The role of board and its committees in managing strategic risk and Failure of governance and its impact on strategy
The Captains, the Crew, and the Kraken in the Deep
Every company is a ship on a vast, unpredictable ocean. Some days the sailing is smooth, the winds are fair, and the destination seems certain. But the sea is always changing. Beneath the sunlit surface, ghost currents shift, phantom reefs materialize, and leviathans of risk-the kind that can splinter a hull and drag a mission to the depths-are always lurking.
In this high-stakes voyage, the board of directors is the command crew on the bridge. Their job isn't to scrub the decks or hoist the sails; it's to chart the course through the heart of the storm. They are the keepers of the map, the watchers of the weather, the ones who must ultimately answer the most fundamental question: What kind of ship are we? Are we a nimble explorer, darting into uncharted coves for rare treasure? Or are we a heavily armored galleon, built to withstand anything the main trade routes can throw at us?
This choice-the company's "risk appetite"-is everything. It's the soul of the strategy. Too timid, and the ship rots in the harbor, falling behind sleeker vessels. Too reckless, and you're chasing legends straight into the kraken's lair. The board's sacred duty is to provide oversight, to stand on the quarterdeck and ask the tough questions, ensuring the captain (management) isn't just staring at the horizon with wishful thinking, but is truly prepared for the monsters and the magic of the deep.
To see the whole ocean, the command crew relies on specialized officers, each with a unique vantage point:
The Chief Engineer & Quartermaster (The Audit Committee): This is the crew that lives in the heart of the ship. They are obsessed with integrity-not just of the numbers in the logbook, but of the vessel itself. They are constantly tapping the hull for weaknesses, checking the soundness of the rigging, and ensuring every system is running as it should. They work with the auditors-the outside inspectors-to make sure no rot has set in below the waterline, guarding against the siren call of cutting corners on compliance and controls.
The Crow's Nest Lookout (The Risk Committee): More companies are realizing they need a dedicated lookout, someone whose only job is to climb to the highest point with a long glass and scan the horizon. This committee isn't focused on the engine room; they're looking for the glint of a pirate sail, the tell-tale sign of a coming squall, or the distant shimmer of a new, undiscovered land of opportunity. They see the big picture, the world outside the ship, and they translate that panoramic view into actionable intelligence for the entire command crew.
The Crew Officers (Other Committees): From the people who manage the crew's morale and pay (Compensation Committee) to those who plot new ventures, every officer has a role in managing risk. A smart board ensures their pay structure doesn't reward the crew for sailing the ship aground in a mad dash for treasure, creating a culture of shared responsibility. When these officers talk to each other, the ship sails as one. When they don't, it's chaos.
Adrift: The Ghost Ship of Failed Governance
But what happens when the bridge goes dark? When the command crew is asleep at the wheel, or worse, arguing amongst themselves while the storm rages? The consequences aren't just ripples; they are a tidal wave that swamps the entire enterprise.
Sailing Blind: When governance fails, the flow of information to the bridge is cut. The compass spins wildly, the charts are written in invisible ink, and the lookout's warnings are lost in the wind. The board, starved of real data, makes decisions based on rumor and fear. They mistake a pod of dolphins for a sea monster or a lighthouse for a ghost light, steering the company toward mirages and away from safe harbors.
The Rot Below Deck: With no one inspecting the ship's integrity, weaknesses fester. Small cracks in the hull of compliance widen. The ropes of internal control fray. Financial misconduct, like barnacles, accumulates unseen, slowing the ship down until one day, a single wave is enough to break it apart. This is the story of Enron and Theranos-ships that looked magnificent from a distance but were hollowed out and rotten from within.
The Flag of a Pariah: A ship earns a reputation. When governance failures lead to scandal and collapse, the ship's flag becomes a warning to others. Investors-the backers of the voyage-flee. Talented sailors refuse to sign on. The company's name, once a symbol of pride, becomes a whispered cautionary tale in the taverns of the market. Shareholder value isn't just lost; it's scuttled.
A Ship at War with Itself: Perhaps the most insidious danger is internal decay. Without clear leadership from the bridge, the crew divides into factions. The navigators fight with the engineers, the deckhands ignore the officers. Everyone blames each other as the ship takes on water. The most brilliant strategy in the world is useless if the crew is working to sink itself.
Ultimately, strong governance isn't about bureaucracy or checking boxes. It's about leadership. It is the steady hand, the watchful eye, and the unified voice on the bridge that allows a ship to not only survive the storm but to harness its power. It's the difference between a vessel lost to the annals of history and one whose legendary voyage becomes a legacy.
Separation of the roles of CEO and chairman and Role of non-executive directors
The Two Captains and the Ship's Sages
Imagine a grand, old ship setting sail on a vast, unpredictable ocean. The journey is the company's future, the destination is success, and the stormy seas are the world of risk. For this ship to not just survive, but to thrive, the structure of its command is everything.
So, who's steering this vessel? For years, we've debated a crucial question: should one person be both the on-deck Captain, shouting orders and managing the crew day-to-day, and the Admiral of the fleet, setting the grand strategy from a faraway map room? Or should these be two different people?
This isn't just boardroom jargon. It's the heart of how a company protects itself and grows.
The Hands on the Wheel vs. The Eyes on the Horizon
Think of the CEO as the Captain. They're on the bridge, hands gripping the wheel, feeling the spray of the ocean on their face. They know the crew by name, they feel the ship's every shudder, and they are obsessed with making headway, navigating the immediate waves and currents. Their focus is powerful, immediate, and absolutely vital. They live and breathe the doing.
Now, think of the Chairman as the Admiral. The Admiral isn't on the bridge of just one ship; they're responsible for the entire fleet. They're in the war room, surrounded by maps of distant lands, weather charts, and intelligence reports. Their job isn't to steer the ship today, but to ensure it's sailing towards the right continent, that it's sound enough for the whole voyage, and that the Captain isn't so focused on speed that they're sailing straight towards a pirate cove or a hurricane.
When one person tries to be both-the CEO-Chairman duality-you have a Captain who is also judging their own navigation. They're drawing the map and then claiming they followed it perfectly. It feels powerful, but it's a lonely and dangerous perch. Who's there to say, "Captain, with all due respect, your map is leading us into the storm, not around it"?
Separating these roles provides a beautiful tension, a healthy balance:
An Honest Mirror: A separate Admiral (Chairman) can look the Captain (CEO) in the eye and give real feedback. They can challenge the course, question the speed, and ask the tough questions, because their job isn't to sail the ship, but to protect its journey.
A Clear Conscience: When roles are split, the Captain isn't deciding their own bonus or evaluating their own epic performance. That conflict of interest vanishes, and trust flows back into the system. Everyone knows the decisions are being made for the good of the voyage, not the glory of the Captain.
A Chorus of Voices: An independent Admiral fosters a culture where everyone on the bridge feels they can speak up. The lookout in the crow's nest isn't afraid to shout "Iceberg!" because they know someone at the top is dedicated to listening. This creates a richer, wiser, and safer command deck.
The real magic happens when the Captain is free to be the best damn Captain they can be, knowing the Admiral has their back and is watching the horizon for threats they're too busy to see.
The Sages in the Cabin: The Power of the Outsider's Eye
But it's not just about the two people at the top. Every great ship carries a few passengers who aren't part of the crew-the Non-Executive Directors (NEDs). These aren't just any passengers; they are wise sages. An old astronomer who knows the stars, a master shipwright who understands the groans of the wood, a veteran diplomat who can read the flags of distant...
