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Feb 2, 2007

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Corporate Governance and Transparent Leadership

The Jay and The Peacock, Aesop's Fables

Corporate disclosure has always been a sore point between
stakeholders and the management. The decision on what must
go into the public domain is difficult due in part to the reality
that companies thrive primarily on well-kept business secrets
of success. These are legitimate concerns although history had
also uncovered improper practices which were well-hidden and
protected under the cloak of business secrecy. There was
public outcry when the cloak was removed and politicians and
corporations revealed who and what they really were. Thanks
to them, corporate governance had taken on a new level of
urgency and importance. Despite the awareness, high flying
politicians and corporate executives are still tempted to follow
the footsteps of the Jay and project the false image of the
beautiful and well-regarded Peacock.

Story:

The Jay and the Peacock

The Jay and The Peacock

A Jay venturing into a yard where Peacocks used to walk, found
there a number of feathers which had fallen from the Peacocks
when they were moulting. He tied them all to his tail and strutted
down towards the Peacocks. When he came near them they soon
discovered the cheat, and striding up to him pecked at him and
plucked away his borrowed plumes. So the Jay could do no better
than go back to the other Jays, who had watched his behavior
from a distance; but they were equally annoyed with him, and
told him:

"It is not only fine feathers that make fine birds."

Moral:

Fine feathers do not make fine birds.
Make-up may do wonders but deep inside, you are who you are.

Kidding me:

For some light-hearted humor, the fable continues ...

Peacock, being proud but brainless, decided to teach Jay a lesson.
He tricked Jay to go up a cliff with him. When Jay was marvelling
at the surrounding scenery, Peacock pushed Jay off the cliff.

Furious that Jay was not killed, but was instead flying merrily
about, Peacock got hold of his cronies to catch Jay. In the process,
Jay was injured in one of his eyes. As they brought Jay to Peacock,
one of them proclaimed, “Look at the bird with one eye.” Peacock
used his hand to close one of his eyes and looked at Jay.

Despite knowing his fate, Jay appeared rather cool. Seeing a fire
being lit up, he was instantly curious as to how a stupid Peacock
was going to cook him. Jay asked, “Pray tell, how are you going to
prepare me?” Peacock smiled, “Nothing special. I am just going to
tell you you are about to die.”

Peacock was too proud to dirty his hands with the killing. As was
expected, his cronies did the work for him. “Oh ... look at the dead
bird,” one of them shouted. Peacock looked up at the sky, and
asked, “Where?”

Not knowing how to cook birds, they decided to bury Jay. Before
calling it a night, one of the party suggested, “Care to join me for a
drink? Johnnie Walker, single.” Another joined in, “Jack Daniels,
single.” “How about you?” “Peacock, married.”

Moral: Where there is beauty, there is no brain, and vice versa.

Quotable Quotes:

“It is public scandal that constitutes offence, and
to sin in secret is not to sin at all.” ... Moliere

“Love and scandal are the best sweeteners of tea.”
... Henry Fielding

“Oh! Gossip is charming! History is merely gossip.
But scandal is gossip made tedious by morality.”
... Oscar Wilde

“Managers who are skilled communicators may
also be good at covering up real problems.”
... Chris Argyris

“My answer is to stay close to ordinary people
because at heart I am one.” ... Ingvar Kamprad

“Whenever we have compromised on our
principles, we and our customers have been
the losers.” ... Marcus Sieff

[browse collection of quotes and quotations]

Lessons in life:

Many would have known the old proverbial saying that “Fine
feathers make fine birds” just as “Clothes maketh the man.”
From a scientific angle, it does appear that “feathers make birds”
and not otherwise. That is, if you believe that birds originated
from a species of reptiles which were the size of our chickens but
ran on strong hind legs. According to this theory, through the
years of evolution, the scales of these reptiles had transformed
into feathers to enable these early birds to take flight.

Could Aesop be wrong then in his moral lesson that indeed “fine
feathers Do not make fine birds?” Following this train of scientific
reasoning, it may interest you to know that scientists have found
evidence to suggest that feathers are not enough, and the UV
markings on the birds' skin and beaks may have significant
impact on the birds' performance in flight as well. This is the
much I can say since I am no expert in this area. Let's bring the
lesson back to our roles as leaders or corporate executives.

In an interesting speech by Senator Byrd, he had described how
the White House proposal to appoint its own independent
commission to investigate the Bush administration's
manipulation of the Iraq war intelligence was a “real turkey”.
In his opinion, while the proposal had all the razzle-dazzle of
involvement at the highest level, the President was effectively
in control of the committee, including its charter, appointment
of members, and reporting channels.

It reminded me of the Watergate Scandal back in 1972. For those
of you who recall, there was a break-in at the Democratic
National Committee headquarters at the Watergate Hotel in
Washington, D.C. As it turned out, these were not criminals but
undercover agents of President Richard Nixon's administration
to plant listening devices. A Senate committee was appointed to
look into the investigations, which led to Nixon having to fire
several of his trusted aides. Nixon then started a series of actions
which led the public and media to think there was an attempt at
cover-up. He appointed a new Attorney General, and gave him
authority to appoint an independent counsel. The counsel was a
Archibald Cox who did a thorough job. He subpoenaed crucial
recorded tapes, and Nixon intervened by getting him to drop his
subpoena. Of course, Cox refused. That led to the infamous
“Saturday Night Massacre” when Nixon got rid of the Attorney
General, and appointed another person who was willing to fire
Cox. The new Attorney General did as he was instructed.
Immediately the public reaction was rife with calls for
impeachment. After rounds of court hearings and convictions
of most of his aides, Nixon finally resigned from office.

The rosy veils that many corporate giants hid behind were also
responsible for some of the world's biggest corporate scandals.
Just about a decade ago in 1997, Bre-X Minerals claimed to have
literally struck gold with massive gold finds in Indonesia. The
stocks were trading at a high of $280 until the company's chief
geologist committed suicide by jumping out of a helicopter.
Rumours started to circulate that the death was an excuse for
him to abscond with millions of dollars. Further investigations
uncovered the horrible truth, that gold was planted into the core
samples, and that the supposed gold mine was simply a hoax.
The company crumbled overnight.

In 2001 was another stunner when accounting frauds and
corruption led to the collapse of Enron, one of the world's leading
energy companies. It was revealed that the company had
artificially boosted profits and hid debts totaling over $1 billion
through a system of well-planned improper accounting
procedures, manipulations, and bribery. Other than the
convictions of concerned key personnel behind the scandal,
their accountant, Arthur Andersen, was taken to task for
obstruction of justice in shredding their audit documents of
Enron. The eventual dissolution of this large accounting firm
reduced the former “Big Five” to the present “Big Four”
international accounting firms.

The list is endless. In 2002, we learned about WorldCom, the
second largest long distance phone company in U.S., using
fraudulent accounting methods to hide its poor financial health.
The false inflation of the assets value came up to about $11 billion,
forcing the company to file for the largest Chapter 11 bankruptcy
protection in U.S. history. As though this was not exciting enough,
that year saw more skeletons in the closets. Global Crossing
improperly inflated revenue and filed for Chapter 11 protection;
Qwest Communications International admitted to improper
accounting; and Peregrine Systems overstated their sales figures
by about $100 million.

Warren Buffett expressed the business sentiments as such:
“The attitude of disrespect that many executives have today for
accurate reporting is a business disgrace. And auditors ... have
done little on the positive side. Though auditors should regard
the investing public as their client, they tend to kowtow instead
to the managers who choose them and dole out their pay.”

Charities are not spared either. There is an ongoing matter in
Singapore involving its largest charitable organization, National
Kidney Foundation, which prides itself as the single largest non-
profit kidney dialysis provider in the world. A defamation suit
taken by them unwittingly uncovered one of the largest scandals
involving a charity. The allegations of false declarations of their
financial reserves, misrepresentation to the public, and misuse of
public funds are now the subject of pending criminal charges and
law suits taken up by the new management.

These cases led to major changes in the laws on financial
disclosure, corporate governance and regulatory controls. The
public worked in tandem with the media to weed out the black
sheep and acted as 'whistle blowers'. The new thinking for white-
collar crimes is to be the first to confess to the misdeeds and to
apologize. Penalties are usually less severe if you cooperate with
the authorities.

Good public relations, celebrity status, and media darlings offer
no protection to crooks. In fact, the more well-regarded you are,
the more sore the public will feel when they find out that you are
actually not what you are made out to be. It is therefore
imperative that you practise a leadership style that is both
transparent and credible. A couple of tips to think about:-

1. As a leader, executive, or manager, it pays to be honest with
your members or staff. Show keen interest in their work and
concern in the people. Remove all their doubts about working
with you.

2. Ask for their opinions on anything – work matters, company,
you – and respect their feedback. This gives the basis for mutual
trust, and promotes the transparency element in the relationship.

3. Be a little open about your personal habits, and reveal relevant
facts about yourself. You will do that with friends, so why not do
the same with your committee members or colleagues. Make them
look up to you not just as a leader or boss, but as a friend and
confidante too.

4. Commitment is important. If you agree on something, fulfill
your part of the bargain. If you have to renege on a promise,
explain to them your reasons.

5. Walk the talk. Ingvar Kamprad, the Swedish founder of IKEA
(cited above), is famous for living frugally despite being the 4th
richest person in the world last year. He drives a 15-year-old car,
flies economy class, eats cheap food, and leads as ordinary a life
as his IKEA staff.

6. Communicate. Be courageous and accountable. Admit mistakes
and shortfalls. Not every news is good news, and a large part of
good training is in communicating bad news. If you are able to
handle it sensitively and candidly, the bond between you and your
members or employees will grow ever stronger.

While organizations and corporations are working on good
governance and practices to become more transparent, the people
at the helm should also practise similar transparency principles. A
transparent leadership adds credibility to a working relationship.
Over time, the others will follow in your footsteps, and if the
people in the organization or corporation work in a transparent
manner, it sure beats any well-drafted corporate governance rules.
In my mind, all the loud talk about governance is nothing more
than 'fine feathers' which do nothing to turn a company of corrupt
individuals into 'fine birds'.

Related Articles:

Communicate truthfully and effectively
Leaders as Role Models

Books worth reading:

For a good discussion of all the corporate meltdowns of Enron,
Tyco, Adelphia, WorldCom, Tyco Laboratories, as well as
corporate governance guidelines and codes of practice in
developing and emerging markets, do read this book
Corporate Governance by Robert A. G. Monks and Nell Minow.

One of the bestseller books on leadership is this Leadership and
Self Deception: Getting Out of the Box. It is in an easy-to-read
story/parable format. Readers will discover how motives
behind the leadership can affect the minds of the followers. If
the leaders are not sincere, and persist in deceiving themselves,
their actions will not only harm their self perception, but also the
relationships with the people around them.

If you are leading non-profit organizations, an instructive book
to read is Governance as Leadership: Reframing the Work of
Nonprofit Boards. It contains well-researched theories and
practitioner tips in the areas of fiduciary duties, effective
trusteeship, and provides a road map for non-profit trustees and
executives to leadership governance.

© Business Fables and Management Lessons

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2 comments:

SUBHASHIS said...

Very true .Thanks for the article

Ben said...

What a fantastic site you have! I haver never seen anything like it. Just wonderful.
Here is a page on another site with 'stories' about corporate governance

Corporate Governance

Look on the right at 'Board Movies'
There is a list with over 20 movies about Corporate Governance.
Besides your site, it is the only place I have ever seen with 'stories' about corporate governance.

A MATTER OF PERSPECTIVES

Perspective Perspective Perspective