ON DIRECTORSHIP is by PETER TUNJIC.

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 a leading voice in the re-discovery of what corporations are and why they exist.

When Do We Start Talking About Promises?

Directors don't just make decisions they exchange Promises.

Directors create value when they ensure Corporations exchange the best possible Promises with Trading Partners (you might call them Stakeholders).   

If creating value is the goal why not meet the challenge head on? 

Instead, there is a tendency to argue the long way round.  Risk, diversity, gender, independence, which committees to form, which personalities make better directors etc are no where near the "money".  They're part of the mix but there is a more obvious question to ask - Can this Board trade the Corporation's Promises into greater strength, resilience and endurance?

If you think we don't need to talk about Promises consider the current debate over excessive executive remuneration.  Surely it comes down to negotiating better promises for Corporations and encouraging directors to be commercial.

Here are 10 questions that help boards make better promises, mitigate risk in the process and get a commercial culture:

  1. Why is the Corporation exchanging Promises?
  2. Can the Promises be made?
  3. What is promised by the Corporation and what is the value?
  4. What is promised to the Corporation and what is the value?
  5. How will the Corporation keep its Promises?
  6. What are the assumptions?
  7. What limits do the Promises place on the future?
  8. What is the risk/probability of bad or broken Promises?
  9. Is the risk/probability priced correctly or mitigated?
  10. What contingencies are in place for a bad or broken Promise?

 

 

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Uncommercial Capitalism