Mastering Governance: The Three Cornerstones of Effective Board Membership

The 2023 OpenAI incident that captivated everyone interested in artificial intelligence will go down in history for many things, including the failure of corporate governance. In its aftermath, there is much talk about how the future board of OpenAI should be diverse moving forward.

Diversity, Equity, and Inclusion (DEI) is a well-researched topic. There has been intense focus on DEI in the workplace in recent years. Briefly, diversity is about the presence of individuals with different backgrounds, races, ethnicities, genders, sexual orientations, and economic backgrounds in a group that functions to achieve a goal. Equity is about giving everyone a fair chance, taking into account the fact that they might have started from differently enabled positions in life and the implementation of policies to address and remedy this. Given there is diversity, inclusion is about creating a culture where everyone feels their voices matter.

The 2020 McKinsey & Company article, “Diversity wins: How inclusion matters,” says, “The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.” The data used for this assertion encompasses 15 countries and over 1,000 large companies.

The paper “The Importance of Diversity on Boards of Directors’ Effectiveness and its Impact on Innovativeness in the Bioeconomy” in the journal “Humanities and Social Sciences Communications” establishes the importance of diversity in corporate boards in the pulp and paper industry. The study looked at the data from different types of diversities, including age, gender, ethnicity, and average degree of education.

A piece of contrarian evidence on gender diversity is presented in a 2017 Knowledge AT Wharton article, “Does Gender Diversity on Boards Really Boost Company Performance?” which says, “Rigorous, peer-reviewed studies suggest that companies do not perform better when they have women on the board. Nor do they perform worse. Depending on which meta-analysis you read, board gender diversity either has a very weak relationship with board performance or no relationship at all.”

I propose that governing bodies look for three crucial elements in their membership to be effective—cognitive diversity, agency, and courage of conviction.

Cognitive Diversity

Cognitive diversity is about including people with diverse thinking in a group tasked with solving problems and making decisions.

The article, “The Effect of Cognitive Diversity on Board Performance,” Insights from The Nasdaq Governance Solutions asks, “Why does cognitive diversity matter so much to board performance?”

It says when a governing body is in a decision-making situation, the collective intelligence it brings is limited when there is no diversity. If everyone brings similar perspectives, the danger of blind spots becomes compounded. If each member comes from a different background, the chance of seeing the whole picture increases since they will bring their frame of reference and thinking to the task.

One could argue that diversity in age, gender, ethnicity, and average degree of education are all proxies for cognitive diversity. They could be, but not sufficient in themselves.

For a governing body to recruit a cognitively diverse membership, it must first define what it means, enlist a diverse recruiting team, use multiple channels for hiring, and assess the cognitive skills such as problem-solving and creativity of the candidates.

It is not enough to have cognitively diverse governing members. They must have agency.

Agency

The Cambridge Dictionary defines agency as “the ability to take action or to choose what action to take.”

Every time you cast your vote, in whatever context, you are using your agency to effect change.

In a governing body, members need the agency to act within the constraints defined by the body. They have a bias for action and are not passive. They are motivated change agents.

In their book, “The Power of Agency,” authors Paul Napper and Anthony Rao provide “Seven Principles to Conquer Obstacles, Make Effective Decisions, and Create a Life on Your Own Terms.” Among the seven principles that form the foundation for developing agency, the four cognitive principles—Position Yourself as a Learner, Manage Your Emotions and Beliefs, Check Your Intuition, and Deliberate, Then Act—are fundamental to having agency.

It is not enough to have agency. One must have the courage of conviction.

Courage of Conviction

“Never give in. Never give in. Never, never, never, never—in nothing, great or small, large or petty—never give in, except to convictions of honour and good sense.”

— Winston Churchill

Merriam-Webster defines the idiom “courage of one’s conviction,” as “the courage to do what one believes is right.”

It is an individual’s ability to stand firm in their beliefs, especially when their position is unpopular and faces strong opposition.

History has many role models who stood for what they believed in. One that stands out is a teenager—Helmuth Hübener—who the Nazis executed. He was immortalized in the film Truth & Conviction, whose synopsis reads:

“Driven by the disappearance of his Jewish friend, a 16-year-old boy named Helmuth

Hübener takes a stand for truth. Within hours, Helmuth types up pamphlets that declare, “Hitler is a murderer. He is the guilty one.” His brave resistance leads him all the way to the highest court in Nazi Germany. With courage, conviction, and the power of the written word, Helmuth and his friends spread the truth, all while being hunted by the Gestapo.”

Mahatma Gandhi, who dared to believe that India should be a free country and did not rest until that materialized is a shining example of someone who had the courage of conviction.

Governing bodies need members who stand for what they believe in.

The Trifecta of Effective Governance

Cognitive diversity, agency, and courage of conviction are must-haves for an effective governing body. Diversity brings different perspectives and encourages all members to think for themselves. Demonstration of conviction is effortless when you have agency and feel empowered.

Next time you have an opportunity to build a governing body, remember the trifecta—Diversity,

Agency, and Courage of Conviction.

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