Review The Case of Process-Oriented Boardroom dynamics found on pages 228 - 235 in Boards, Governance and Value Creation.

Review the case using the Graduate Case Study Format (introduction / analysis/ solution / justification / summary) to structure a comprehensive analysis. Here is the case:

The case of process-oriented boardroom dynamics

In one of our research projects we were flies on the wall in the corporate boardroom of the TINE Group in Norway.57 The TINE Group is a cooperative with about 5000 employees. The corporate board consisted of fourteen directors ten elected by the owners and four elected by the employees. The CEO and other people from the TMT were not formal members of the board with voting rights, but five of them participated during most board meetings. Observing the boardroom culture Our first and immediate observation as we entered the boardroom was the positive atmosphere among the board members. We identified a definite and supportive decision-making culture. This was confirmed during our further observations, even though we later got a more detailed and distinctive picture. The atmosphere in the boardroom was characterised by friendliness and openness, but with a strictly structured meeting agenda. Here are some of our observations.

First, the board members clearly enjoyed being together. They looked forward to the board meetings and to seeing each other. That was the case for all the board members, including the union representatives, the CEO and the TMT.

Second, we got the general impression that the board was a well- functioning social system in which trust and confidence were built on openness and the willingness of all board members to contribute and to say what they thought. The board members were not sitting on the fence defending themselves. They were open to sharing information and knowledge and to entering into arguments. However, they were generally also open to and willing to accept alternative outcomes from the board decision-making processes.

Third, the board members devoted considerable time to their work on the board. Huge piles of documents were read before each meeting, and all the board members were involved as board members of subsidiary companies. They had regular meetings with the owners through the regional membership organisations. Many of the board members were willing to spend close to 50 per cent of their working hours on activities related to the TINE board.

Fourth, we found that creativity was stimulated through the variety in the personalities of the board members and various task-related conflicts. We observed the variation in contributions among the board members. Most of the owner-elected representatives had similar backgrounds, but there were so many representatives that the differences in personalities became very evident. This was illuminated by the nicknames we gave them for example, the crusader, the politician, the analyst, the strategist, the sound farmers wisdom, the summariser, the women alibi, the unionist, etc. We also observed how managerial interests were challenged by various regional interests, employee interests, societal interests, gender- related interests, etc.

The above observations gave a picture of a process-oriented decision- making culture. Great emphasis was given to hearing all voices, to involving the whole board and to attaining unanimous decisions. This was a very time-consuming process, and the board meetings did last a long time. However, this decision-making culture the cohesiveness, the openness and generosity, the involvement and use of time, and the creativity set the scene for board-level dialogue on a strategy that enabled part-time board members to shape the thinking of executives and vice versa. The board members involvement inside and outside the boardroom made it possible to bridge the gap between the knowledge of the board members and the executives. Our conclusion was that the culture in the corporate board of TINE embedded board decisions both in relation to the corporate management and in relation to the owners. The boardroom was a communication arena that, with its focus on processes, shaped the context for strategic debate.

How to create a process-oriented decision-making culture

Our observations made us reflect upon the elements necessary to create a process-oriented decision-making culture.

The chairperson

Board leadership may have important effects on group performance. The TINE board chairperson was a full-time, non-executive chairper- son. One aspect of being non-executive is that he did not have a per- manent office at the TINE headquarters, and one of his main tasks was related to working with the owners and other external stake- holders. He was, without doubt, the leader of the board. He was the one running the process leading to the establishment of the present TINE Group, and he had chaired the board that selected the present CEO. The chairperson acted like an industrialist building an empire. It was important for him personally that both TINE and the board were working well. He was the one, as the builder of an empire, who was setting the standards. Thus he also displayed enormous involvement.

The chairperson was highly respected. He was praised for creating enthusiasm among the board members, and he was good at running processes. He has a role model with high integrity. Sometimes the board members even made decisions based on loyalty to him more than on the contents of the particular case. One of his mottos was When you search for the best in others, then you will find the best in yourself. He was clever and enthusiastic about including and using the potential of the individual board members. We observed, however, that he was also skilled in using a large number of techniques in influencing board decision-making outcomes. Such techniques included preparatory discussions with the CEO and other board members, detailed personal mental preparation before each meeting, summarising discussions, and arranging the voting order.

Codes and norms

Codes of best practice exist, first and foremost, to create norms and structures that ensure that board decision-making takes place in efficient and just ways. They are there to create board effectiveness and to bridge the gap between board task expectations and actual board task performance. Norms may be formal as well as informal, and informal rules of the game may be more important than formal regulations and structures. Norms may include expectations about attendance, advance preparations for meetings, values and corporate cultures, and ethical standards. Our observations were that the board norms at TINE reflected norms from cooperatives and not-for-profit organisations rather than those from investor groups and stock markets, from managerial hegemony and business elites, or from family businesses. Process-oriented board involvement is one such norm. There is a tra- dition that boards are both the formal and the real decision-makers, and the board members are very conscious that decisions need to be embedded among the members. The use of time, commitment and inde- pendence were among the norms we observed.

Meetings and structures

The board structures at TINE include the length and frequency of the meetings, board-management relations and the attendance of the TMT at the meetings, preparations and presentations of the items on the agenda etc.

One main feature is that board meetings in practice usually lasted two days, and quite often a third day was added for example, when there was a strategy seminar, a board development seminar, council meetings or the annual owners meeting. In most cases some social activities (or at least a dinner) were arranged in the evenings. The board members therefore had considerable time to socialise and to discuss matters in a setting other than the formal meetings.

One reason for having such long meetings was so that all the board members should be able to voice their opinions, and on most major items on the agenda the chairperson was inviting a round. This meant that each board member was asked to give his/her opinion. A consequence of this practice was that a comment or an idea from one person often triggered ideas from the others. This initiated some very creative sessions: several times we observed how a comment from one person led to discussions that resulted in important and relevant decisions.

The long meetings were needed to cater for the presence of people from the top management team. The various items on the agenda were prepared by various persons in the TMT and their respective staff. They also made decision proposals and presented the case for the board. Most often the decision proposals were changed after the discussions in the boardroom. The CEO and the board chairperson were clearly open to these changes, and they did not seek any kudos from having their own proposals accepted. It was possible, as several of the directors in the TMT were present at the board meetings, to express subtly nuanced opinions on various issues. This made it easier for the board members to get involved in creative discussion.

At every meeting there was an item on the agenda called open post. On this item the board members were invited to introduce issues they wanted to have discussed, and the CEO and the chairperson also introduced issues they were planning to put on the agenda at a later meeting.

Informal communication

Formal communication between the TMT and the board should go through the CEO, and the CEOs communication should be with the chairperson. However, TINE had a structure wherein the members of the corporate board and the members of the top management team were on the same subsidiary company boards. A system of internal interlocking directorates existed, and this system created professional and friendship ties between members of the corporate board and the TMT. These interlocks facilitated communication and coordination.

These examples have demonstrated that the board structures at the TINE Group made it possible for the board members to develop the context for the strategic debate. They shaped the content, context and conduct of strategy and important decisions, and their influence was continuous and not confined to discrete decision episodes.

Decision- versus process-oriented culture

We got a picture of a process-oriented boardroom culture at TINE. Many of the features we saw are almost the opposite of present practice and recommendations in corporate governance development. In table 8.3 we contrast aspects of a traditional, decision-oriented boardroom culture with the process-oriented culture we found in the case of TINE.

Board task expectations are criteria for board effectiveness. The main board task expectations at TINE were embedding and participation in strategic decision-making. The boardroom culture was characterised by cohesiveness, openness and generosity, preparedness and involvement, and creativity. Codes of best practice and agency theory emphasise the control of managerial opportunism and the ratification of decisions as board effectiveness criteria. The boardroom culture should display codes of best practice that can be described by criticality and independence.

Various aspects of board dynamics are listed. The decision-making speed at TINE was slow and the board meetings were lengthy. The board consisted of members of long standing. The opposite characteristics are often recommended in codes or in practice.

In TINE there were a large number of board members, diversity among board members was encouraged and appreciated, and the strategists were the dominating board members. In practice elsewhere we often find that having a small number of directors is encouraged, and that board members are homogeneous. The type of board member advocated in the ongoing corporate governance debate can be categorised as barbarian, and the recommendation is that they should replace many of the present board members, who are classified as supporters.

In the TINE case presented above closeness in boardmanagement relations is discussed, and trust was described as a basic characteristic of the boardroom relations. The board was like a work group, and boardroom norms were influenced from the leadership literature rather than the finance literature. The chairperson in TINE was a role model, a coach and a leader, while chairpersons in other companies/firms act as trouble-shooters, decision-makers and chairs.

At TINE, decision-making took place through negotiation and communication, the decision outcome was open, and the decision consequences and ownership interests were long-term. The opposite is often the case in practice. In TINE we observed dynamism with virtuous development circles. The assumptions behind the prevailing theory of corporate governance, managerial opportunism, have been severely criticised because they may lead to vicious development circles. Furthermore, we found at TINE a comprehensive value creation definition that was clearly beyond pure shareholder value logic.