LONDON – As the season in which public companies hold their annual general meetings progresses, one persistent issue is the lack of genuine dialogue between company officials and the general public. In place of robust debate and discussion among investors, executives, the workforce, and the community at large, the conversation seems to be taking place in different silos, with one group sitting around the boardroom table and another gathered at the kitchen table.
From the outside, a boardroom is all too often viewed as a kind of bubble where big decisions that influence thousands of lives are made by faceless people. They are perceived as places where big bonuses are awarded to chief executives and where horse-trading and old boy networks are more important than merit or hard work. With people outside the boardroom increasingly demanding to hold those inside it to account, opening up avenues of communication is now critical to companies’ long-term success.
An important feature of this shift will be the realization by high-profile executives that they can no longer afford to brush off criticism with the you-just-don’t-understand defense. When Jamie Dimon, CEO of JPMorgan Chase, said that he didn’t think that United States Senator Elizabeth Warren “fully understands the global banking system,” many were infuriated at the arrogant condescension of his pronouncement. His words tapped into a wider feeling that CEOs are out of touch and unwilling, or unable, to respond to tough questions with sincere answers. Even the widely respected investor Warren Buffett missed the mark when he said that Warren “would do better if she was less angry and demonized less.”
In the absence of genuine dialogue about issues like wage discrepancy, corporate social responsibility, data privacy, and a bonus culture that does not seem to provide the right incentives for hard work or to adequately penalize failure, worries and mistrust are guaranteed to fester. Lack of transparency, absence of clarity, and a paucity of answers feeds into the perception that companies are too often engaged in dodgy dealings and can’t be trusted. Worst of all, the breakdown in communication deprives those around both the boardroom and kitchen tables of the opportunity to realize that they are talking about similar problems and share similar desires to find solutions to them.
Chief executives and board chairs need to think of those with whom they interact as people to talk with rather than at. Leaders who can talk are fine; but those who can listen are even better. Business executives need to realize that if they cannot explain their decisions in ways that investors, regulators, workers, and consumers can understand, then they – not the people with whom they are talking – are the problem.
When activist investors want to take a look at a company, the boardroom instinct should not be to circle the wagons and call in consultants to do battle. Instead, boards and executive teams need to ask themselves why their company has become a target and whether there are legitimate concerns to be addressed.
Annual general meetings provide an ideal opportunity to stand up and ask hard questions – an opportunity that investors and community members should make certain is not wasted. At Yahoo!’s recent annual meeting, the board was asked a wide range of questions; but, with the exception of a question or two about Alibaba, few of them addressed any of the real issues facing the company today.
CEO Marissa Mayer was asked questions like why the “underline” icon had been removed from the formatting options in Yahoo! Mail and why there was so much spam in Yahoo! Finance. If companies like Yahoo! are to benefit from occasions like this, individual and institutional investors alike need to up their game and ask real questions about the business in the open forum of the annual general meeting instead of airing their concerns behind closed doors.
For the conversation to be truly effective, however, it must continue between annual meetings. Smart business leaders must provide frequent opportunities for the exchange of ideas and expressions of concern. Silos must be knocked down and bubbles must be pierced, with bridges being built in their place. Tomorrow’s successful executives will be those who take the opportunity to join a real conversation and draw wisdom from the crowd.
Lucy P. Marcus, founder and CEO of Marcus Venture Consulting, Ltd., is Professor of Leadership and Governance at IE Business School, and a non-executive board director of Atlantia SpA.
Copyright: Project Syndicate, 2015.