis Wing, sent the samples to New Delhi's Bhabha Atomic Research Centre, which discovered clear indications from analysis of the hair, that Pakistan had developed the ability to enrich uranium to weapons-grade quality.

Even today, many nuclear facilities in Russia have no detector system or security cameras to warn of the theft of weapons-grade uranium and plutonium — or of the weapons themselves.

Around 70 per cent of security devices at weapons facilities were reported worn out in 1999 and 20 per cent had been working, un-serviced, for two or three years.

At other sites, in the recent past, alarm systems were non-operational because electricity supplies had been severed due to non-payment of bills.

Mustard gas is so called because of its smell. This oily, yellow-to-brown fluid is a vesicant or blistering agent, producing large painful burn-like blisters wherever and whenever it comes into contact with skin, even seeping through the thick cloth of uniforms.

It remained potent, mixed in concrete, even after 25-30 years. It remains harmful even after more than half a century on the seabed.

The US conducted trials to establish the mosquito as a method of disseminating yellow fever in the late 1950s with uninfected insects released by helicopter or aircraft above Savannah, Georgia and at the Avon Park bombing range in Florida.

In just 24 hours hundreds of people had been bitten, demonstrating their spread over a wide area.

The use of the insect as a purveyor of the weapon had been proven.

With all the sophistication, when NBC WMD hits, the probability of survival would be miserably low.

(Books courtesy: Landmark, Chennai. www. landmarkonthenet.com)

Tailpiece

"He kept on arguing that the rabbit he caught had only three legs."

"And you didn't tell him."

"No, because he was actually holding a cat."

hindubusinessline@hotmail.com

D. Murali

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Is your company over-managed and under-directed?