Governance Bites #33: board culture, with Tracey Berry

Tracey Berry is a Partner at Mosaic Financial Services Infrastructure. She is an experienced company executive and director, with particular experience in banking and financial services. She is on the board of the National Provident Fund, has been Chair of Nikko Asset Management (New Zealand), and on various trust boards. She has been an executive at Kiwibank, BNZ, Westpac and TSB. Tracey was also on the Financial Advice Disciplinary Committee for over 12 years.  
In this conversation, Mark Banicevich asks Tracey about board culture. They discuss what an observer would see in a board with a healthy and effective culture, what symptoms one would see in an unhealthy culture, and how to resolve them. Mark also asks Tracey about the best governance advice she has received.
#governance #governancebites, #director, #boardroom, #boardcraft, #culture

Transcript

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Hi. I'm Mark Banicevich. Welcome to Governance Bites. Today, I get to spend time with Tracey Berry. Hi Tracey. Hi. Thank you very much for your time. Great to be here. Tracey is on the board of the National Provident Fund. She's actually got a lot of board of experience, having been the chair of Nikko Asset Management in New Zealand. She's been on the Financial Advice Disciplinary Committee for over a decade, and has been a trustee on some significant trustee boards, as well as some other governance boards. And is now a Partner at Mosaic Financial Services Infrastructure. So, a wealth of experience. Thank you very much, Tracey, for your time. Yeah, pleasure. How have you managed to all that so young? That's scary. I think this just some photo editing. I'm not really that young. Kids in my twenties. Not that young. No way. Oh, wow, I didn't know that. That's amazing. It’s thrown me. Today, we're actually going to talk about the culture of the board of directors. And my first question is actually about, what do we mean when we talk about board culture? What exactly is board culture? Culture's the shared values and norms and mindsets and behaviours that show up when a group of people get together. And they tend to be quite ingrained. So, culture tends to be quite ingrained, such that the dynamics endure beyond one or two board member changes. Sometimes it's deliberate. So, a board of directors has set out a pathway, what they want their culture to be, and then they're very deliberate, and striving towards those culture objectives. And sometimes it's very passive. It's what happens when groups of people get together, and how those shared norms and behaviours eventuate. And that culture essentially informs how the board operate, how they interact with each other, how they interact with others that interact with the board, and therefore, the operation of the board in general. Right. How much of that is formal? Written down through a board charter, for example. And how much of it's informal, just through the way they interact? Yeah, well, from my experience, it's often informal. Boards evolve over time, and they change over time, and so they form, and sometimes reform, depending on the composition of the board. But they tend to sometimes be dominated by a strong board member, that sets the tone. And the others fall in line. Other times, it may be more directive, and structured, because they've engaged an independent to talk about culture. Right. And then they’ve been working on culture. And it depends where they are, and where they want to go to. But often, how it arises in the first place, is just by the group of people that are there, and what they bring to the table, and how they interact with each other. Okay, right. Thank you. How does a healthy and effective board culture present itself? If I were an observer on a board with a good culture, what would I see? Oh, you'd see good cander. You'd see a really open and transparent environment. You'd see colleagues who clearly had some trust and affinity for each other. But there was still good, healthy cander, and debate and challenge. You'd most definitely see diversity of thought, and representation across the board table. You'd see them being well organised, and well prepared. Right. Those are, I guess, some of the attributes that you'd see, conversely, in an unhealthy culture. Would you expect to see a whole lot of agreement? Or would you expect to see disagreement, and discussion, and debate? Oh, should be definitely disagreement, discussion and debate. I think some of the best boards that I've either been on, or been engaged with as a speaker, too, have most certainly had that sort of cander in the room. Where they've got such a foundation of trust and respect, that they can be very open, and very deliberate with their questioning. And so, I think that's a critical part of everybody bringing their skills and expertise to the table. That's what makes the richness. If we've got an environment where everybody thinks the same, and it's all group think, then we're definitely not going to elicit the best outcomes. You don't need a board then, do you. Only need one or two people with that range of thought. That's quite right, Given that diversity that you're talking about, if you have diversity of culture, if you have diversity of gender, and backgrounds - people coming up with these very different mindsets, and also very different life experiences - how does that impact the culture that can happen on a board? Because, if you have like-minded people, then culture becomes fairly easy, right. Everyone kind of gels. But when you've got people with quite significant differences in their background, it's much harder to get that gelling. So, how does that impact the culture? I think that's the richness of the culture, is the composition of a board. Good practice is, everybody's bringing something different to the table. And so, it's actually the combination, and the way those complement each other, that can elicit the best outcomes, the best support for management, the best governance and oversight. So, it's about having respect for the contribution of your fellow board members. Acknowledging that they're bringing something that's potentially is different to what you're bringing. It might be better representation, a closer vantage point to the consumer or user, it may be legal background. They're bringing something that perhaps you don't have, specifically, in your toolkit. But actually, it's how they all come together, that builds the puzzle. Yes. That gets the best outcomes. So really, I expect it requires a good level of emotional maturity on the part of every individual board member. To have that mutual respect for other people, that have got different backgrounds and different cultures. To enable that foundation of trust, for the culture to arise well. Yeah, that's right. I was reading something interesting the other day, and it was talking about the fact that sometimes the most charismatic, strongest CEOs [Chief Executive Officers] that are such strong individuals, typically, sometimes, don't make the best board members. Yes. Because, they're used to being very independent. Thinking very directive. And maybe not as used to being part of a bigger team, that is one voice at the table, not the voice at the table. Right, right. Okay. What are some of the symptoms of an unhealthy board culture, and how could you resolve them? Yeah. You get the converse. So, you'll get a lack of transparency. You'll get mistrust. There may be clicks that are forming within the board. So, there's those conversations that happen outside the boardroom. You've got asymmetry of information. It makes it incredibly difficult, and it's certainly not constructive for board members not to have access to all the same information, in the same dialogue, and the same way, to be able to have those conversations in an open and transparent way. And so often, you might see the very obvious ones. Of unhealthy, where they're confrontational. There'll be dissent openly in the room, arguing between board members. And then you've got the passive unhealthy environments, where people are unengaged or disengaged. So, they're not reading the board papers. They're not coming prepared. They're not engaging in the conversations. They're equally unhealthy. But for different reasons. Right. And what approach would you take, if some of those things were happening in a board, to try to reset the culture? Well, sometimes boards get an external, to help facilitate that. It depends on the nature of the board. But, it can be useful to get somebody independent to come in and assess the culture of the board, if the board hasn't recently assessed it themselves. Particularly if there's fractions within the board. It can be very difficult for them to come together, because they're already at opposing sides. Right. So, getting somebody independent to help facilitate that, and decide as a board, who do we want to be? What is our culture as a board? And if that doesn't work, if we can't get alignment, then sometimes the board composition needs to change. Of course, right. Well, thank you. That's been a really interesting conversation. I'm sure we could go on, and dig into this a little bit deeper. But we try and keep the videos as short as I can, so people will watch them. So, a final question, then, for you. What is the best governance advice you've ever received? I think that governance is deliberate. So, culture is cultivated. And if you want a good culture, it's like any relationship. You need to work at it, and decide what relationship you want to have as an active board member. And does that measure up to the expectations of your fellow board members? And so, in order to get that, communication is incredibly important. The ability to communicate with your peer group. Call each other out, if you feel like we're slipping on our standards. I think, yeah, I think it's like any relationship. It's formed, and to be good, it has to be deliberate. Great, okay. Well, thank you very much, Tracey, for your time. Yeah. That's been a really cool conversation. I'll look forward to catching up again soon. Yeah. And I'll see you next episode.