Feb 22, 2024 Nurole logo
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Decision-making: how boards make good decisions (and avoid bad ones), with Dr Shefaly Yogendra (Chair, NED and Advisor)

🎙️ You can listen to the full podcast interview with Shefaly on Apple Podcasts and Spotify.

Boards exist to make decisions. But how often does your board make the best ones? Shefaly Yogendra is a Chair, NED and Advisor with a PhD in decision-making. In her her conversation with Nurole CEO Oliver Cummings she answers the following questions: 

  • What framework do you use to promote good decision making on your boards?
  • What tactics do you use to make boards feel comfortable with discomfort?
  • Where has emotion enhanced decision-making on your boards?
  • How can board members uncover biases that impact decision-making?
  • How good are boards at retrospecting past decisions to inform future ones?
  • How do you manage conflicts of interest when it comes to decision-making?
  • What impact do term limits, director investments and compensation have on decision-making?
  • ⚡ The Lightning Round ⚡

Oliver Cummings: Hello and welcome to another episode of Enter the Boardroom with Nurole, the business podcast that brings the boardroom to you. I'm your host, Oliver Cummings, CEO of Nurole, the board search specialist and market leader bringing science to the art of board hiring.

Today's guest, Dr. Shefaly Yogendra, is a non-executive director at J.P. Morgan U.S. Smaller Companies Investment Trust, Temple Bar Investment Trust, Harmony Energy Income Trust, and Witan Investment Trust. A specialist in governance, growth, risk, and decision-making with a focus on technology, branding, and talent. Shefaly was also, until recently, an independent governor of London Metropolitan University and a former trustee of Beyond Me. Shefaly, a huge welcome. And thank you so much for joining us today.

Shefaly Yogendra: Thank you for having me on.

Oliver Cummings: Shefaly, you've taken on an amazing breadth of responsibilities on boards, chairing ESG nominations, remuneration, and audit and risk committees. But one of the experiences that really jumped out to me from my research on you was your PhD in decision-making from the Judge Business School at Cambridge.

I'd like to dive into some elements that I think feed into good decision-making, and one of those things is the decision-making process. I've found, as an organization, our decision-making process has improved over time as I think we've become better at being more structured with how we approach decisions.

So we spend a lot more time now understanding the problem. Then having understood the problem, being very clear about gathering what information is relevant to that problem, then having a very distinct phase where we lay out what the options are. We don't jump on any decisions, but are very clear that we're just trying to get as many different options out on the table as possible. And it's more of a sort of creative process.

And then only then at the very end, you then start having a very clear session. Once you've got everything out there, everyone's had the opportunity to feed in, of really trying to narrow it down which is the best of those options. And surrounding that, we also probably become a lot more conscious about things like the time of day we're making decisions, because I think there's quite a lot of research around that. I know if you're ever being judged in a competition or trying to raise investment, your chances of success are much higher at certain points in the day and typically earlier and not just before mealtimes for certain.

But what's the process that you favor in the boardroom? If you go onto a board and you look at the decision-making process being used, are there some where you go, gosh, this is not very good. And this is how we need to improve it. Or actually this is a really good process for this, this, and this reason?

Shefaly Yogendra: I think that's one important consideration in there, which you mentioned about time of day. So I'll quickly touch on that and go back to your bigger question. We'll sort of take into account decision fatigue. We do get tired of making decisions, and then we default to a lot of things that would come naturally to us.

There is also the idea of having too much choice. You could generate too many options, and people will then kind of gravitate towards the default. It's a bit like going into a coffee shop with 50,000 combinations possible and we always get the particular favorite that we get. Anyway, we don't experiment very much.

Oliver Cummings: The paradox of choice.

Shefaly Yogendra: So that's really important to remember because we could falsely tell ourselves that we have all these choices when in reality we are going to gravitate to the comfort zone that we are used to operating in. That being said, in answering your question, I would draw upon the committee chairing at the moment.

I have been interim chair in the university, and I'm very open to those conversations at the moment from chairs or CEOs who would like to be challenged by somebody who has both abstract and practical lenses on this. And I also serve as a board mentor to CEOs and to board directors. So I'll draw upon some of those stories as we go. I should also say, whatever I'm saying is not to be seen as contrary to my own boardrooms right now, because I see a lot more by way of my advisory work and not just on my boards.

So I would say functioning boardrooms or good functioning committees, first and foremost, have to have a culture of psychological safety so that people feel comfortable talking about issues. And almost a corollary from there is to have a culture of having comfort with discomfort. It just means that people know that anybody who's asking a question is asking so that we could all do our jobs better and make a decision that's better in the long run, and nobody should be offended that a question was asked. So I think these two things go together, creating a culture of psychological safety and creating a culture where we are comfortable with discomfort.

Now, in addition to what you outlined as your process, you also know that boards often have a main job of replacing the CEO or finding the next CEO, right? So equally, boards must consider their own decision-making processes periodically. One is to look at the process and say, are we really doing this right? Challenging one's own process and doing that in real-time. And that exercise exercises that muscle and makes it much more useful to use.

And the other thing is boards should look at whether they are fit for purpose. Do we have the right kind of expertise, the right kind of experience, the right culture, which we mentioned, around the table as well? And then the question of board refresh. If we are not, if our process isn't right, if the composition of the board isn't right, what is it we are going to do at the next refresh?

So the process of decision making, in my view, is beyond just the actual process of collecting data and evaluating it, but to actually see is the process of evaluating the data itself sufficient. We can't use the same process for every decision that we are going to make. If there's a decision to be made about, let's say, raising money in an [00:07:00] environment which is prevailing now.

This is a completely different conversation to how this conversation might have happened three years ago, when there had been no Ukraine war, there had been no other crisis of geopolitical nature, no pandemic, nothing. So we have to look at the process for its internal intrinsic robustness rather than for whether it follows all the right steps that we are used to following.

And then, if we don't find that we are capable of running that process on our board, given what we have by way of people, resources and experience, we should consider whether we are fit for purpose quite regularly and address those questions in the board refresh when it comes up.

Oliver Cummings: Okay. One of the things you talked about there was that comfort with discomfort, which in theory sounds great. And it's certainly a mindset that I spend a lot of time promoting - trying to promote - within my executive team, [00:08:00] as well as the boards I'm involved with and promoting psychological safety.

And yet I know from my own experience, there are times when you get those uncomfortable questions and your visceral reaction is such that it can be quite hard to maintain that sense of comfort. And I'm someone who generally is pretty calm. We've experimented with different things that help build the muscle in the organization for doing that.

So when you get people to argue opposite sides of the position that they are naturally. And you switch them around so that people can feel that this is very much, we're exploring it from all sides. Are there practical sets for someone listening to this as a board member thinking, “well, yeah, that sounds great, but how do I actually make that happen on my board?”

Shefaly Yogendra: So. It is interesting you mentioned the bit of the conversation we were having earlier about the culture of psychological safety.

One has to culture [00:09:00] one's culture, which means it's not going to happen overnight. So some of it can be done by way of softer, on the side processes and allowing informal conversations, which we also know are prone to capture and decision making can happen outside the boardroom and just get validated or rubber stamped in the boardroom, which we also have to guard against.

The other thing I think is a very important role that the chair of the board and or a committee plays by making sure that things that are being said are not shocks or surprises. And that requires a lot of work being done outside the boardroom. Essentially, to make sure that you know what everybody in your committee or in your board is about to spring on you in the room.

In a very strange sort of way, it also makes sure that everybody has read the board pack before they engage with you on the matters that are to be raised, but that is a side benefit. In talking to your board members or your committee [00:10:00] members outside before the meeting, you can actually hear more deeply about what particular lens they are bringing, what things concern them.

There may occasionally be things that people want to raise, but they will not raise them in the boardroom. In which case you, as the chair of the board, allow your shoulder to be used to fire that gun, and you raise the point, thereby raising the point that needs to be raised. 

So I would say that in addition to taking time to build that culture of safety, there are also the practices that you need in order to make sure that nothing is sprung as a surprise on people.

And that itself interestingly contributes to the idea of psychological safety. I like the tool you mentioned, arguing the opposite point, but we don't always have neat opposites. The opposite of day is night, but we will not always have neat opposites. So that tool can actually fall down unless somebody black and white matters, which you will agree as a growth company CEO.

Your decisions are [00:11:00] not, they're not black and white. And then you talked about how people can get emotional. Emotions are not a terrible thing. We somehow get trained to believe, you know, and we, you know, we can laugh at Sheldon or we can talk about Mr. Spock, we have been trained to believe that somehow being cold and rational is the preferred binary opposite of being emotional.

Now in decision making literature, which is quite vast across various disciplines, neuroscience evidence says, and I'm paraphrasing roughly, that if your emotional functioning is not up to the mark, your rational decision making will suffer. So when we take that into account, we really have to consider what emotionality in decision making really means.

And I know I'm probably, if you'll allow me the luxury of dwelling on this point, as a gender, women are often seen as the emotional [00:12:00] gender. It cuts both ways. It cuts badly if you are the kind of person who is happy to wipe a tear if it is a moving discussion or it's about a difficult topic or if you're the person who is a woman but is able to remain cold and rational in the way that people associate with men.

However, I would posit this as a provocation. That in your life, in your work life, and in my work life, if we were to pull stories together, we have probably seen more men showing emotion in the workplace than we have seen women. Even though the word hysterical derived from the Greek word for uterus, hysteros, is often applied to women.

Men are the ones who will throw tantrums, lose their temper, shout, bully, harass, otherwise get emotional. So if you think about all the experiences we have with our colleagues, we see a lot more men displaying emotions too. [00:13:00] So what we are really talking about here is that emotions aren't bad. Emotional regulation, however, is critical.

Because we don't suffer from people bringing emotions into decisions, we suffer from people bringing emotional dysregulation into decisions. And that can cut both ways. If somebody's hyper emotional, whichever way we want to put it, whether they cry at everything or they get angry at everything, or somebody who's so cold and rational that you wonder if they are a sociopath or a psychopath.

So I think being able to balance Or regulate your emotion instead of letting it go into emotional incontinence at any level is the critical input that we need to bring in. People don't feel passionately about things that they don't care about. If they care about, we must heal them. And yes, at the same time, We have to make sure we call the conversation within the time frame that we have the things that we need to get done.

What's on what's on the agenda today? [00:14:00] And as a CEO, I really don't envy you your job in terms of having all those conversations about critical decisions. While making sure that the culture that you are building is actually getting built and is actually seen to get built, that this is a psychologically safe space where I can express dissent.

I can ask a question and nobody will get angry or upset or offended that I asked a question.

Oliver Cummings: Yeah. So Brian, I think Brian Halligan, it was recently said being CEO is overrated. Certainly, certainly true. I'm interested. So to explore that further, can you give me some examples of where that emotion in your experience has informed better decisions to bring that to life for me? 

Shefaly Yogendra: I think back to Black Lives Matter protests which happened in the pandemic, and We have been mentioning the culture of psychological safety in our conversation so far.

I [00:15:00] hate to say this, but a lot of white people did not feel comfortable talking about it because they felt that it was not their place. If they had questions, they had nowhere to go to ask anyone. without fearing that they'll get judged. But at the same time, organizations that have a large number of, you know, black people in their ranks or whose customers or stakeholders have a large number of black people.

Somewhere our human empathy told us that they were hurting, but people were so taken by their fear that they didn't, they didn't know how to break that. Right. So in one of the things I was engaged in, I did say that we need to kind of put out a statement. Sometimes it is not about the statement. It's about the fact that the statement means that you thought about it, you felt their pain, and you thought about what support could be extended while also publicly taking a stance on the matter.

I don't think those conversations anywhere, whether in a [00:16:00] boardroom or an executive room, or even in the broader ranks of employees in any organization were devoid of They were highly emotional. And at the same time, it was valuable to just reach out to people at, at a human level and say. Are you okay?

And I would say from my experience that it catalyzed some conversations that I did not expect. I won't say I wasn't ready for it, but I didn't expect it. And they gave me a great deal of insight into some of those individuals functioning, their fears, their motivations, as well as their positive commitment to changing the world.

And I think That kind of conversation can only happen when people are passionate and emotional about things. It is difficult sometimes to confront it, because if you are a sort of calm and rational person that I know you are and I am, it can be, but we don't, [00:17:00] we don't have to experience everything ourselves in order to believe in its validity as an experience.

and sometimes being calm and rational gives other people the space to process their emotions so that when we talk to actual decision making, coming to the point of decision making, we know where they are coming from and we have taken that into account. We have honored whatever points of view they're bringing, and then we have made a decision which they will no doubt agree on because they feel heard.

I think the key thing with consensus is that we don't all have to agree. What we are really agreeing to is that once a decision is made, we will not sabotage it, which is a completely different agreement, right? So I would say that emotion does play a role, and we mustn't negate it or dismiss it. We have to learn the ability to handle it because it contains information as well.

Oliver Cummings: I'm curious to hear how you think about how that [00:18:00] connects with bias. So one of my favorite books is one from Warren Buffett's partner, Charlie Munger Poor Charlie's Almanac, which includes a list of 25 cognitive biases from a paper he wrote on the psychology of human misjudgment and. I mean, examples include things like incentive course bias, you're controlled by incentives, a loving tendency, we will just want to be liked, a hating tendency.

We love, we love to hate a doubt avoidance tendency. We like to make decisions quickly, sort of Kantian fairness tendency where we expect the world to be fair and just an overoptimism tendency where we're overly optimistic. What he calls a deprival super reaction tendency where we suffer more from a loss than we enjoy from a proportionate gain, which I guess some people call a loss, loss, aversion social proof, tendency, you, you tend to think and act like the people around you.

And so it goes on. I won't go through [00:19:00] them all, but I'm curious to hear how you think about biases. Do you think boards in order to make better decisions need to have a more... Conscious approach to identifying what their underlying biases are. And, is there a risk that actually I can think in some circumstances and research that I've read at least that suggests an awareness of bias can sometimes actually end up reinforcing the bias and actually being unhelpful. What's your experience and approach there or advice to a chair wrestling with that? 

Shefaly Yogendra: So I think there are two parts to what you just said about awareness of the bias can reinforce it, but sometimes awareness of a bias can also give you a conscious choice.

not to let that bias play a role, right? A sort of ordinary life example would be that there are children who are bullied, who grew up to be bullies and their children who are bullied, who grow up to stand up to every [00:20:00] bully that they ever see. They grow up with a very strong sense of fighting against injustice.

So to some extent, I think making the unconscious bias more conscious gives us a choice. And then the choice we make is who we really are, essentially. But when it comes to talking you know, how would a chair take that into account? It's very difficult, and those conversations, I think, have to happen not in the context of a board decision, but in terms of getting to understand who these people I'm working with.

So I'm reminded of an interesting experience we had in one of my boards. I won't say which one. We were... Doing a set of interviews and between two interviews, we had about 15 minutes for, you know, fill your glass of water, go take some more tea. And in one of those breaks, we said, so what was your first job that you got paid for?

How old were you and what the job was? So we went around the table and I was the last one who answered [00:21:00] that. So people went, I was 10 years old. I, you know, I was a paperboy. I made this much money. I was a shelf stacker. I did this and blah, blah. Everything came to me and I said. I was 22, and it was my MBA internship, and it was paid, and it was in Procter Gamble.

For a second, the boardroom fell silent. And then everybody laughed and said, wow. I said, yes, that's what privilege looks like. And you all thought I was your diversity candidate. Of course, I'm not the diversity candidate, but I make fun of that term all the time. But that was really quite interesting.

Because on the face of it, if people see everybody's paid jobs and see how much money they have made in their careers and everything else. I look like the person who's diverse. I am, but in a way that they didn't imagine. So getting to know the people around the table can sometimes really illustrate what they bring.

And I was just thinking of another [00:22:00] chairman of mine who, although he and I grew up in two different countries, we both have experience of rolling blackouts. Electricity shutdowns, right? So we both feel passionately about energy resilience in a way that's very hard to explain. We almost look crazy when we talk about it.

The other thing is that he is deeply committed to biodiversity, which is something we know about him, but a lot of people may not, that he has a massive farm where he's restoring biodiversity for the past decade or decade and a half. Which means when we talk about ESG and biodiversity with him, it is not TNFT compliance.

To him it is real. To him it is the experience of what happens when you plant 2, 000 trees. After five years, how many are still standing? How do you nurture them? How do you make sure they actually remain? What does it do to the wildlife population in that area? Or whatever the, you know, the animal population around the, Around the area where the trees are planted, we [00:23:00] wouldn't know these things by working within the confines of an agenda and a decision making charter.

We would know this if we actually understood who we were working with. And as we were saying earlier, the independence of the directors is a key artifact of why we are NEDs on boards. Their independence or ours, each one of our independence is forged in our own experience, our own training, our own lived experience and everything else we are doing in our life. And to be appreciative of that is probably one of the ways of discovering biases.

Oliver Cummings: I love that. What a great, great illustration. I want to move on. And talk about another of my favorite authors, Annie Duke who in her book, thinking in bets, talks about the dangers of resulting where people are inclined to judge the quality. Of a decision based on the outcome rather than the decision quality itself.

So [00:24:00] if you think about rolling a dice I know I'm teaching you to suck eggs here, but just so in case others aren't familiar with the concept, if you're rolling. A dice and you think you're going to get a six, you can roll that dice three times and not get a six. Now, if the payback for rolling a six was such that it could be that it still made sense to take that risk of, of paying, you know, X to get 10 X.

Because the probability of getting the six was lower than that. But we're often guilty, I think, of looking at the outcome and saying, Oh, well, we made a bad decision. And in my experience as an investor, I think I've seen the same thing where we were actually okay at reviewing past decisions, perhaps not as much as we could have done, although we tended to spend more time revisiting failures rather than.

Successes you know, Matthew side, black box thinking is all built all around the things that go wrong. Inviting disaster. I mean, there's been, there've been loads of [00:25:00] books written on, on what you can learn from failures. Really? I'm not sure it's quite so established on the successes, but how in a boardroom environment, you know, what are you seeing?

How good are boards at? Retrospecting decisions they've made and then using the lessons 

Shefaly Yogendra: So first of all I'll say I think Annie Duke's book Thinking in Bets is a very good read. I anchor the Director's Book Club somewhere else. And that was one of the books I assigned last year to read.

So I would very much recommend that people read it because the separation of the process from the outcome is a really important skill to learn in good decision making. That said, when you said there are lots of books written about failure and, you know, failure is examined, yes, that's also true. We have all the time in the world to celebrate and applaud success, but when we unpack it, if we unpack it.

We are actually [00:26:00] looking at survivor bias. Because in broader management literature, we are also aware that what sounds like best practice actually doesn't travel. So there has to be something to be said for failures because you could identify where you fell short. And one of the reasons we examine failure is that the expectation is if we do all of these right things and do them right, we will have the same outcome.

It doesn't work like that because there are other circumstances that might have changed. A bit earlier I mentioned raising money now versus three, four years ago. Complete, you can do the same process now and you will not raise money simply because the broader macroeconomic circumstance has changed and there is a very different risk propensity in play.

There's a very different play altogether of the environment, right? So, to your question about whether boards spend time revisiting and retrospecting decisions, I would say that there are certain decisions that [00:27:00] get validated or challenged or reviewed on an ongoing basis. So, for example, if we have approved a strategic plan and there are certain KPIs against which we can measure the performance of the organization, that gets reviewed on a quarterly, half yearly, annual basis anyway.

Some other decisions, for instance, in fund management, if you've changed your fund manager, you're looking at their performance and it's a way of retrospecting, did we make the right decision, but the key thing remains that one is mindful of the bigger picture, which can. change how even the best performers can or cannot end up with the same outcome.

And I think that's really important. And to quote one of your heroes you have mentioned before, Warren Buffett, rising tide will raise all boats, but when the tide goes out, you find out who's been swimming without their trunks on. And I think it is important to remember that contextual difference. Even when we retrospect on something, what was [00:28:00] different is more important to pay attention to than what was similar, because similar things might behave differently given the bigger picture having changed.

So boards do retrospect in various ways, but It is, in my view, right to focus on, you know, things we failed at because from success we just say, Oh yeah, success has many fathers. So many people will claim that this went right or this went right. When something fails, we know exactly what failed. I could do a whole different podcast with you on my failed luxury venture.

I learned more from that, which I bring when I work with startups on advising them on growth strategies, on building structures for growth and sustainable growth, et cetera. I learned more from it than I did ever from advising any successful startups I've advised.

Oliver Cummings: Okay. Interesting. I want to go on to a slightly different topic, which is around the subject of conflicts of interest which you've written [00:29:00] about. I've seen some shocking examples of board behavior where board members have put themselves into some inexcusable positions. One sticks in mind where the board member had negotiated a consulting agreement on the side where they had a success fee that was contingent on a transaction going through a transaction that the board hadn't signed off on. 

And it was just flabbergasting to me that this was not obvious to them that this was inappropriate, but you've, you know, clearly complex of interests have the potential to negatively impact decision making at the same time as you've reflected most directors on boards do have some degree of interest in the businesses that they're scrutinizing. And actually that can be incredible. If they do have potential conflicts of interest, it means they care about it. 

Just talk me through how you think as a chair, [00:30:00] as a board member, you should be thinking about where to strike that balance. Of conflict of interest when it comes to decision making and we're interested to particularly around the question of sort of materiality, 

Shefaly Yogendra: So you will, if you have any interest in something, there will be something that will be seen to be in conflict. So the key thing there from a board's point of view is that the conflict is declared, notified, and then managed correctly. And that is where the job of chairing, whether it's a committee or a board, becomes really important.

So the example you gave of somebody having negotiated a side contract is a failure of governance in many, many ways. They should have talked to their chair. They could have talked to them, they should have talked to the board. If they talked to the CEO, the relationship should have surfaced. So it's a multi point failure for something like that to happen.

And that should be a moment of reflection on it soon. So, As I was saying [00:31:00] the important thing is to manage the conflict and it can be managed in many different ways. And I come to the point of materiality as well. As you know, in listed companies, we have to do personal closely associated disclosures as well.

So that's one sort of check and balance in the governance requirements. I've also recently seen some public body boards. actually have a disclosure register on people's spouses and partners jobs and interests as well. So let's say somebody is on an NHS board and there is a medical equipment supplier who supplies to that particular NHS trust or the hospitals under their care.

And they happen to be married to the chairman of this board. So that's in a disclosure. And then the stakeholders and the governors around the board are then sort of almost duty bound to question, how are we managing this conflict? So the declaration is [00:32:00] insufficient. Managing is important. Materiality, I feel is not. It's not rocket science if disclosures and debate are both conducted properly, but it is often also a judgment call.

So an illustrative example would be, let's say, you know, there's a lot of conversation as you know about multi generational boards now that you want to bring in younger directors who are working in companies, emerging areas of tech and so on. When you bring them on board. You are essentially looking to tap them and their knowledge and their wisdom and their experience of those emerging areas of technology.

You could have all the conversation, understand various matters. When it comes to making a commercial decision, you have to ask the question, will they personally or their companies benefit from revenue and profitability and bonuses? And if that is the case, then maybe you can ask them to step away when the commercial discussion happens.

Now, you could say, well, they have already contributed to the debate and you [00:33:00] know, their opinions and their input was going to linger in the room, you know, like the Cheshire cat smile long after it has gone. But If we are bringing, as we have been discussing, some consciousness to our decision making process, alertness to the process itself while we are engaging in it, then we may be able to work around the conflict of interest point much better.

Conscious sharing, I have to say, plays a huge role in whether conflicts are managed. Or dismissed or actually just not even discussed. People do not realize what conflicts people might have. So I think good chairing and alert, good governance actually are very big components in that. But you will allow me, I'm going to ask or put forward two provocations.One is that there is this whole skin in the game requirement for investment trust directors.

I have not seen, and I'm not a, you know, well established person in this area, I'm a relative noob to the space, so I'm very [00:34:00] willing to be, you know, sent readings. How much... debate has there been on how are directors decisions affected by the size of their shareholding in the investment trusts on whose boards they sit?

That's a question worth asking, and I don't know that there's a lot of debate. And the second thing that I would say is that There are similar requirements as norms, not as rules, but as norms that, let's say a company goes to IPO, directors must invest two years of their fee at IPO. Are we not at the risk that, are we not putting companies and boards at risk of accepting only those on the board who have all had the exact same learning potential, similar career trajectories as one another?

To me, that is the death knell to inclusion and all that, you know. lip service we give around it. I am digressing, but I did say these were two [00:35:00] provocations. How do directors' interests actually affect, how do the sizes of their holdings affect their decisions? And has it been studied? Has it been explored?

I'm sure if you ask people consciously, they'll deny it, but is there anything that we can look at as proxy indicators? And the second thing is when we do enforce these requirements on listed, at least investment trust boards. Are we really basically saying that anybody who's not had the same old career is not welcome in these boardrooms? And is that good governance? Is that inclusion that we all want to make statements about?

Oliver Cummings: I think those are two great questions. On the first one, I've always been very influenced by some of what Buffett has written on this where, and I, and I think this is quite a US thing, but in the US non-execs are paid. Relatively much more than they are paid in the UK. 

And in his mind, there are a lot of non execs who are basically clipping a coupon and taking decisions [00:36:00] that minimize the risk of them getting kicked off the board, because often it's the CEO executive chair that's running the board and therefore they need to keep them happy rather than what's best for the shareholders.

And so he has advocated for those independent directors to have to put. Their money where their mouths are and have a greater stake in the game, which having come from a private equity background myself, where that's very much the mindset of getting your executive team to invest in the business.

And it's often a difficult balance to strike because if people are over invested, they become so stressed that they cease to function productively. But if they haven't got enough skin in the game, then it's easy for that. You know, focus to drift, but I haven't seen you ask if there's been debate, what I haven't seen is, is a lot of data around this and like everything in the board space, it's so difficult to run a true control test.

So you know, the limited data I have seen tends to be more around [00:37:00] board members' experience and a level of entrepreneurial backgrounds in the, in the case of say startups leading to higher. Board organization performance, 

Shefaly Yogendra: there are no term limits in American governance. People can keep serving as long as they want. And we have now quite strictly enforced term limits. Although if you read the corporate governance guidelines, they're not term limits for the board directors as much as they are for chairman, but invest sort of voting, voting agencies and investors, institutional investors, both expect refreshment of the board.

quite regularly, if, especially if the performance isn't good, but even if the performance is good. So I think that's one of the tenets of American governance, corporate governance, which creates its own problems, as it were, creates capture of the boards. And I think the second thing would be This non separation, yeah, non separation of [00:38:00] the chairman and CEO, that's another American corporate governance article.

I went to Stanford Director's College last year, I was the only British person there. I can also spree DAWBs, so they were all discussing how employers could change healthcare offerings to enable their female employees to continue to access abortion. I do not know if we are. Any time going to have that conversation in British boardrooms because we don't need to, but we might, who knows.

Right. But it was quite interesting to see how there are stark contrasts between what is being discussed in boards, how boards are structured, how governance is structured, what guardrails exist or don't exist in both cultures. It was a very interesting, partly quite amusing experience for me to actually have attended that in a room full of really experienced listed company board directors on American corporations.

Oliver Cummings: Really interesting. I mean, there's so much there and as far as it relates to decision making I feel like I could make [00:39:00] a case on the opposite side of both of those arguments. And from where I sit, at least I feel like neither of them are perfect. Of all the systems that have been tried, this is the least bad. I also see non-executives with term limits here who are adding so much value.

And then their full stuff, what just. For some arbitrary date, that makes no sense when it's so hard to find board members who really add value. Now, clearly in the U S you have the opposite problem where you've got people who are adding no value and they're just going on and on and on. But I'm not sure whether something as blunt as term limits is the solution to that problem, because it feels to me like the underlying problem is someone. Adding value. 

And by the same token, when I look at, you know, you have the U S the sort of chair and CEO roles fused at the same time, if I asked most CEOs here, I'd go as far to say, you know, is your time with your board, the highest return on your time invested in any given period? Most of them will say, no, a lot of them will say, it's a, it's something [00:40:00] to be endured.

And therefore there's something still not working quite right in my mind with how that system where they are separated is working, there are too many boards that aren't adding enough value that their role is there to ensure the company is well run. But too many of them. And I think, especially in my sense, in the listed company spaces, they end up defaulting to the easy policy ticking box, ticking stuff where they can feel good because they've done things, but they haven't actually really made sure the company.

Is well run by bringing in things like best practices from other companies, things that are harder to measure and softer. But I suppose it's a lot in there to unpick and I'm not sure how much of that. Is within the control in terms of, as it comes back to sort of decision making within a given board member in a sense where we're stuck for now with the parameters that our boards face.

There's also an interesting one actually in the pro bono space talking, picking up on your point around inclusion, [00:41:00] why do more pro bono. Roles, not pay because exactly this, you have exactly the same issue. You end up with the people doing those roles, the ones who can afford to do work on an unpaid basis.

I see it particularly in a space like the private education system, they're expecting people to give up their time for nothing. And they want people from outside of that system to do that. Well, why would someone do that? 

Shefaly Yogendra: The Blunt case is for the fact that you are not going to get the people who need to do these jobs. And these jobs are really heavy because universities, for instance, are not easy businesses to run.

They're complex. They are seen as public facing, accountable for public money, all of that. And the amount of time, if you want to do your job seriously, is quite an ask. And then Back to the moral argument about inclusion, rather than the business case for inclusion, is that you are basically [00:42:00] saying that only people with gold plated pensions are going to sit on these boards.

And that becomes even more pointless as an exercise in the case of higher education because what we are doing is overseeing the training and education of those who will be in the workforce and affecting society over the next 30, 40 years, when most of us will be dead and gone. We have a very different mandate for stewardship when it comes to education boards.

And I'm afraid that if somebody is Not going to be around to see the impact of their decisions and is only doing it because they can afford to do it I'm just that's just not my definition of good enough.

Oliver Cummings: I think there's so many great examples there of how the environment in which boards operate and the parameters that often are out of their control are going to have a serious impact on their decision making. So something like that, you know, whether you pay or not pay your board members is ultimately going to affect your decision making because it determines [00:43:00] the diversity.

Going back to the point that you're making earlier, it determines the conflicts of interest at work. It's a really powerful point. Time has flown by. It's time to go on to the lightning round where I say a short statement and ask you for a quick response if you're ready. So first up the boardroom behavior that irritates you most.

Shefaly Yogendra: People who don't read board papers and think others can't tell.

Oliver Cummings: This is some shocking statistic. Like execs think that less than 30 percent of the board have read all the papers. It's just mad. Best book. Every board member should read and why.

Shefaly Yogendra: Can I give, get three? Can I get three? Then people have a choice. 

Oliver Cummings: Yes.

Shefaly Yogendra: Okay then. So I would recommend The Tyranny of Merit by Michael Sandel, whose justice lectures on YouTube are worth listening to as well. Accounting for Slavery by Caitlin Rosenthal and The Power of Not Thinking. By Simon Roberts, whom [00:44:00] I also count as a friend.

Oliver Cummings: Amazing. I haven't read any of those. So I will add them all to my list. Your favorite quote and why?

Shefaly Yogendra: My favorite quote is something by HL Menken, who was a conservative thinker last century. In America, there's always a well-known solution to every human problem, neat, plausible, and wrong. And the reason why I like that quote is quite self-explanatory. I think we can simplify complex things only so much, and after that, we take risks absurdly, or as the young ones say on the web, complex things are complex.

Oliver Cummings: love it. I think that feeds back into Charlie's simple pain, avoiding psychological denial. The sort of the bias that we have to simplify things. Your most significant professional insight.

Shefaly Yogendra: I think complex problems of the future will not be solved by applying narrow functional and disciplinary training and [00:45:00] tools and approaches of the past. Complex problems require accepting that we will have to do some left field thinking.

Oliver Cummings: The worst professional advice you've ever received.

Shefaly Yogendra: This you will never believe, Oliver. Have you tried anglicizing your name?

Oliver Cummings: Oh gosh. That's unbelievable. Wow. Shefaly, thank you so much. That's been such a privilege. Being able to tap into your amazing breadth and depth of experience. Thank you so much for taking the time to share with us. 

🎙️ You can listen to the full podcast interview with Shefaly on Apple Podcasts and Spotify.

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