Governance is still about people

Effective corporate governance springs not so much from lists of rules as from the human element of relationships between boards of directors and top managers, according to a veteran director of companies such as Ford Motor and Estée Lauder.

Irv Hockaday, former president and CEO of Hallmark Cards (and Kansas City Southern before that), spoke today at the Association for Corporate Growth in Kansas City. Besides Ford and Estée Lauder, Hockaday is on Crown Media Holdings’ board and is a former director of Dow Jones (before its 2007 sale), Sprint Nextel and Aquila (before its 2008 sale). He’s seen plenty of corporate ups and downs.

While acknowledging the benefits of diversity and other ideals for boards, Hockaday said people who try to codify good governance will fall short:

The corporate nannies, those who tell us how boards should govern companies, have all sorts of rules of the road and advice that appears to me to be gratuitous. … There is a lot to board dynamics and corporate governance that cannot be put down in a rulebook.

Governance at Ford, for example, includes things some people don’t like – family involvement in management and the board, plus disproportionate voting rights for the family’s stock. But Hockaday describes a strong relationship between Ford’s independent directors, the family represented by Bill Ford, and CEO Alan Mullally.

While General Motors and Chrysler succumbed to recession and filed Chapter 11 in 2009, Hockaday credits the human side at Ford – and actions by the board and management – for sustaining Ford as the only one of the Big Three not to file.

None of this is to say that the watchdogs are wrong about best practices for accountability and transparency. But truth is, governance is still about people making good decisions for their businesses – not just minding the nannies.

© 2010 Johnson Strategic Communications Inc.

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2 Responses to “Governance is still about people”

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