Good board members are always open to learning more about topics relating to the governance of companies. Lifelong learning enables individuals to hone their skills and remain current to keep up with the shifting corporate landscape. In addition, it makes sense to open your eyes to opposing viewpoints and theories that you might not have considered. Literature is one of the best ways to shift your perspective, and this article explores the best books on corporate governance.
Why read books on corporate governance?
Whether these books validate your current position or challenge it, you can gain great insights by listening to thought leaders in governance. These books will cause you to consider your views and either embolden them or help you see different ways to solve the common problems that boards of directors face. Diversity of thought in the boardroom leads to better decisions, and research shows that diverse boards perform better in general.
Here is our shortlist of the books that board members should read.
The 8 Best Books on Corporate Governance
Jeff Gramm is a hedge fund manager and teacher of value investing at Columbia Business School. His book Dear Chairman charts the rise in shareholder activism and how it affects modern corporate governance.
Within the book, Gramm shows how activist investors can help improve inefficient businesses but also push through potentially destructive short-termism.
Along with documenting his lived experience, Gramm illustrates his points through letters offering corporate governance insights from major business leaders, including Ross Perot, Carl Icahn, Warren Buffett and Benjamin Graham.
The Future of Boards: Meeting the Governance Challenges of the Twenty-First Century by Jay W Lorsch
Jay W Lorsch has edited this book to feature contributions from faculty and alumni of Harvard Business School who have insight into and experience with corporate boards.
Published in 2012, the book sought to guide corporate governance using the lessons learnt from the global financial crisis of the late 2000s. It covers director compensation, improving strategic thinking, understanding and resolving boardroom conflicts, and overcoming group pathologies on a board of directors.
Lorsch believes that governance is key to preventing another financial crisis of the magnitude of the one that preceded the book, and the contributors provide salient tips to help guide boards forwards.
Owning Our Future: The Emerging Ownership Revolution by Marjorie Kelly
As a Distinguished Senior Fellow at The Democracy Collaborative (TDC), a non-profit research organisation Marjorie Kelly is interested in alternative forms of ownership for businesses.
In Owning Our Future, Kelly explores alternative ownership structures, which she calls “generative”, in order to find any lesson that boards can learn from them. From a community wind farm in Massachusetts to an employee-owned major UK department store chain, Kelly dives into various business structures and uncovers five essential patterns of ownership design that drive success.
Mean Business: How I Save Bad Companies and Make Good Companies Great by Albert Dunlap
Albert Dunlap was known for heading into failing companies and turning them around. His methods were considered brutal, often involving mass downsizing, leading to him being nicknamed Chainsaw Al or Rambo in Pinstripes.
In Mean Business, he lays out his playbook as used during his stewardship of Scott Paper. Scott made a $277 million loss in 1993 and was on credit watch for excessive debt. Dunlap became CEO and chair in 1994, and just over a year-and-a-half later, Scott posted record earnings, with a $6.5 billion jump in its stock value. A rise of more than 200%.
Although Dunlap remains a controversial figure, this is a fascinating insight into the mind of someone with incredible drive.
Allan Kennedy was scathing of CEOs in his 2000 book, The End of Shareholder Value. He asserts that CEOs prioritised shareholder value in the short term over long-term value for the business, creating share prices that are unsustainable.
Kennedy argues that CEOs should be barred from directorships of other companies, whilst board members would be compelled to act in the interest of all stakeholders, not just the shareholders. He extolled the virtues of regular board evaluations by third parties and holding the board of directors to even higher standards.
Boards That Deliver: Advancing Corporate Governance from Compliance to Competitive Advantage by Ram Charan
Corporate governance expert Ram Charan explores why simply putting in more hours does not necessarily lead to better governance. Charan’s approach is to anchor his examples and solutions to real-world scenarios. Rather than relying on statistics and vague generalisations, he attempts to identify real pain points for boards of directors and ways to overcome them.
In Boards That Deliver, Ram Charan shares the processes that successful boards employ surrounding all areas of governance, from strategy to succession planning to CEO compensation.
The book contains many actionable ideas that boards can implement in order to refine their procedures and become more effective.
The Governance Revolution: What Every Board Member Needs to Know, NOW! by Deborah Hicks Midanek
Deborah Hicks Midanek’s book is another that questions the notion that shareholder value is the single most important goal of a corporate board. Experienced company director and strategy advisor, Midanek argues that the board should be focused on innovation, strategic renewal and investment. She also suggests that maximising shareholder value is a distraction — something she claims is impossible, as all shareholders have different goals and investment horizons.
Midanek is an advocate of the board’s duties being for the good of the enterprise rather than the shareholders. She believes in a model whereby companies treat shareholders as having a relationship with the company, but not owning it.
The book also rejects many of the accepted governance truths, such as the benefits of separating the chair and chief executive officer roles and granting proxy access with limits. Midanek warns that these are not easy wins for improving corporate governance.
Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way by Ram Charan, Dennis Carey, and Michael Useem
Charan, Carey and Useem conducted multiple interviews with business leaders to better understand the changing role of boards in the 21st century. They explore the demands and pitfalls of the new corporate governance model, including tips on how modern boards can flourish.
The book discusses the fact that CEOs are less likely to act unilaterally now and that boards have an important say in decisions made over the future of the business. It also provides a guide to overcoming problems that this might cause, such as bogging down the meeting process.
Boards That Lead helps with recruitment of the right people, successful succession planning, raising the bar on ethics, risk management and more.
What are some examples of different corporate governance systems?
Here are two examples of corporate governance systems:
|Anglo-US model||Board and shareholders are the controlling partiesManagers and chief officers are secondaryCapital and shareholder structure highly dispersed|
|European model||Executive board controls corporate managementSupervisory council controls the executive boardEmployees and investors choose the supervisory councilDecisions often influenced by government and investor banks|
Why is good corporate governance important?
With good corporate governance, boards become more efficient and effective. It is also a framework that reduces the risk of directors making major errors that affect the organisation or its stakeholders.
Who should read books about corporate governance?
Corporate governance books are ideal for board members, as they provide insight into varying theories and points of view. Being able to see other peoples’ perspectives is an important skill for questioning decisions and ensuring they are robust. In addition, investors would benefit from gaining an understanding of the roles and responsibilities of directors by reading these books.
This is a selection of the best books on corporate governance, which will help you understand many of the theories put forward by industry insiders. Even those that do not align with your own views are worth reading, as they could expose you to new ideas and approaches to solving challenges. Understanding a variety of perspectives is important for challenging your opinions and stress-testing them.
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