climate change and director responsibilities

When the evidence for anthropogenic climate change is no longer in dispute, it is unthinkable that there are directors of publicly listed companies who admit to be climate change deniers.  There is no longer any scope for deniers to cling to their ideological positions, even if encouraged by sceptics in Government, certain political donors and their sympathisers. See an earlier post on conservative ideology and climate change.

Some recent work by a special counsel at Minter Ellison, Sarah Barker, has highlighted the fact that climate change deniers who are company directors are likely to breach their duty of care.

Sarah has two decades experience on advising governance, disclosure and fiduciary duty issues and was recently acknowledged by the United Nations PRI for her recent work on directors duties and climate change.

As Chairman of Regnan, Australia’s leading governance advisory and engagement body, I am particularly interested in Sarah’s paper and its implications for corporate Australia. The abstract, quoted with permission, reads as follows:

“The science relating to anthropogenic climate change is no longer in credible dispute. With its physical and economic impacts increasingly observed, the attention of legal commentators has begun to broaden from responsibility for emissions mitigation to liability for climate change induced harms.

 At the same time, Courts are demanding higher standards of proactivity and engagement from corporate boards in order to satisfy their statutory directors’ duties.

This paper combines, and extends, those two areas of scholarship by examining whether common corporate governance approaches to climate change may contravene directors’ primary duties under Chapter 2D of the Corporations Act.

 It concludes that, even where directors’ subjective bona fides are not in question, passivity, reactivity or inactivity on climate change governance is increasingly likely to contravene the duty of care and diligence under section 180(1) of the Corporations Act, and increasingly unlikely to satisfy the ‘business judgment rule’ defence under section 180(2). This includes governance strategies that emanate from climate change denial, a failure to consider its impacts due to ignorance or unreflective assumption, paralysis caused by the inherent uncertainty of its magnitude and timing, or a default to a base set by regulators or industry peers. In addition, even considered decisions to prevail with ‘business as usual’ are increasingly unlikely to satisfy the duty (or the business judgment rule defence) – particularly if they are the product of a conventional methodology that fails to recognise the unprecedented challenges presented by an erratically changing climate. In addition, whilst unorthodox, it is reasonably arguable that a failure to actively consider the impacts of climate change may also breach the duty to act in good faith in the best interests of the corporation under section 181.

 Accordingly, directors who do not proactively respond to the commercial risks and opportunities of climate change, now, may be held to account under the Corporations Act if corporate value becomes impaired into the future”

 Maybe activist investors will start to demand  board change and directors who are climate change deniers will eventually be forced to step aside. A better outcome would be for them to acknowledge  that their own views and the overwhelming scientific evidence are at odds, and to further reflect on that Sarah’s paper may have implications for them.

five impressive tourism premiers

In the post Sydney Olympics era I had the chance to work with, and observe, a series of State Premiers with varying degrees of interest in the tourism industry. While most of them understood the economic engine that tourism can be, there were five who stood out.

The late Jim Bacon personally took on the tourism portfolio as Premier and achieved new sea and air access under his guidance. It underpinned a boom in the State’s tourism growth. Unlike subsequent leaders who failed to see the myth of jobs growth from extractive industries, Jim fully understood the inexorable trend towards the service and knowledge economy.

Building on the Kennett legacy in Victoria of well integrated infrastructure and tourism, Steve Bracks and then John Brumby took the integrated events, tourism and infrastructure strategy to a new level. Both Premiers knew the industry and elevated it within their cabinets. For a decade, from 2001 to 2010, Melbourne “ate Sydney’s lunch”.  It also coincided with leadership in NSW that took a “do little” approach to attracting visitors. Little wonder that Cairns and Melbourne took market share from Sydney for inbound arrivals in this period.

Steve and John fostered Victoria’s key advantage – co-operation. Co-operation between public and private sector and within Government, where seamless events and tourism policy was elevated to an appropriate level – and where Departments worked together to fulfil a vision.

In Queensland, a State where tourism represents an even bigger slice of the economy, Peter Beattie also elevated its relative importance. Gaining aviation access, creating conference infrastructure, promoting Queensland internationally and domestically, the job was well done. Peter led the charge. I can still see him calling, and then steering, a meeting of industry leaders, when Ansett fell out of the sky in September 2001.

My final nominee is Barry O’Farrell. Barry had watched the neglect in NSW for years in opposition and was determined to make a difference. He had only really started the journey of integrated infrastructure, events and promotion when he resigned recently. I saw the manifestation of his beliefs at a Tourism and Transport Forum recently where he spoke to 100 industry leaders for 20 minutes without referring to a note.

He spoke with deep knowledge about key infrastructure developments in Sydney and the respect he had for the Victorian model. His conversational address acknowledged at least a dozen people in the room, reflecting an engaged Premier. Let’s hope the momentum continues under the leadership of Mike Baird.

I have no doubt that John Olsen (who was a key driver in G’Day LA), Mike Wran and Geoff Gallop were all effective tourism industry supporters, but for the five men I have acknowledged, it was a fundamental platform of their leadership and the prosperity of their States.

leadership on a t shirt

Often the best leaders achieve success through just being themselves, acting authentically and intuitively. Some of them are compelling individuals, possessing that special combination of strength and warmth, bringing people with them on a journey.

Many others struggle, having been thrust into leadership roles from functional areas with few reference points or training. Many of them lurch instinctively towards authority and control behaviours, which undermine their leadership effectiveness. Coaching, mentoring and training are therefore important in enabling successful leaders, but beware…..

….there’s a leadership advisory industry out there, offering advice to anyone prepared to put their hands up for the challenge. It’s hard for aspiring leaders to sift through this jungle and know what really counts. Organisations like 20I20 exchange, where it’s more about asking the right questions than providing the right answers, stand out in the crowded ocean of leadership development.

Through the school of hard knocks, much reading and many conversations on leadership over forty years, I have formed a view that there are six big enablers to effective leadership. They are to:

  • LISTEN and UNDERSTAND
  • INCLUDE and EMPOWER
  • Be COURAGEOUS and DISRUPTIVE
  • Foster VISION and POSSIBILITY
  • Be INDEPENDENT and FOCUSED
  • Act with INTEGRITY and lead with WISDOM

One of the authors and experts on leadership who I enjoy reading is Dan Rockwell, also known as “The Leadership Freak”. Dan runs a blog and tweets @leadershipfreak. His twitter sphere content is prolific and incisive, so I’ve gathered 25 of his best one-liners (leadership on a t shirt) in support of my six themes. They all add colour and richness to otherwise dry headings. Thanks Dan.

1. LISTEN and UNDERSTAND

 “Your worst problem is believing you know the problem when you don’t”

“No one listens until they feel as though you’ve listened to them”

“Moving people begins when you understand them not when they understand you”

“Understand others before challenging them”

2. INCLUDE and EMPOWER

 “Everyone who’s making a big difference in the world is doing it with others”

 “Reach higher by helping others reach higher”

“If leadership is about people, why are you focused on projects?”

 “The more responsibility you expect, the more freedom you should give”

 “Those who cling to authority lose it, those who give authority gain it”

3. FIND COURAGE and DISRUPT

“Leaders who are afraid to rock the boat, eventually sink the boat”

“If you’re satisfied with the world you aren’t a leader”

“Delay makes confrontation more difficult”

 “Meaningful leadership means identifying tough problems and solving them”

4. FOSTER POSSIBILITY and VISION

“Leaders don’t let the past control the future”

 “Great leaders fuel fires. Lousy leaders drown dreams”

“Get people talking about their dreams to inspire others”

“Those who wait for the future to change repeat the present”

5. BE INDEPENDENT and FOCUSED

“Those who are uncommitted find fault. Those who are committed find a way”

“The need to fit in motivates deception and creates mediocrity”

“Indecisive leaders who need to please everyone end up pleasing no one”

 “Weak leaders constantly point out what’s wrong with others”

6. Lead with INTEGRITY and WISDOM

“Leaders who sweep issues under the table will lead stagnant inefficient organisations”

 “The core quality of leaders with wisdom is they seek wisdom”

 “Self-protection and leadership cannot live together”

“Pretending everything is ok doesn’t instil confidence in those who know it isn’t”

What resonates with you?

asking powerful questions

asking powerful questions

Everything we know in the world has emerged through people’s curiosity. In a world where any answer seems to be a Google search away, we are losing the capacity to be curious and ask questions. In the realm of big analytics, where virtually any cause and effect can be identified, the biggest constraint is the ability to pose the right question. In life generally, and in the work place particularly, we seem to pay more attention to problem solving and analysis. We tend to have a short term focus – and the pace of life tends to stifle reflective conversations.

Going a step further, if we can lift from just asking questions to asking powerful questions, we invite curiosity and possibility, which can generate energy and forward momentum. To achieve this, the settings are as important as the questions. Vogt, Brown and Isaacs, in their important paper, “the art of powerful questions” make the observation that “authentic conversation is less likely to occur in a climate of fear, mistrust and hierarchical control”.

For many leaders, it can be a stretch to encourage diverse views, explore assumptions, suspend judgement and look for connections of ideas. If they can climb this mountain and be prepared to embrace the possibilities that may flow from the conversations, amazing transformation can take place.

Mark Strom, a colleague of mine in the 20I20 exchange leadership group, presented a brilliant TED talk on asking grounded questions. If you’re genuinely interested in this topic, I suggest you allocate 16 minutes of your life to watching the You Tube clip. Mark contends that while grounded questions generate stories and conversations from which change can occur and people can shine, many things work against this happening……such as preoccupation with spreadsheets, procedures and  strategy documents. Mark shares some powerful examples of the difference between abstract and grounded questions in his talk. He explains that a grounded question often comes from the side rather than front on.

Mark makes the point that logic works well on what cannot change, grounded questions work well on what can change. Questions like “what’s wrong?” and “how do we fix it?” tend to lead to focus on problems, whereas questions like, “why did you become a teacher?” take the shackles off, liberating people to generate stories that often lead to special insights.

Vogt and Strom both give guidance about how to ask grounded questions – there are certain rules about construction, scope and assumptions (such as the power of “why” above “which” and “who”), but both come back to the most important success factor – “stand back and look at the people who you are questioning and admire them”. Grounded and powerful questions are natural and not contrived. They come from empathy and a genuine desire to want to learn the answer. In a trusting environment, the art of powerful questioning can uncover, for people and organisations, a world of possibility and deep change.

Leaders with the courage and mindsets to undertake innovation at the enterprise level, are likely to also have the capacity to incorporate a culture of grounded questioning. These will be the leaders who give as much attention to developing powerful questions as they do to problem solving – and who steer strategy evolution that engages multiple voices and perspectives in networks of conversations. Such leaders are creating the conditions that will help to future proof their organisations.

innovation at the enterprise level

innovation at the enterprise level

An innovation is something original, new, and important that breaks into a market or society. Innovation is generally considered a process that brings together better outcomes from novel ideas to make an impact on. It is not invention, which is about the idea itself; nor is it improvement, which is doing the same thing better.

Innovation is essentially a learning process. Within organisations, it demands an understanding of why we do what we do, as a starting point to looking at things differently.

Why innovate?

Novel ideas from innovation have been the hallmark of the progress of mankind for centuries. Today, in a world characterised by a collapse in timeframes and rapid reconfigurations of business models, enterprises face a harsh ultimatum – innovate or die. The factors which cause business death are almost certainly not the ones that are being currently focused on, but they can be identified by a systematic innovation process.

Companies employing effective innovation practice drive six times more revenue from new products than companies which don’t. Apart from the differentiation benefits, competitive advantage and profits from new products, innovation reinforces brand, fosters continuous improvement and future proofs an enterprise. Innovative companies also typically attract and retain better people.

How to innovate?

Effective innovation requires leaders to create the right climate and for innovation processes to become embedded in every aspect of the organisation. It requires an innovation mindset within a culture that nurtures, guides and supports innovative thinking and practices. In fact innovation potential can only be sustained if the culture of the organisation allows it.

 While an innovation mindset fosters innovation throughout an enterprise, the best case studies of systematic innovation seem to involve fully involved and endorsed innovation teams from all levels of an organisation, incorporating inputs from customers, suppliers and external experts. Success comes from the ability to deal with the uncertainty of the future and not from an orientation through pre-established objectives or organised plans.

There are no silver bullets here, but success is most likely from a process which inspires vision, creates the right environment, stimulates ideas and then tests the ideas before implementation. Success is when we take those ideas from possibility to probability.

Handbrakes on innovation

Most of the constraints come from leaders who don’t understand innovation processes or who just pay lip service to it. Not only can leaders squash innovation but they can be overconfident in their ability to nurture it. Development Dimensions International measured, in 500 companies, how successful leaders fare at promoting innovation in four major areas: inspiring curiosity, challenging current perspectives, creating freedom and driving discipline;  and found a gap of 35% between leaders and employees perceptions of what was happening. So despite what managers think, many of their employees don’t believe that their leaders actually want to challenge the status quo or hear new ideas, less still champion these ideas to senior management. Sound familiar?

Nilofer Merchant compares many innovation efforts to an “air sandwich” – that is, the top tells the bottom what to do and all the stuff in the middle – the debates, trade-offs and necessary discussions – is missing. This air sandwich is the source of most strategic failure.  The change from a closed exclusive concept of who can participate, to an open and inclusive approach is essential for effective innovation.

Traditional methods of assessing financial viability are also one of the biggest barriers to innovation. It is only by having different KPIs that organizations can understand the different elements of risk and reward in innovation and how they relate to investment levels and financial viability. There needs to be a commitment to the long term view, which is mostly not the focus of standard metrics.

Further material

If you want to dig deeper, Scott Berkun suggests five great books on the subject. There is also a good EY report and a link to an overview of disruptive innovation below:

  • “Innovation and Entrepreneurship” by Peter Drucker
  • “Thinkertoys” by Michael Michalko
  • “Dear Theo” by Vincent van Gogh
  • “They all Laughed” by Ira Flatow
  • “Brain Rules” by John Medina
  • Innovating for Growth” EY report
  • The explainer on disruptive innovation HBR

                                                     “the power of imagination makes us infinite” John Muir

links to previous posts

August 13, 2012  |  main blog  |  No Comments

PLEASE ACCEPT MY APOLOGY FOR THE SITE BEING DOWN FOR SEVEN DAYS.

Everything is back in order and to restart, here are links to recent posts (excluding wine and travel posts)

the shared leadership imperative

the shared leadership imperative

Brian Cook, the Geelong Football Club CEO – who has steered three premierships at Geelong and two at West Coast – was interviewed recently on Fox Sports. He was asked what the pre-requisites are for a good coach. His response was compelling – “the two most important elements are leadership and cultural development – the ability to achieve the desired culture in the club and to lead the eight assistant coaches in a way where they operate as an effective team. The technical and tactical elements come second”.  I reflected that the most successful leaders in my experience have also focused on creating team culture and team decision making processes as their primary objective. The vision and strategies in these organisations were generally defined by, agreed to, and lived by the team.

The concept of shared rather than authoritarian leadership has been an espoused “preferred state” in most modern organisations, but has often been derailed by leaders who have problems giving up control. If only they could see the irony that the former CEO of Levi Strauss, Robert Haas articulated – “the more you share leadership and responsibility, the more you multiply your own effectiveness through the effectiveness of others…..you have to accept the fact that decisions and recommendations may be different from what you would do alone…..different but possibly better. You have to be willing to take your own ego out of it”.

Why change? Traditional leadership styles are a carry-over from the evolution of the industrial era which created centralised systems and hierarchies to support those times. Ingrained for centuries, they remained accepted as the norm. Today, they are increasingly coming under pressure to change to modes that will support the new imperatives in business and society.

Getting a sniff of the need to change, there’ve been many well intentioned attempts to introduce shared leadership, only to see them despatched to the “too hard basket”. We’ve seen as many failures as successes, because it takes commitment and then relentless determination to establish the mindsets, processes and rules to make it work.

 I was lucky enough to work with an organisation in the late 90’s where three years of hard work created a powerful team environment. Staff and managers stepped up to wear the hat of their assigned role, as well as that of leader, often “taking one for the team” and seeing the organisation as a whole. It was underpinned by agreed goals, mutual respect and strong adherence to the team norms (like not tolerating territoriality, passivity or mediocrity). People who couldn’t comply were rejected by the team – or volunteered to leave. There was less “wheel spinning” and everyone felt valued and recognised. It reminds me very much of the team culture at the Sydney Swans over recent years.

If today’s leaders (be they in community organisations, family businesses, sporting clubs or large corporations), can’t see this irony, there are some powerful forces at work that will apply the brakes to centralist, heroic and authoritarian leadership styles. The digital world demands that we share. A former boss said once, “information gives power”. Today, sharing information gives power. So does sharing leadership and responsibility.

 Social media is also helping to redefine leadership. As Michael Fauscette writes, “people have new levels of empowerment because of their on line voice, and expect experiences from organisations that mimic those in their personal life….power and communication are networked, not hierarchical and one way”. Organisation cultures must therefore change to meet these new requirements – or people will move to places where cultures have already been transformed.

In a shared leadership team, each person fulfils a clear role and all members strive for a common, agreed goal. A true team provides the right environment for the pursuit of quality, customer service, productivity or whatever is agreed, in a changing environment. Intact teams also provide strong social and emotional rewards, including self-esteem and a sense of being valued. There’s great satisfaction in being part of a high performing team where critique, learning and personal development flourish.

When a true team culture is established with its norms and behavioural expectations (often around respect, listening and personal obligations to the team), it’s hard for leaders (or anyone else) to violate the culture. It’s also a hard place to want to stay if you’re unaligned. As we move from the old industrialised world business cultures to those of the knowledge economy, some of the different imperatives can be summarised as follows:

 OLD – Hierarchical model   NEW – Social business model
  • Managing
  • Hoarding information
  • Leaders are served
  • Conformity is rewarded
  • One way communication
  • Openness discouraged
  • Top down strategy
  •  Coaching
  • Sharing information
  • Leaders serve
  • Everyone has voice and influence
  • Networked communication
  • Transparency flourishes
  • Particpatory strategy/viison work

I’d like to hear your personal experiences and thoughts. Does change depend on having a leader who believes in shared leadership, or can organisational culture be changed by the people? Do staff really want shared leadership or do some have fear of the commitment and step up needed?

Image by Omar Eduardo

pain or gain from structural change?

pain or gain from structural change?

Fanned by the hurricane that is the digital world, creeping globalisation and undeniable climate change, mature economies are undergoing huge structural change. Christopher Rollyson argues that the major driver of change is actually people placing greater value on consumer experience.  They demand better choice, access, convenience and quality at a time when consumer power has never been stronger.

The pace of change is certainly accelerating, as is the noise from many affected by job losses in industries like manufacturing, retail and traditional media. There are plenty of ostriches playing the blame game – “It’s the carbon tax!” (even before its introduction) or, “it’s Fair Work Australia” or “it’s the exchange rate”. Conditioned by a legacy of handouts and bailouts, the complaints are also generally accompanied by calls for the government “to do something”.

Fortunately, there are also business leaders who see the change towards a knowledge economy as an opportunity rather than a problem. Peter Roberts’ recent piece in The Australian Financial Review highlights how enlightened companies are finding the way to adapt and benefit. He cites companies like GE, which has identified $30 billion of near term opportunities in Australia in areas like LNG and wind power. We don’t all have the deep pockets of GE, but there are other impressive examples of adaption to a changing world, such as the gradual transition of LJ Hooker from property developer to sustainability manager. My own experience suggests organisations that embrace environmental and sustainability challenges, tend to drive costs down and foster innovation more rapidly than those that choose to treat them as an imposition.

The knowledge economy isn’t the exclusive domain of high tech and big companies. In reality, the biggest changes will come from the application of innovation and knowledge in the low to medium technology sectors, which form the bulk of the economy. These sectors include food processing, transport, the hospitality industry, and service industries in general. They provide the possibility for intelligent customer-focused business solutions that will attract consumers like magnets.

Julian Cribb has written a compelling opinion piece called Australia in 2050. He paints a picture of the biggest economic driver being knowledge (including technology and advice) and thebiggest export sector climate adaptation, where we use our own natural climate volatility experience as an intellectual springboard for creating new industries. Opportunities will span food production, water management, construction of homes and workplaces, urban design and tropical medicine.

What can governments do? The most relevant policy responses are likely to be around supporting financial pressures borne by innovative firms, and re-focusing the role of Australia’s knowledge infrastructure, particularly universities and scientific institutions. There will also need to be a much greater commitment to R&D, in the way that China has committed to spend an incredible 2.2% of GDP annually ($320 billion) on R&D in the latest five year plan. Such responses are required to diminish the debilitating brain drain from Australia to places like Silicon Valley. We need to see the level of debate about our rapidly changing economy, migrate from whingeing and blame, to insight and possibility.

image by jason hoover