Giving Voice to Values in the Boardroom

Cynthia Clark

• Publisher: Routledge
• Year: 2020
• ISBN:
  9780429603020
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book takes the central issues facing board members today and applies the giving voice to values framework while also providing insights from practicing board members who have faced these issues. It covers such topics as strategic planning and monitoring, director independence, privacy and cyber risk, executive compensation and CEO succession planning. With this book, readers will also grapple with the conflicts of interest that might arise in the director selection process, role of the nominating committee and the compensation committee in order to cultivate more optimal board dynamics.

The principles of giving voice to values start by asking a deceptively simple question: ' What if you were going to act on your values—what would you say and do? ' The book then provides an overview of the current landscape of corporate governance along with the major rules and director duties applicable to the board of directors. The book's latter chapters contain a series of five scenarios common to the board of directors that are presented as a set of "Board Challenges" involving the tensions often found in board work.

In Giving Voice to Values in the Boardroom, the author, Cynthia E. Clark, provides practical strategies for board members and other constituents of corporate governance to deal with these challenges. These cases are designed to help users of the book implement prescripting and action planning. Each case will also have discussion questions about the stakes and stakeholders, common reasons and rationalizations and examples of how firms and governance professionals have handled similar board challenges.

PART 1

THE GIVING VOICE TO VALUES (GVV) FRAMEWORK

1

THE GVV FRAMEWORK

What are values?

The central premise behind giving voice to values (GVV) is that individuals can increase the likelihood of acting on their values – and the efficacy when they do so – by learning a predetermined framework and then practicing how to use that framework when values conflicts arise.¹ It can be summed up as building a moral muscle memory so that when issues inevitably arise, they are better prepared.

All board members face ethical dilemmas. These ethical dilemmas are most often about conflicts with moral values. By values, we don't mean qualities like “creativity” or “innovation” – which are important no doubt – but rather moral values that are widely shared across time and culture. In fact, the GVV framework makes an important distinction between ethics and values. Ethics are ruled-based and externally imposed. Values are personal and deeply held beliefs about good and bad behavior, desirable and undesirable actions, right versus wrong.²

By focusing on values, the GVV framework allows individuals to speak from a self-motivated, aspirational position rather than an obligatory stance imposed from the outside. Board members are uniquely poised to speak from such a position as they are endowed with the highest authority in firm decision-making.³

A great deal of academic research argues that senior executives see their decision situations through personalized lenses formed by their experiences, personalities and values.⁴ These different value systems not only give rise to conflicts between board members but also lead to different company and board practices.

You may be thinking there must be a very wide range of values making it difficult to voice your values in the boardroom. However, research across cultures and different time periods shows there are five widely shared values: honesty, respect, responsibility, fairness and compassion.⁵

These values often conflict with some other compelling option (e.g., profit, market share, promotion) or a fear, such as being fired, marginalized or otherwise retaliated against. We all face these types of situations where we are tempted by these other attractive options. Still, we can understand and even normalize temptations in the business world without accepting them as being appropriate.

In fact, conflicting values are not choices between having values and not having values. Instead, tensions arise typically in two settings:

1. They sometimes arise because there is a conflict between two important values: maybe telling the truth or being fair to your fellow directors. In this situation, because two important values are involved or both choices can be expressed as a value, we tend to think both choices are equally good. But that is rarely the case.
2. There can also be a conflict between a moral value and a temptation that many of your fellow board members advocate for. This latter type is usually framed as a choice between what is right and what is essentially a well-crafted rationalization of a wrong. We will discuss rationalizations in the next section.

As personal and organizational values come into focus in our daily life, according to the GVV approach, it is useful to become somewhat familiar, even comfortable, with the idea that recognizing and communicating them is a normal part of business – in fact many experts believe it is a must.⁶ However, any business decision comes with a risk that it will not turn out like we hoped it would. So, unfortunately, our choices come with no guarantees.⁷ Yet there are times when a clear wrong is in full view and the GVV framework focuses on how to address it, especially when we feel unable to act, but are nevertheless interested in trying to figure out how to enact effectively.

These are the types of conversations about values – and acting on them – we address in this book. Before doing that, however, we need to look into the GVV process and become aware of the roadblocks. Still, it's important to keep in mind recognizing our differences does not preclude boards from developing or even pursuing shared goals which can act as a preliminary position for thinking more about how to voice and act on those values down the road.⁸

Tale of two stories

Before we move on, let's take a closer look at the power of choice – or what GVV calls the tale of two stories. This is a brief exercise to help us clarify who we are, who we've been, and who we can be.⁹ The exercise is simple because it relies on our past experiences at work.

Each board director should answer both these stories on his or her own.

Story 1, speaking up

Recall a time at work when your values conflicted with what you were expected to do regarding a nontrivial board decision and you spoke up and acted to resolve the conflict in a way that was consistent with your values.

• Describe the situation.
• What did you do and what was the impact?
• What motivated you to speak up and act?
• What made it easier for you to speak up – things in your control or in others' control?

Story 2, not speaking up

Recall a time at work when your values conflicted with what you were expected to do regarding a nontrivial board decision and you did not speak up to resolve the conflict in a way that was consistent with your values.

• Describe the situation.
• Why didn't you speak up or act?
• What would have motivated you to speak up and act?
• What would have made it easier to speak up – things in your control or in others' control?

By juxtaposing these two stories, we are better able to define our motivations and inhibitors but also those of the companies on whose board we serve. In effect, we can create a list of both enablers and disablers that affect our ability to voice our values. Bringing these types of work memories to the front of your mind and revisiting the tale of two stories is a skill and confidence builder. Building moral muscle memory involves this type of reflection so that when a similar business context or personal situation comes up, we can more easily recognize it and deal with it effectively.

Rationalizations

Sometimes it's difficult to talk about our values and immediately change the behaviors of ourselves or others because, typically, our inner thoughts and emotions (i.e., cognition and affect) present us with a rather sophisticated set of rationalizations for either acting or not.

Drawing on the actual experience of business practitioners as well as social science and management research, author Mary Gentile developed the GVV framework to help managers combat rationalizations so they may voice their values. According to Gentile, a manager must ask, “What if I were going to act on my values – what would I say and do?”¹⁰ GVV provides a framework for answering this question so a manager can practice, script and then act on his or her values in the workplace.

There are a number of common rationalizations in business contexts and in this book I apply them to the board of directors. For example, we might face the (1) standard practice/status quo, (2) materiality, (3) locus of responsibility and (4) locus of loyalty rationalizations. These are by no means a full set of rationalizations you might encounter in your company or board. But it's helpful to explain in detail these commonly experienced ones so when you do encounter these types of pushback, you are better prepared to work on your action plan.

The standard practice argument is best captured by the statement, “Everyone does it”. This argument assumes that an action is acceptable simply because the majority of the people engage in it or because it is something that has been done for a long period of time. This rationalization is powerful and many of us use it to avoid taking responsibility. Such a rationalization might apply, for example, to a board's use of pay consultants to determine Chief Executive Officer (CEO) pay and subsequently ratchet it up.

Second, the rationalization of materiality refers to making the argument, to yourself or others, that an action is not material – that is, it doesn't matter, it is insubstantial, it does not hurt anyone or it does not make a difference in the long run. Framing the question in terms of materiality shifts the focus from the action to its consequences, and it also minimizes those consequences. Here, people tend to believe that if they can live with the consequences of an act, then it is acceptable. Consequences, however, tend to multiple and are often not known fully at the time. Using this rationalization, you might hear people saying, “It's no big deal” or “It's not that important to the overall picture”. For example, such a rationalization might apply to hiring a new board member who is personally connected to the firm in some way.

A third customary rationalization involves one's locus of responsibility. Responsibility refers to our sense of who we think should act in a given situation or who is requiring us to act in a situation. We tell ourselves either “It is not my problem” or “I'm just following orders”. This rationalization usually reduces your personal accountability because you think your actions result from some authority figure who has the control. Perhaps you've heard a board member say they are just following orders (of the committee, of the CEO, etc.). Sometimes we hear people claim they are not the appropriate person to handle the situation or do not possess the requisite authority to remedy the issue or are simply following directions. Sometimes we extend this rationalization to blaming the victim of harm for a variety of reasons – “It's their own fault”.

Fourth, we justify actions that concern the locus of loyalty. Needless to say, our loyalties can conflict. We can, at the same time, want to be fair to one person but also not want to harm another. This rationalization assumes that loyalty to one group necessarily means disloyalty to another group. For example, a fellow director might ask you not to reveal his devotion to the CEO when making board decisions. He is loyal to the CEO but not loyal to the process of objective decision-making incumbent upon the board, another form of loyalty. Sometimes, people express this rationalization something like “I don't want to harm [person x] but I know this isn't fair to [person y]”. It is important to note this rationalization is not the same as a director's duty of loyalty discussed at length in a later section.

Each of these rationalizations can be identified and worked through. In doing so, it doesn't mean we will become free of personal bias or ethical temptations. It does mean we will recognize them more quickly and begin to implement change. GVV is not just about the cognitive process of awareness and analysis of these rationalizations, but, even more, it is about the prescripting and rehearsal – the creation of a moral muscle memory – so that these responses are more natural, comfortable, even automatic. Much of current research suggests that we react to ethical conflicts emotionally, immediately, automatically, rather than initially thinking them through rationally.¹¹ So, we need to create an alternate automatic response based on our values through practice.

What is giving voice?

Voice is important for promoting effective team functioning, and a board is one of the most vital teams in a company. Voice can often ensure the board has up-to-date and relevant information, better preparation for strategic change and a more complete set of alternatives.¹²

Therefore, pushing back on these rationalizations and developing our automatic response involves considering how to effectively use your voice – ideally without being perceived as self-righteous. You might ask then, what do we mean by voicing your values? First, a few clarifications are as follows:

1. Voice is not only about speaking up.
2. Both voice and loyalty can coexist.
3. Voice and exit are not exclusive alternatives.

It would certainly be reasonable to assume that voicing our values is merely about speaking up – or whistleblowing – when we see conflicts of interest or dishonest behaviors in our firm. However, giving voice may also mean asking a well-constructed question, offering a new way of thinking about a situation, providing additional analyses or finding another way to accomplish a task that is more acceptable ethically. Voice also involves taking the needs, desires, and emotional investments of others into consideration – in effect about finding ways to talk about values successfully. By anticipating or listening to others' concerns, you will be better able to find a mutually acceptable way to address the situation. So, in fact, voice may be soft or loud and is by no means always an overt protest.¹³ A useful way of thinking of voice is the discretionary communication of work-related ideas, suggestions, concerns or opinions.¹⁴

Second, we acknowledge the very real possibility that loyalty can be a form of action which coexists alongside using one's voice. In other words, a board member may voice her values because he or she is loyal to the firm rather than in spite of it. Often, however, voicing our values can be perceived as being disloyal to our friends or our colleagues. Many people assume the greater the extent to which we identify with the organization, the greater the likelihood our perceptions are distorted in ways favorable to the firm – meaning we believe we must avoid the label “not committed to the firm”. This assumption relies on a false dichotomy, as if unethical behavior and loyalty to the firm are one and the same. Loyalty does not mean doing anything our company wants us to do. Likewise, it differs from a board member's duty of loyalty (discussed in depth in p. 30 “Duties of the Board”), where a board member's personal interests must remain secondary to that of his or her board work.

However, part of learning to voice our values is to frame words like “loyalty” in different ways so that loyalty does not cloud our perception or replace thinking. In reframing this false “loyalty versus integrity” challenge, we acknowledge that being loyal to our friends and colleagues occurs when we stand up to them in voicing our hones...