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Corporate Governance

Many factors contribute to corporate governance failings. However, few are as fundamental or as pervasive as poor decision-making.


This is often associated with the widespread failure to distinguish between two very different disciplines: the management of agreement and the management of disagreement.


Management of disagreement


Disagreements among directors are commonplace, especially when the board is composed of capable and independently-minded directors. This can be a good thing, since a board that never argues is likely to be failing in its duties.


However, such disputes can get out of hand and may also be indicative of competing factions among the directors. If they are not resolved promptly and properly, they can rapidly escalate into acrimonious disputes that paralyze the board, scare investors and damage the business.


Often, the chairperson will be quite capable of dealing with the problem. But what if s/he fails to do so for any reason?


The potential consequences of such disputes are so severe that it is incumbent on any responsible board to adopt appropriate dispute resolution procedures well before the need arises – a bit like a dedicated corporate governance dispute board.


Management of agreement


Potentially just as destructive as a failure to manage board disputes is a failure to manage agreement among directors.


A degree of group cohesion is necessary for a board to function effectively. However, the very dynamic that binds a group together also frequently obscures the shortcomings of its decision-making. The greater the cohesion, so the greater the pressure to conform.


The resulting false sense of consensus can give rise to serious errors of judgments. The financial crisis highlighted the extent to which  boards of directors are especially prone to ‘groupthink’.


Yet 'groupthink' is by no means the only cause of misjudged agreement.


The diversity of diversity


One of the ways in which constructive debate can be encouraged is by having sufficient diversity on the board. More diverse boards tend to be better able to address the challenges of an uncertain business environment.


All too often, however, ‘greater board diversity’ amounts to little more than a politically correct, box-ticking exercise, more concerned with gender and race than with genuine differences of approach and experience.


A further critical factor is the extent to which a diversity of views and the proper scrutiny of management may be stifled by the economic dependence of non-executive directors (NEDs).


This is frequently reinforced by NEDs' sometimes limited understanding of how the business actually works; their frequent deference to those perceived to be more knowledgeable; their limited exposure - if any - to shareholders and other stakeholders; and management control of information flows.


Balancing uncertain expectations


The NED is a classic decision-maker under uncertainty, a challenge exacerbated by the extent to which many governance issues are often far from clear-cut, especially in situations calling for a balancing of stakeholders’ interests and expectations. need to be carefully balanced.


Significant problems can arise when companies venture into new terrain, with unfamiliar risks and business dynamics.


This applies as much to foreign investors in Africa as to the growing number of African companies being listed on foreign stock exchanges.

What we do



Our international exposure has afforded us exceptional insights into the complexities of corporate governance, especially as regards collective decision-making, management reporting, unconscious bias and the challenges involved in reconciling the potentially conflicting interests of stakeholders.


We have a thorough appreciation of the various statutes, codes and listing requirements in the major jurisdictions, and we closely monitor the views and concerns of institutional investors.


  • We advise on appropriate board-level dispute resolution procedures, and establish and administer these for clients.


  • We also advise on a range of board-level communication and diversity issues.


  • We train directors, especially NEDs, to manage agreement, disputes and diversity.


  • We facilitate board-level retreats and strategy workshops.


Our interest is not confined to major listed companies. We also work with government entities, municipalities, parastatals, utilities, academic and sports bodies, family-owned businesses and NGOs.


And because we always seek to work closely with clients' in-house legal counsel, we are not restricted to Sub-Sahara or even the UK.

Why "intelligent and decent directors fail"


The frequency of high-profile corporate governance failures raises questions about the reliability of traditional indicators of corporate governance quality, and whether fundamental issues are routinely being overlooked.


In a 2002 letter to Berkshire Hathaway stockholders, Warren Buffet famously commented as follows on the deficiencies of modern corporate governance systems:

“Why have intelligent and decent directors failed so miserably?


"The answer lies not in inadequate laws - it's always been clear that directors are obligated to represent the interests of shareholders - but rather in what I'd call 'boardroom atmosphere'.


"It's almost impossible, for example, in a boardroom populated by well-mannered people, to raise the question of whether the CEO should be replaced.


It's equally awkward to question a proposed acquisition that has been endorsed by the CEO, particularly when his inside staff and outside advisors are present and unanimously support his decision. (They wouldn't be in the room if they didn't).


"Finally, when the compensation committee - armed, as always, with support from a high-paid consultant - reports on a megagrant of options to the CEO, it would be like belching at the dinner table for a director to suggest that the committee reconsider.”

That was more than a decade ago, shortly after the dot-com bubble burst. Since then many jurisdictions have revised their company laws and governance codes, yet the crucial challenge of managing agreement and disagreement clearly endures.

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