The Companies Act tasks directors to apprise themselves of company activities and make up their own minds as to how decisions should be taken. Strong governance structures should also exist in companies. This spirit of independence and good governance should infuse leadership so that the best interests of the company are safeguarded.
Yet when we look around today, we see State Owned Companies floundering and some multinational heavyweights like KPMG, SAP, McKinsey and Bell Pottinger in serious trouble.
“Surely” you ask “why didn’t some of their directors stop these disasters?”
The herd mentality trap
It is human nature to adopt a herd mentality particularly when there is a forceful and strong CEO. That is precisely why the framers of the Companies Act required independent leadership and good governance.
Good governance and leadership consists of demonstrating accountability, honesty, transparency and respect for all staff and stakeholders. You don’t need committees and red tape if your business is a small one – your leadership should demonstrate these characteristics.
It also pays to be a good listener as this trait curtails “leadership cults”. Encourage your managers and staff to challenge you.
Short term thinking often gets a business into trouble. Listen carefully to your independent thinkers.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)