In many ways, the saga of the resignation of the Hockey Canada Board of Directors represents a textbook case of what not to do when it comes to governance.
Posted at 9:00 a.m.
Added to the deficient internal governance rules noted in Judge Cromwell’s report, three ingredients have blended into the recipe for this disaster.
First, the resistance of the Hockey Canada Board of Directors to fire its CEO was heavily criticized, as if the Board felt powerless and unwilling to exercise its oversight function.
Second, despite the diversity and expertise of the directors, the board appeared completely disconnected from its external environment, unable to understand the expectations of its stakeholders and to measure the risk of inaction.
Third, the defensive tone adopted during the parliamentary hearings and the collective resignation of directors gave the impression that strong groupthink was at work, fueled by a blind faith in the morality of the board and management, thus preventing the situation from being considered realistically.
Although this is an extreme case of poor governance, the ingredients of this explosive mix are not uncommon on corporate boards.
First, the reluctance of directors to exercise their control function over management is a much more widespread phenomenon than one might imagine. Because they consider their term of office as a “service” rendered, directors generally focus their energy on creating value and condition their term of office on the existence and maintenance of a positive relational atmosphere.
Indeed, serving on a board of directors to play the role of policeman or wasting time fighting opponents is not very attractive. This concern was particularly evident in the letter of resignation from Hockey Canada’s interim board chair, Andrea Skinner, who indicated that she no longer considered it “reasonable to continue to volunteer her time” for the organization.
Seemingly understandable, this service logic is actually problematic. On the one hand, it is done to the detriment of the directors’ control function, whose primary objective is to assess the performance of management and the existence of opportunistic behavior. On the other hand, sitting on the board of directors, even voluntarily, is never totally disinterested. Being a director comes with significant rewards in terms of social status and activities, professional recognition, career development and, in some cases, gifts.
Second, boards rightly take for granted that director expertise is a key factor in their success and effectiveness. From this perspective, however, Hockey Canada’s governance failure is difficult to explain. The profile of the resigning directors does not show a substantial lack of expertise. On the contrary, on paper, the amount of expertise assembled around the board table seemed quite sufficient.
Thus, Hockey Canada’s dysfunction is a reminder that expertise is as much about possession as it is about application.
The search for experts “with” the right knowledge should therefore not be considered, as is too often the case, mainly as a process of validation of professional titles and past experience, but also as an in-depth assessment of the how ‘experts’ define their role and envision the application of their specialist knowledge.
Third, the sense that the Hockey Canada Board of Directors was operating in an alternate reality, completely disconnected from the outside world, is far from a unique phenomenon in our studies of governance. This disconnect is generally facilitated by a lack of reflexivity and justification in the thought processes of administrators.
For example, compensation policies are very often dictated by powerful market rhetoric that senior executive pay is essentially a comparables issue. According to this logic, the morality of compensation is objectively determined by the talent market. Thus, by being convinced to act well, the board of directors locks itself in its own certainties, and the indignation of the public vis-a-vis extravagant remunerations becomes inaudible.
In sum, the perfect storm that destroyed Hockey Canada is a lesson in humility for boards of directors across the country, regardless of the size and form of the organizations involved.
The desire to serve without controlling, the misuse of expertise or the overestimation of the morality of the group of administrators are constant threats to good governance.