Compliance is important, but more emphasis on compliance means less emphasis on good governance.
Earlier this season in episode 104 I confessed that the 20 years of work I did on board ratings was maybe not optimally spent. The heart of the problem is that I was one of many who were perpetuating a false equivalence between good governance and compliance, or in my case good governance and the disclosure of specific information in specific ways. Obviously, complying with rules and communicating truthfully and transparently with stakeholders matter a *lot* but they’re not at all the same as good governance. And what happens when people like me put pressure on boards and executives to invest their scarce time into compliance with external expectations that are unrelated to good governance is, well, good governance is less likely to happen. If you buy in, even a little, to my definition of good governance as the act of intentionally creating effective conditions for decision-making, then you already know what I’m talking about. A compliance-oriented agenda clearly doesn’t describe effective decision-making conditions. Honestly, the fact that real-world boards of large, sophisticated listed companies spent time worrying about the board ratings that I ran kinda feels embarrassing to me now. If there’s a message here it’s this: to all you regulators, institutional investors, activist investors, researchers, journalists, and anyone else who has the platform and wherewithal to compel directors to comply with more rules and expectations, before you open your mouth please ask yourself if that compliance is really in service of good governance.