Do you recognize the mechanism that the same patterns of life and habits can be very functional in a certain phase in your life, but can rather form a blockade later? There are plenty of examples hereof in psychology. A child not feeling safe can resist it with aggressive behavior. The opposite is also possible: the child actually withdraws into itself when threatened. At the time of the threat, both reactions are effective to protect yourself from the threat. Later in life, an aggressive attitude picked up in the meantime or acquired modesty can become an impediment for forging healthy relationships. A primary reaction once effective in the past thus becomes a blockade for further development in the present.
Anticipating on change
This is no different in a company. In periods of growth and prosperity, a looser attitude towards spending may arise. That is also a good thing, because growth often requires substantial investments. Subsequently, the company’s economic situation deteriorates somewhat, but the looser financial attitude is not changed. In that case, the company can suddenly very quickly get into financial trouble. All stakeholders in a company can learn from that.
Good governance requires the ability to notice changes in the environment quickly. It requires flexibility. You have to dare to give up certain patterns and habits that have become second nature in time, and to transform to new patterns. The supervisory board has an important task in this respect. Because they have more distance to the company, supervisory directors are often able to notice changes surrounding the company sooner than the management board. They can subsequently help the management board to become aware of the need to change course.
Out of comfort zone
The shareholder also has to be aware of a changing environment. He also has to adjust his behavior to it. The same applies to the employees. Retiring at age sixty is not possible anymore if everyone lives ten years longer on average. So you have to work longer, too. Rights and obligations are never absolute. They transform with time into ever new forms. This requires flexibility from everyone. Sometimes this is difficult. In general, people are very conservative. You prefer matters not to change too much. People bask in their comfort zone, reluctant to come out of it.
A good example of governance of state-owned companies is the transformation from what once were government services (public housing, public transportation, power supply, telecommunications, etc.) into state-owned companies and state-owned foundations. The well-known hierarchic structure of a department and the accompanying top-down relationship from Minister to Director or Secretary General and so on downwards is no longer applicable. Friction is created when the shareholder continues to think he is at the head of the (meanwhile privatized) company as if that company is a service or department.
So a minister also has to get used to not being able to give the director of the state-owned company instructions. He cannot direct the supervisory directors either, except with the legal options every shareholder has. The supervisory directors, in turn, also have to get used to not being the boss in the company. The same applies to political leaders. They “divide” the most important positions on supervisory boards of state-owned companies and boards of foundations. They sometimes think that the other members of the party that acquired their new position “thanks to the party” have to follow the instructions on behalf of the party in their supervisory work. But this is not the case. Limited liability companies and foundations have other rules of governance than services or departments or political parties. In this process of privatization, the true political leader consequently turns out to be a transformer, not only of others, but also and particularly of himself. He knows how to adjust his behavior to the new circumstances. If you do so, the company flourishes, if you don’t, it will be ruined. The taxpayer bleeds.