One afternoon, a few years ago, a pungent odour and smoke was emerging from a washroom in our home. But for my wife’s serendipitous presence that day, this could have led to disastrous consequences for the 500-home condominium where we live. Little smoke emitting through the keyhole of door into the bedroom, molten plastic smell, and darkened white tiles behind the now burned out water-heater were the tell-tale signs of a small fire that raged within and a black cloud that had evaporated through the ventilator. Upon post-mortem of the incident, we learnt that day, the importance of thermostat in controlling the action of filament.
Aren’t our boardrooms expected to play the twin functions of action and control? Just as inside the water-heater, a filament does all the work, in Boardrooms Executive Directors perform all performance action. The thermostat like monitoring function is played by the Non-Executive Directors, who keep a check on unbridled power exercised or excessive indulgence by the Executive. Just as a thermostat cuts-off the supply of electricity periodically, the board must regulate the discretionary power enjoyed by the CEO and their team.
A malfunctioning thermostat has led to many a burst – from Enron to Satyam to IVRCL and many others. One can see that most of the corporate malfeasance and failures have occurred due to failure of either the filament or the thermostat of a Board. Filament failure results in collapse of a company. However, the thermostat dysfunction leads to catastrophic results — be it impact on gullible stakeholders (e.g. shareholders, homebuyers, citizens) or nightmare for policymakers or a toppled economy. Debacles occur when the boards fail to test and calibrate the crucial functionalities.
The analogy can be extended further to learn from the types of filaments as well as a variety of thermostats. Let’s keep that discussion pending for another blog while you reflect to recognize the dominant characteristic of your Board – is it an epitome of bright flickering light emitted by filament (aka CEO) or there is a non-glamorous role of thermostat doing its role, quietly?
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