Page 32 - Insurance Times March 2022

its founder. Few business failures are so inseparable from needs to be changed or dumped. Linking executive pay and
the failings of their promoters. Industry insiders often quote reward schemes to these benchmarks is also vital to ensure
a line attributed to Goyal, “I am the person in Jet. When accountability and to measure the performance of both the
people look at Jet Airways, they look at me.” The garrulous strategy and the executive team.”
founder of the airline, admired by some for his quicksilver
wit, was once its biggest asset but today, he has proved to Independent Directors should also (in addition to the
be its biggest liability. management) be held accountable for board decisions and
audit-related compliance practices. The concept of CEO and
“Some boards tend to believe in their own intuition rather Board chair separation is well accepted in Europe, and
than actual evidence,” she said. “Boardrooms are where key American companies are steadily moving in right direction.
decisions are made and executives are in that room because This would bring a better balance in the boardroom.
they have made quick decisions in the past and they probably Accountability and action against fraud/negligence are
have had a good hit rate, or at least they did early on in major concerns. Professionals (auditors) should be made
their executive careers. As a result, executives feel that they accountable and consequences (punishment) should follow
have good instincts and they become less willing to listen to if there are any deficiencies and slip-ups.
challenge, listen to bad news, or accept contrasting views
from assurance functions that they think are meant to check Experts believe that better executive screening is necessary
the numbers and any legal issues, not set the agenda.” and recent corporate governance scandals may put
executive appointments under greater scrutiny in future.
Ego trips can often turn into nightmare corporate journeys. This May, for example, a joint committee of members of the
“Biases are often projected onto strategies and they become U.K. Parliament published its final report into what went
inextricably linked with directors’ egos,” said James Berkeley, wrong at collapsed construction giant Carillion.
managing director at strategic advisory firm Ellice Consulting.
“Executives take the notion of strategy too personally and 3. Lack of Collective Responsibility
take offense when it is questioned. Boards can then dig in While the buck may stop with boards for pursuing a flawed
and become defensive about something that ordinarily they strategy or for failing to implement a good one, others are
would not be so supportive over.” also culpable. According to U.K.-based risk consultant Keith
Blacker, there is increasing evidence that those who are
2. Lack of Executive Accountability supposed to provide independent assurance on risk and
Berkeley said that there are two ways to prevent boards corporate governance are not doing their jobs properly.
from backing poor strategies, or from continuing to pursue “Auditors, advisors, non-executives, risk managers, internal
them in the face of overwhelming evidence that they have auditors, in-house legal, compliance and others are all
gone wrong. The first—and most preferable—involves hiring meant to present a challenge to the board and act as a
people with the appropriate talent, experience and ‘critical friend,’” he said. “No area of discussion should be
judgement into board roles from the start who can deliver left unchallenged, including corporate strategy. But
the intended strategy, and who are prepared to adapt it— somehow, their contribution often falls short or they are not
or scrap it—if circumstances change. The other is to make
executives more accountable for the strategies they
greenlight and steer by making pay and rewards much more
contingent on actual performance—not just in terms of
financial results, but also in securing the business’s long-term
future by, for example, committing to improving and
investing in recruitment, retention and training programs.

“Making sure that you have a strong leadership team from
the start is crucial, but it is also important to know up front
whether they have the nerve and good business sense to
pull the plug on a failing strategy,” Berkeley said. “There
need to be benchmarks in place to measure success and a
recognition that, if these aren’t met, then the strategy

32 The Insurance Times, March 2022