Cranfield School of Management professor Andrew Kakabadse talks about the political edge of the corporate governance debate
According to Andrew Kakabadse, the future of corporate governance in Europe rests on the political future of Europe. The one is completely intertwined with the other.
'Movement toward the unification of Europe is raising interesting issues about the relationship between corporate governance and society,' says Kakabadse. Specifically, some kind of compromise will need to be negotiated between the Anglo-American 'shareholder value' model of governance and the continental European/Japanese 'stakeholder' model.
'The first model is self-regulating, the second ruled by legislation,' explains Kakabadse. The aim of the first is to ensure rapid profitability for investors, the second to ensure societal wealth. The future challenge will be to see how the two models fit together.'
Easy option
This is a challenge that Kakabadse faces everyday in the classroom at Cranfield, one of the UK's leading business schools. 'It would be much easier to just teach the 'shareholder value' model of governance because its results are more tangible. With the 'stakeholder' model, you have to start talking about ethics and then you're on shaky ground. A lot of executives are hard pressed to see what this has to do with economics.' According to Kakabadse, the tensions in the classroom over this sort of issue mirror tensions being played out in boardrooms all over the UK. And that includes Cranfield's boardroom. 'Unlike universities that get large government grants, this school is 96 percent self-funding. That means that everything we do has to be earned which means that the services we offer have to provide real value.' Which takes him full circle back to the debate over ethics. 'Can this be justified as something that needs to be covered in the classroom?'
The content of Cranfield's courses has changed dramatically over the years Kakabadse has taught there, reflecting major shifts in business practice. 'In the 1960s we were teaching strategic planning growth techniques. Then in the 1970s businesses started looking for how to add value with the emphasis on distinguishing themselves on price. Now we teach strategic leadership which is all about relationship marketing.' And he thinks this third phase is here to stay. 'Increasing globalization means there is more competition. So the only way for companies to distinguish themselves is through perception.'
As well as the content of its programs, Cranfield continually reviews its approach to executive and director education, looking at not only what it teaches but how.
'Twenty years ago, we used to sit in the classroom and lecture. Now we have to be more sensitive to companies' individual needs. We used to run eight-week courses, now people only have time to take two or so days out.' General management courses are no longer just about general management issues. 'Companies are becoming more specialized so our courses are very much targeted to individual sectors.'
Research has also become a key priority. 'It's really important to keep up-to-date with all the new trends to ensure we've got the credibility to teach people about issues of governance as well as leadership.'
Cranfield has responded to some of those challenges by focusing on a number of new areas. It has introduced courses for non-executive directors, for instance, although Kakabadse believes the problems that companies face over non-executive directors are much more likely to be rectified by public education than by director education.
'The problem is non-executive directors are not being paid enough. But companies are in a no-win position because if they did pay directors what they were worth, they would be slated in the press.'
Cranfield also offers a tailored consultancy service enabling companies to send a number of their key executives on courses designed specifically for them. 'Rather than being taught in the classroom, executives explore strategy and leadership issues in small study groups which usually carry on a long time after the program has finished.'
Hopefully they're not the only lessons which add value outside the classroom.