I was recently invited by the accountants’ body, the Institute of Certified Public Accountants of Kenya( ICPAK) to run a session at their 7th Annual Governance and Ethics Conference. The topic they chose for me was “Inside the boardroom: the realities of shareholder engagement”, and this in the context of the overall theme of the event, “Sustainability and Convergence”. I felt challenged by the title thrown at me, and I was happy to accept for an extra reason: I am the chairman of the council of KCA University, and since ICPAK is our sponsor I would be addressing my shareholders, the institute’s members. In preparing the presentation my mind first took me to the two key words in the theme, and I began with “convergence”. For in whatever I do, whether as a director or a consultant, I am always focused on convergence, on helping to bring people together, aligning their energy by building healthy cultures. As for “sustainability”, in today’s world we are increasingly conscious of the need to think beyond the next quarter, the next year, to longer term sustainability. This inevitably requires organisations of every kind (not just the giants) to be sensitive to shareholders yes, but now more than ever to all key stakeholders. I could readily see why the two words were chosen together, for surely unless there is convergence between stakeholders – among whom the shareholders – you can forget about sustainability. So here was my launch platform. I would elaborate on how to bring about convergence, this in support of sustainability, and then explore the engagement of shareholders in such a context. Within the context, my terms of reference clearly specified that I had to discuss how this should unfold in the boardroom. Did this make my task easier or more difficult? In the boardroom, shareholders are represented by the directors they appoint at their Annual General Meetings. Such representatives sit alongside independent (typically non-executive) directors, and executive directors (those who participate in the organisation’s management). But in the boardroom good governance allows no room for differentiation of perspectives, however much the actual realities may differ. Each and every director must only be concerned with the best interests of the organisation. They all strive to add value as best as they can with that one unified objective, and none among them is more or less important or influential. So where does engagement with directors who represent shareholders come in? Why must they be singled out for special attention? It is because their principals, as Roger Hitchcock of the Sirdar Group expressed it to me in the context of private companies, are “legitimately selfish” in their objective of seeing some combination of dividends and growth. Yet when these directors enter the boardroom they are obliged to become, like any other director, “legally selfless”. Much comes down to how a chairperson engages those at the table. In those boardrooms, is their leader talented at converging fellow directors around building sustainability? Does that leader know how to engage the “legitimately selfish” outside that room so they focus only on becoming the “legally selfless” within it? Take the example of a board agenda item, again in the context of a for-profit company, to decide on how much of a dividend to pay. Directors representing shareholders may be inclined to press for higher amounts, but they must not succumb to such temptations if it is other than in the interest of the company. If higher disbursement will starve the organisation of needed capital then sustainability will be compromised. So the mature, responsible shareholder-elected person in the room will go for gratification-deferral, in support of future benefit. I am happy to report that I duly performed at the conference, in front of around two hundred of KCA University’s shareholders. I laid out my thoughts on convergence and sustainability, taking time to review how what is discussed at board meetings will support these two key pillars of governance and ethics. You’ll have to ask those present how well I engaged them on the subject. But alongside addressing my theme, I can confess that I did take advantage of this unusual opportunity to enhance shareholder engagement with the university. The writer is chairman of a management consultancy, ‘The DEPOT’ The views expressed in this article are of the author.
