Interview: Professor Andrew Kakabadse
Global Boards: One Desire Many Realities
Steve Macaulay
Today I am interviewing Professor Andrew Kakabadse about his
book Global Boards: One Desire, Many Realities that he has co
written and has given some interesting perspectives on the whole
idea of global boards.
Now Andrew, let’s go straight in with the subtitle: One Desire,
Many Realities – can you expand on that?
Andrew Kakabadse
The ‘one desire’ is that boards work as the governance
mechanism to keep a check on the management and the rest of
the organisation. And the check itself is an assumption that
Anglo American governance will predominate.
That is the ‘one desire’. The ‘many realities’ is, that’s not true.
There are many forms of board functioning, there are many forms
of board structure and there are many assumptions behind board
purpose and Anglo American is actually the minority in the world.
It may be the most talked about and the global corporations in
their greatest number may be British and American corporations,
but we have Chinese, Indian, German, French, Turkish all coming
up very fast and they are going to challenge this ‘one reality’.
Steve Macaulay
Now aside from, if you like, an academic view on this, there are
some practical implications in this – what would they be?
Andrew Kakabadse
Well if you look at the history of boards, they started in the
twelfth century, half way through. Pope Pius the Fourth created
the first sort of board structure to look at wealth creation on
behalf of the community. So the very first boards were
stakeholder, and it took about another 350 years through royal
prerogative to create enterprises which had much more
shareholder value, and that started in the UK.
So what is the purpose of a board? It is somehow to look after
management and the corporation and somehow to keep the
corporation on track and keep it ethical. What is happening in
the world where you have so many different cultural ties and
cultural views, is that in fact boards take on very different
purposes. And if you are a multinational or a global corporation
trying to understand how to penetrate a new market, or if you
are an investor in a joint venture and you have created a joint
venture board between yourself and a Kazak partner or an
Uzbekistan partner, you’d better understand what just the words
governance, board, director really mean in those circumstances,
Professor Andrew Kakabadse
just so that you can simply function.
Steve Macaulay
So one of the tensions is between shareholder discipline and
sensitive stakeholder management. Can you explain how those
tensions are and should be resolved?
Andrew Kakabadse
In the 1960s we did not have such tensions because post World
War II, fifteen years later, what we got was tremendous growth;
the greatest period of growth for the Americas was the 1960s, as
equally the UK into the 1960s/70s But then growth slowed down
and growth was really determined by careful handling of costs.
So now we have, what we called twenty years ago as a negative
term, bean counters running the organisations. Which means
basically people of a financial background now entering into the
roles of CEO, chairmen and key director positions.
So with cost discipline what you are really looking at is ensuring
that the shareholders are getting their value from that
investment, which means other stakeholders which includes
employees as well as the supply chain, people in the community,
people who may receive direct or indirect benefit from the
organisation, come out second best.
Now in many parts of the world that is unacceptable and
stakeholder concerns, which is having a much broader view of the
organisation as a vehicle that creates wealth for the benefit of us
all, as opposed to a vehicle that creates wealth for the people
who have directly invested in it, is the emerging view. And if we
take simple population- think of China, India, Indonesia,
Germany, Turkey, Scandinavia, France, Italy, Portugal-they vastly
outnumber the Anglo American economies. So we are caught,
we are caught between cutting costs, repositioning costs and
handling communities in a way that benefits the community.
And today the skill of a board and its relationship with its
management is to be able to handle that paradox.
Steve Macaulay
One of the key messages that comes out of the book is diversity is
good; contextual understanding is vital. How would you see that
being translated on the ground with global boards, with situations
that people are having to manage? And I am thinking of the gap
really between a global statement and the kind of realities that
people are actually faced with.
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September 2009
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Professor Andrew Kakabadse
Andrew Kakabadse
Ten years ago I heard the phrase ‘think global, act global’. The
reality today is ‘act global, think local’, especially ‘think local’. So
if you are going to start penetrating so many different marketsand you are going to have to, for economy of scale reasons- have
a global brand, a diverse product set but certainly from a
homogeneous base, you must know how to position those
products and services in a way that makes sense and attracts
customers in different parts of the world.
So diversity today is a business issue; what has happened is that
diversity has also been high-jacked as a political issue; in South
Africa it’s race, and you can understand why it’s race. In Britain,
and especially the United States, it’s gender. And I suspect if you
go into those macho cultures you can see why gender has
become to be a predominant concern. Go to Hong Kong and you
are likely to irritate female directors with an interpretation of
diversity being gender; for them it is how do we penetrate the
exceptionally complex and stakeholder structure of China.
So the global director today has to have a mindset, not only of
their products and services, but what are the diversity
interpretations that are critical to their business, both in terms of
the sale and distribution of what they have to offer, but equally
the defence of the brand and the defence of the organisation.
You can do as much harm today by selling more and damaging
the brand and reputation of the organisation than by simply
selling less.
Steve Macaulay
So finally, if you were to give some dos and don’ts to people in
these big global boards, responsible for global operations in a
whole variety of different countries and so on, what would it be?
Andrew Kakabadse
Thirty percent of your knowledge is your organisation, its
products and services; 70% are all the locations, stakeholders and
cultures in which you operate. Upset that balance and you will
be hurt.
Steve Macaulay
Andrew, thank you very much.
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September 2009
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