Nowadays, risk management and compliance are the bride and groom of corporate governance. Daredevil and Wimp are the fighting bridesmaids. Although, fighting? These days almost all members of the board of directors or supervisory board are wimps, softies. Risk management has become an excuse to avoid audacious entrepreneurship. Compliance is the magic word with which regulators all over the world put a noose around the neck of entrepreneurship. The noose is just not pulled tight enough to lead to complete suffocation. This applies to risk management as well, where the same misguided, mechanical and officious suffocation method is replicated. Successful entrepreneurship is often nipped in the bud by a use of checklists that results in a weak risk appetite matrix. Then the supervisory board can feel at ease and continue to sleep. After all, the risk of personal liability has been covered by the fact that the topic of risk management has been put on the agenda and was sufficiently discussed. Wimps, in other words.

The other extreme are the ‘Daredevils’. They are the autocratic entrepreneurs who don’t take anyone’s advice and just do their own thing. They do not tolerate an active supervisory board. They are often the pioneers who made the company big, before all of the rules and regulations could take root. They don’t have any fears or doubt. They easily find a following, these Daredevils, because a lot of people like to follow a ‘leader’. He says he knows, so he must know! And that’s of course the danger, because Daredevils are great for breaking through the frontline, but they are unsuitable for sustainable development and growth. What do you do as a supervisory board member in such a field of power relations?

First and foremost you’ll need to look and listen very carefully. You must be fully aware what stage of development the company is in. Often a company is in a transition period from one phase to another. A typical pitfall during such a transition period is a lack of awareness of that transition: most stakeholders act as if the phase that is being left behind is still the current one. In doing so, they hinder the company’s transition into the next phase. Therefore, the supervisory board must be both the lubricant and the go-getter. Supervisory Board members must be able to take sufficient distance to see that changes can and must be implemented. Old patterns of behavior are then no longer appropriate. That sometimes means that Daredevils should make way, because there is no longer a frontline where their fighting ways are functional. Replacing the Daredevils by pencil pushers doesn’t really help things either, though. And if we’re talking about an organization with only wimps, it wouldn’t be a bad idea to temporarily throw a Daredevil in the mix. Risk management? Absolutely! But don’t forget: you learn the most from your mistakes. This also applies to an organization. If you repeat mistakes or willingly seek them out, you are incompetent. If you avoid mistakes, you are lost. If a supervisory board member doesn’t understand that dynamic, he must go, Daredevil or Wimp.

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Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost.

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