Both these examples of industrial and corporate interlocks demonstrate the same common denominator. Both stakeholders have something to lose. Self-interest beats disinterest. It is human behavior rather than factional and thus structural representation which is the more important. This leads to the obvious conclusion that board structures are merely mechanisms: simply adjusting the insider / outsider director proportions may have no effect without two essential conditions.
First, all members should demonstrate substantial strategic competence in adapting to the future trading conditions of economic discontinuity. Replicating historical indonesia corporate game plans will not be adequate. Second, shared values of mutual benefit - that is, self-interest, where a risk of loss is known to exist, will focus boardroom decision-making splendidly. It follows that the debate on indonesia corporate governance should be more concerned with competencies and self-interest than with increasing the number of independent directors who have very little to lose and who, on the margin, are likely to be less informed. So, what to do? Here are three recommendations.
First, improve strategic competency. Rotate the high-fliers. Clear differences exist between the grooming of successful top managers and those whole lead companies performing n the lower quartile of their industry. The variable which most distinguishes Indonesia board directors of upper quartile companies from their underperforming counterparts is the extent of multifunctional managerial experience between the years 25 and 35. Job rotation does pay off: a career of functional specialization does not.
Exposure to the demands of different managerial functions forces strategic decisions, particularly in an international context. I gave an explanation of the database and method in 'the chief executive: a breed apart', in the Strategic Management journal in 1989. Interventionist management development really can improve strategic competence.
A young manager's PRONED should be established, composed of those fast rising managers who have yet to achieve a main indonesia board directorship. These would become external directors at the subsidiary divisional level, ideally where commercial interlocks exist.
Second, fixed tenure directorships. Rather unkindly, the indonesia board has been compared to the elephants' graveyard in the Tarzan films, a place of great mystery where ageing elephants go to die! The assumption is of great wealth and wisdom but nobody can prove this since the elephants never return. Why should a main board directorship be a terminal appointment? The Indonesia board has to fulfill its mandate of strategic endorsement and decision, and there is no evidence that age correlates with the ability to handle rapid change, to succeed in conditions of trading discontinuity requires lateral thinking ability, not replication of historic decision. It therefore follows that directors should have a 'sell-by' date. Just as politicians provide poignant examples of staying in power for too long, directors should be appointed for a finite period, perhaps for a maximum of six years with a third of them being replaced every two years.
Three, widen the composition. All the evidence supports the view that where shared values exist, a superior long-term financial performance will follow. If the composition of the board were widened from the current narrow legal focus of shareholders only to include the wider stakeholder constituencies, provided that the representatives demonstrated strategic competence, conflict would be reduced and consensus improved. This is not to argue for a solution of the type advocated by Bullock, but is a recommendation for sustainable self-interest, a professional strategic partnership of all the interested parties.
Will this occur? probably not: but unless the Indonesia board moves away from its narrow focus of representation with all its potential for short-terms conflict, those countries which have rejected this model, Germany and Japan, will continue to outpace their inherently constrained competitors.***
First, all members should demonstrate substantial strategic competence in adapting to the future trading conditions of economic discontinuity. Replicating historical indonesia corporate game plans will not be adequate. Second, shared values of mutual benefit - that is, self-interest, where a risk of loss is known to exist, will focus boardroom decision-making splendidly. It follows that the debate on indonesia corporate governance should be more concerned with competencies and self-interest than with increasing the number of independent directors who have very little to lose and who, on the margin, are likely to be less informed. So, what to do? Here are three recommendations.
First, improve strategic competency. Rotate the high-fliers. Clear differences exist between the grooming of successful top managers and those whole lead companies performing n the lower quartile of their industry. The variable which most distinguishes Indonesia board directors of upper quartile companies from their underperforming counterparts is the extent of multifunctional managerial experience between the years 25 and 35. Job rotation does pay off: a career of functional specialization does not.
Exposure to the demands of different managerial functions forces strategic decisions, particularly in an international context. I gave an explanation of the database and method in 'the chief executive: a breed apart', in the Strategic Management journal in 1989. Interventionist management development really can improve strategic competence.
A young manager's PRONED should be established, composed of those fast rising managers who have yet to achieve a main indonesia board directorship. These would become external directors at the subsidiary divisional level, ideally where commercial interlocks exist.
Second, fixed tenure directorships. Rather unkindly, the indonesia board has been compared to the elephants' graveyard in the Tarzan films, a place of great mystery where ageing elephants go to die! The assumption is of great wealth and wisdom but nobody can prove this since the elephants never return. Why should a main board directorship be a terminal appointment? The Indonesia board has to fulfill its mandate of strategic endorsement and decision, and there is no evidence that age correlates with the ability to handle rapid change, to succeed in conditions of trading discontinuity requires lateral thinking ability, not replication of historic decision. It therefore follows that directors should have a 'sell-by' date. Just as politicians provide poignant examples of staying in power for too long, directors should be appointed for a finite period, perhaps for a maximum of six years with a third of them being replaced every two years.
Three, widen the composition. All the evidence supports the view that where shared values exist, a superior long-term financial performance will follow. If the composition of the board were widened from the current narrow legal focus of shareholders only to include the wider stakeholder constituencies, provided that the representatives demonstrated strategic competence, conflict would be reduced and consensus improved. This is not to argue for a solution of the type advocated by Bullock, but is a recommendation for sustainable self-interest, a professional strategic partnership of all the interested parties.
Will this occur? probably not: but unless the Indonesia board moves away from its narrow focus of representation with all its potential for short-terms conflict, those countries which have rejected this model, Germany and Japan, will continue to outpace their inherently constrained competitors.***
