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InReview – Issue 34

Back to the Drawing Board: Designing Corporate Boards for a Complex World by Colin B. Carter and Jay W. Lorsch; Boston, MA, Harvard Business School Press, 2004; xii, 242 pp.

Colin Carter is a Senior Vice President with the Boston Consulting Group, and Jay Lorsch is a professor at the Harvard Business School.

In the wake of the business ethics scandals beginning with Enron and Andersen, critics have come forward with their quick fix solutions, many focusing on the governance role of the board. Proposals include separating the chairman and CEO positions, ridding the board of inside directors, changing compensation schemes for directors, limiting terms, and generally creating higher standards of accountability for boards.

All of these proposals sound good on the surface. They seem to inhibit lax practices that lead to ethics breakdowns. Perhaps, say Carter and Lorsch.

In a very insightful analysis of corporate boards, they study these and other quick fixes, looking for unintended consequences in the proposals. For example, more independent directors would seem to bring objectivity to the board, but in fact this would mean the directors would be less knowledgeable about the business and therefore more dependent on the CEO for information about the company. The net result could be a CEO who is less accountable to the board.

Boards can play a stronger role in corporate governance, and many of the proposed suggestions can be made to work. But board members have limited time to do their work, and not recognizing this limitation creates unrealistic expectations. The authors’ proposal is to think through how to best allocate the limited time of board members to achieve best, not perfect, results.

This is a remarkable book on corporate governance that details out nuances and unintended consequences of a myriad of quick fixes. Anyone who is prepared to offer a quick solution to governance issues through board changes should read this book carefully.

My only regret is they limited their discussion (perhaps because of their experience) to boards of publicly traded companies. Many of their constructive conclusions apply equally to non-profit boards and boards of private companies.

Reviewed by Al Erisman

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Positive Organizational Scholarship: Foundations of a New Discipline edited by Kim Cameron, Jane Dutton, Robert Quinn; San Francisco, Berret Kohler, 2003; 465 pp.

Positive Organizational Scholarship (POS) is a new research movement in organizational studies focused on understanding the mechanisms that enable human excellence in organizations. This book is edited by University of Michigan (birthplace of POS) professors–other contributors are from respectable institutions such as Michigan, MIT, New York University, Harvard, and others. Though POS isn’t a mainstream movement, these are serious scholars who deserve to be heard. They propose a lopsided majority of organizational research focuses on negative phenomena. To tip the balance, POS is concerned with “positive deviance” to “understand what represents the best of the human condition in organizations.”

A total of 20 articles cover three main subject areas: (1) virtuous processes and positive organizing, (2) upward spirals and positive change, (3) positive meanings and positive connections. As an example, a chapter in section one contrasts “transcendent” behavior in which persons are causal agents of their selves and their environment, with “traditional” perspectives in which behaviors are viewed as a result of an interaction between persons’ traits and their environment. How would organizations function differently if people took greater thought about the moral agency of their actions?

I find the ideas and theoretical underpinnings of POS to be really energizing. If a positive view on how organizations should work better is contagious, POS is the virus. Let’s just hope it’s a virus for which there’s no cure. To catch the bug, check out www.bus.umich.edu/Positive/.

Reviewed by Gerard Beenen

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Leadership on the Line: Staying Alive Through the Dangers of Leading by Ronald A. Heifetz and Marty Linsky; Boston, MA, Harvard Business School Press, 2004; xi, 252 pp.

Heifetz and Linsky are faculty members of the John F. Kennedy School of Government at Harvard University. Heifetz is author of Leadership without Easy Answers and cofounder of the school’s Center for Public Leadership. Linsky is Faculty Chair of many of the school’s executive programs.

Leadership, whether in business, at the university, in politics, or at home is a tough job. It is much more difficult in a world changed by technology, values, globalization. Heifetz and Linsky confront the difficulties head on, offering insight from their combined fifty years of teaching and consulting. I say insight, because they avoid the trite, quick fixes that some authors put forth as a means to reach a broad, popular audience.

I particularly liked their characterization of how people deal with change.

“People cannot see at the beginning of the adaptive process that the new situation will be any better than the current condition. What they do see clearly is the potential for loss.”

Understanding this initial reaction to change can help the leader address, rather than be broadsided by, the resistance. And while the authors said nothing specifically addressing the technological change that hits so many companies, the application of their ideas to this case is obvious.

The book deals very practically, and deeply, with the many issues that confront the leader. It will be a valuable addition to the library of anyone in a leadership position.

Reviewed by Al Erisman

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The Naked Corporation: How the Age of Transparency Will Revolutionize Business by Don Tapscott & David Ticoll; New York, Free Press, 2003; xv, 348 pp.

Toronto-based researcher and consultant Don Tapscott is one of today’s most prolific and insightful analysts of the impact of information technology on business. He is author or co-author of such books as Paradigm Shift, The Digital Economy, and Growing Up Digital. Ticoll and Tapscott previously co-authored Digital Capital and Blueprint to the Digital Economy. Tapscott was also featured in the January-February 2002 Ethix magazine “Conversation.”

Tapscott and Ticoll’s central message is simple: information technology makes information widely accessible whether we like it or not. Preventing others from knowing what you are doing is almost impossible. Transparency is a growing and irresistible force in business. “Corporations have no choice but to rethink their values and behaviors–for the better. If you’re going to be naked, you’d better be buff!” (p. xi.).

The Naked Corporation is full of stories of how transparency brought to light unethical or illegal business practices by companies which were then punished in the marketplace. If your operations are going to be transparent to all of your stakeholders, they argue, your best strategy is to embrace a deliberate strategy of openness–and then ensure that the corporate reality seen by those stakeholders is more or less aligned with the values of the observers. In this way transparency is a driver of better corporate ethics. The business case for transparency (plus good ethics) is that it nurtures the sort of trust and cooperation essential in the era of extended business networks and knowledge work.

Tapscott and Ticoll acknowledge the counterarguments. For example, some information needs to be kept secret or confidential–not everything in life or business is enhanced by full disclosure to all comers. And the very same technologies that distribute information and illuminate situations can also be used to distribute dysinformation and to obscure situations. Tapscott and Ticoll might be termed “optimistic realists” on these issues. I hope they turn out to be right. In any case, anyone in business will benefit by reading The Naked Corporation and considering these issues.

Reviewed by David W. Gill

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