Wanted! People Governance

Few people would argue that Warren Buffet is not the most prominent investor and speculator in Business today. Accordingly, we would also assume that his statements carry a substantial amount of credibility and should not be discarded. Addressing companies that are being targeted by activist investors, Buffet stated earlier this month, and I quote: “Don’t listen to Wall Street… They’re like sharks: they’ve got to keep swimming. They stretch for targets, and you’re seeing that. But there is a place for them in America. All American businesses are not being run in the interest of their shareholders with really capable management. When that happens, change is needed.”

Earlier in August 2015, and at a Regional Conference on Human Resources in Banking, held in Beirut, the First Vice-Governor of the Central Bank of Lebanon, Mr. Raed Charafeddine, a prominent Thinker, Good Governance Activist, and prime promoter of Cultural Dialogue said in his keynote speech: “… If the basics of a Doctor’s profession are to have clean hands and tools, with a clear mind, then it is the alphabet of Bankers to demonstrate integrity, transparency, and good will”. He also uttered: “For every action there is a reaction. This is a basic principle of mechanics that applies to what is going on around us including the Financial Crisis and the role of the Human Factor in creating it. As such, we are bound to zoom onto the behavioral and moral dimensions, and thus spare no efforts in nurturing and sustaining the moral behavior of the Banking workforce”.

With the above in mind, and while chatting with a friend who happens to be a Board member of a Lebanese Bank, we came across the Bank’s major challenges, and guess what was their main Challenge? Yes, Employee Ethics. They at the Bank were totally disturbed by the fact of how people who leave the Bank have no moral retrain in utilizing their relations with the clients of the Bank to entice them to move to the competitor.
Now add to the above the VW Group scandal, where the biggest Automotive group in the World failed to govern its people, who effectively managed to convince millions of people around the World that they are driving eco-friendly cars (VW claims that around 11 million vehicles are affected by the emissions’ scandal). Further, the fresh news that John Thain, CEO of CIT Group (ex-CEO of Merrill Lynch) is stepping down next year falls in context. This top paid executive who drew a lot of attention and criticism during the financial crisis revealing that he spent $1.22 million of corporate funds on his office areas, and paid his driver $230,000 in annual salary (double of what people in that same position earn). What would we conclude?

We live amidst a Crisis of Ethics. The problem that the Business World is facing today is not that of funding, or innovation, or expansion, or profit making. The problem with Business today is the ethics of its human resources. All of the above mentioned anecdotes revolve around people behavior at work. Integrity is no more a given, rather it is an RTP (Required to Prove). In a business World where Values became so much mutated, too many human resources ended with a messed up internal compass. As rightfully said by Mr. Charafeddine in that same conference: “We live in a World where many human resources in business lost the meaning of a ‘Taboo’ leading to the domination of a new paradigm where the end justifies the means, manipulation is smartness, hard work is weakness, and loyalty is absurd.”

But what is wrong? Simply, it is the way the Business World is dealing with this crisis. Too many efforts have been invested in sustaining integrity. A lot of those efforts focused on Corporate Governance as a means of ensuring that Businesses – and Organizations in general – are well governed. However, I believe that this model failed to make the link between good governance and the human resource in Business. Corporate Governance principles focused so much on strategic and high level directives for governing businesses, and gave much less attention to the role of people and their behavior in good governance.

In other words, what Corporate Governance creeds need to focus on is not only matters related to Boards’ set up, Committees’ structure, Reporting and Authority Grids, Succession Planning, and Executive Remuneration. Rather they need to expand their span of focus to include:
1. Alignment of business practice with Corporate Values.
2. The Quality of Leadership and how leaders / managers are selected.
3. The Quality of Managers’ Decisions.
4. Background and reference checking practices of the HR Department.
5. Individual – Organization fit; making sure that attitude and values of employees are aligned with those of the Business.
6. Individual – Position fit, with focus on Competencies presence and continuous measurement.
7. The assurance of principle driven HR management away from internal politics and hidden agendas, hence mitigating pressures on employees to seek evasive ways for career and advancement and income growth.
8. The mechanism for dealing with lack of compliance with Integrity and Ethics rules.

Bottom line, we live in an era where life on earth is being redefined, including values, principles, ethics, and thinking paradigms, and as Warren Buffet puts it “When that happens, change is needed”. This change need not be bad, rather, it is worth considering that the success of the Human Race rests on thousands of years of Values-driven behavior carved through experience and accumulated wisdom. Rethinking how we live, think, and grow is essential. Having Corporate Governance guidelines is indispensable. Yet, being aware of trends that are putting us off-track in life and in Business is also of utmost importance. In light of all this hassle, it is time for people in charge to notice that it is People who need to be governed not Organizations.