Corporate Lessons from Sports Field

Opening Ceremony

Asian Games are in full swing in China. After the grand opening China is leading in the games tally and is actually way-way ahead of other participating countries. Watching the games, I can’t help comparing the corporate playing field with the sports games field.

In sports, viewers marvel at the dedication, commitment and perseverance of sports person. For the country to lead in an international event, both men and women have to compete and win in nearly equal number of games. A sports person is completely focused on his/her game and has to win by playing according to the rules of the game. If rules are broken, or a sports person takes performance enhancing drugs, he/she is immediately barred. Victory is always based on fair play and great performance.

The corporate games show somewhat different picture. After the financial crises there was a huge cry that CXO’s are rewarding themselves with high pay packets and bonuses though they have jeopardized the organization. The penalties for wrong doing appear to be light and most escape any form of formal punishment. The increasing trend of white color crime indicates a prevailing mind set of “ rules are meant to be broken”. Gender inequality in boardrooms is prevailing despite various efforts, even in developed countries.

Here are three posts which highlight the abovementioned issues of the corporate world. The question is should we spend some time learning to play according to the rules from sport-persons? Click on the headings below to read the full post.

1.    To Dispel or Not Dispel…Legendary Board Myths by TK Kerstetter (via The Board Blog)

This week I was asked to speak at a service club luncheon to a group of about 250 prominent Nashville business people. My topic was corporate boardrooms and I decided to address some of today’s legendary board myths. The following were the myths and my feelings on legitimizing or dispelling them.

Myth #1: CEO and executive compensation is out of control
I was hoping to dispel this myth, but actually, our research shows that this is not just a myth. For the last five years, more than 60% of corporate directors have felt that boards cannot control CEO pay, although interestingly, only a handful think that is the case for their company. Actually, the more I think about this topic, the more frustrated I get. Plain and simple, we still don’t have a good system that truly pays executive management for performance in both the upside—and the downside—of a capital market cycle. Here’s what bugs me: Right now it’s all about optics, not pay for performance. If the stock price and earnings are up, executives get big paydays. It doesn’t matter if they have improved the company or not. From 1990 to 2000 we experienced the longest running bull market since World War II, and stock options made mediocre executives millions even though they didn’t increase market share, improve earnings over average industry performance, or move up in any peer group analysis. So we got spoiled

2.      Women severely under-represented in corporate boardroom by Cathy Rose A. Garcia and Park Min-shik (via Korea Times)

A glaring lack of female directors on a company’s board of directors is a sign that it is not a “healthy business,’’ according to Lucy P. Marcus, founder and chief executive officer of Marcus Venture Capital.Many Asian and Korean corporations have little or no female representatives in boardrooms, but Marcus says this is sadly still an all too common case on corporate boards around the world.

“There is no doubt that women are severely under-represented in the boardroom, and this is not only the case in Asia, but all over the world. The lack of women on boards, however, is a reflection of a wider problem with diversity: it is one of color, age, international perspective, and more,’’ Marcus said in an interview with the Hankook Ilbo, a sister paper of The Korea Times.

Marcus, whose company works with venture capital and private equity funds, institutions and corporations, said that as an investor, the lack of diversity in a corporate board sets her alarm bells ringing.

“When I see a business with a board that has a preponderance of people with similar, if not identical, profiles, this is a signal that it is not a healthy business… Its good corporate governance and good business sense to reflect a range of the organization’s stakeholders,’’ she said.

Data shows the percentage of women board directors in Asia is only 1.8 percent, compared to 20.5 percent in Nordic countries and 14.1 percent in North America. Marcus noted that having diversity results in a more capable and better functioning board that is better equipped to deal with various challenges

3.         A Wave of Bank Prosecutions Is Unlikely by Peter J. Henning (via Dealbook)

The inspector general of the Federal Deposit Insurance Corporation told The Wall Street Journal recently that the agency had opened criminal investigations into about 50 banks that had failed since the financial collapse in 2008. While that makes it sound like prosecutors will soon be filing charges against a number of bank executives, do not hold your breath waiting for a flood of prosecutions.

The last time there was a surge in bank fraud prosecutions was in the early 1990s during the savings and loan crisis that led to the collapse of nearly 1,800 financial institutions. Unlike that era, the number of bank failures has totaled 311 since 2008, and most of those were smaller institutions that got caught up in construction lending.

Although some larger banks did collapse in 2008, like Washington Mutual and IndyMac Bancorp, those failures appeared to be more related to aggressive mortgage operations that fell apart during the collapse of the housing market rather than misconduct by executives. And banks were hardly the most prominent contributors to the financial crisis, with the mortgage lender Countrywide Financial playing a significant role, while the collapse of Bear Stearns and Lehman Brothers triggered much of the upheaval in the bond market.

What do you say, should the corporate world learn some lessons from sports people to achieve performance ethically?