A German pensioner caused havoc in the sewers of the northern German city of Kiel recently when he flushed nearly Aud$50,000 worth of deutschmarks down his toilet in the mistaken belief that the currency was worthless since the introduction of the Euro.

Sewerage workers were able to recover about half the money from the man’s plumbing system, and most of the remainer was recovered from blocked local sewers.

The man, aged 64, apparently lived a spartan existence, and dried the notes out before taking them to his favourite bank teller to be counted and exchanged for the Euro.

It was not clear if he had laundered the money first.

Changes to governance and compliance requirements over the past decade have placed greater demands on boards. One of the consequences of those changes is that the role of the Company Secretary is evolving from an administrative/compliance function to embrace a broader leadership and strategic role, and to play a crucial part in linking the board and management.

Company Secretaries are becoming more involved in developing the board’s process, to enable the board to be more effective.

This evolution can be challenging and exciting, and requires Company Secretaries to develop an expanded skill set and a different way of thinking, influencing and communicating.

A study by Chartered Secretaries Australia in 2004 identified the top 5 responsibilities of Company Secretaries as:

• managing the board of directors
• handling continuous disclosure responsibilities
• managing board committees
• ensuring compliance with governance standards
• dealing with AGMs.

One of the key skills that highly effective Company Secretaries must possess, or develop, in order to carry out those roles, is the skill of asking the right questions.

Little training available for questioning skills in business: Incredibly, as important as it is to be able to ask questions in business, business schools do not teach the skill of knowing when to ask a question and which question to ask.

Although the legal profession is well represented among Company Secretaries, legal education generally does not include questioning skills, especially the skill of asking questions on non-technical issues, which form by far the majority of issues both in and out of legal practice.

Most ‘at risk’ business communication deals with subjective reality: The majority of written and verbal communications in business relates to facts, strategy, solutions, beliefs, opinions, assumptions, perceptions and interpretations. Many ‘facts’ are, in reality, beliefs, assumptions, opinions and interpretations wrapped in language that is designed to appear factual, but which is actually a representation of personal, subjective reality that often bears little resemblance to the truth.

Unfortunately, many decisions at all levels of management are based on that type of ‘fact’, and result in financial loss for the company, job losses for employees and loss of share value, especially when those decisions are made at executive and board levels.

Many, if not most, of those losses could be avoided, if the right questions are asked.

One-Tel and NAB are two recent Australian examples where the right questions might have made a significant difference. One-Tel disappeared; and NAB lost $360m, its principal executives and most of its board members as a result of its currency trading debacle. And, of course, HIH developed a culture (reflecting the leadership style) that strongly discouraged questioning what was done at the top, and finally imploded, impacting many thousands of families and businesses and almost bringing the residential building industry to its knees.

Questioning skills are time- and cost-effective, and high ROI: The pity of all this is that it is so easy to ask the right questions. They only take a few seconds to ask and can save a great deal of money, time and effort.

Why aren’t the right questions asked more often? Generally, questions are not asked because the opportunity and need for a question is not recognised. There are a dozen or so  patterns of language commonly used in business that demand questions. I can guarantee that those patterns, and the risks associated with not challenging them, are present at every board, executive and management meeting. The fact is that most business leaders are only vaguely aware (if at all) of those patterns, and how to challenge them. However, the most highly effective business leaders are very aware of those patterns, and know the questions that challenge or counter those patterns.

Test yourself: Consider the following example:

“At the time of writing, [global] trading operations continue to manage risk responsibly in changing market conditions. Adherence to risk discipline is good.”

On first reading, would you ask any questions? Or would you pass on to the next item on the agenda?

Look at the quote again. They are the sentences written in a report* to the NAB’s Risk Management Executive Committee in November 2003, not long before the NAB discovered that it’s trading desk had lost  $360 million - roughly 10% of the Bank’s annual profit.

There are at least 8 elements of those two sentences that, individually (and in combination), might be of interest to a Director or Executive - patterns of language that can very easily and subtly slide your mind away from the key issues that, as a caretaker of the company’s assets and brand/business, you must be vigilant in considering. Patterns that set alarm bells ringing.

Did you spot the eight?

One shot at asking a question: It is critical to be able to identify, at normal speech speed and in the midst of a lengthy conversation, the language cues that flag potential problems. If you have to pause and think about what the 8 elements are, you’ll stand little chance during a normal conversation or whilst scanning documents.

Have you spotted the 8 yet? If so, (or even if not), what now? Having identified the 8 elements, how, specifically, will you tackle the language and deal with the issues raised by those 8 items. Which of the items will you tackle? How will you do that in a few seconds, and effectively? Which will you tackle first, second or third so that the potential problem is identified and a risk strategy implemented to prevent the problems causing damage? How do you do that in a way that works best?

The value of an effective Company Secretary: Company Secretaries are ideally placed to ask the right questions and positively impact the success of the board, executive team and business. These days, they often have access to the board/chairman,  the executive team, to meeting agendas and decision-making processes in a way that was not possible a couple of decades ago.

One Company Secretary, whom I’ve known for some years, takes the view that his duties include asking the questions that will assist the board  and executive team to be properly informed, so that they can make informed decisions. He considers that to be necessary to enable the board to comply with their legal duties, and also to ensure that the business is as effective and competitive as possible.

He works both behind the scenes and in meetings to effect that outcome, quietly and unobtrusively. For instance, if he spots a possible flaw, ambiguity or omission in board papers submitted for an agenda item, he may contact the author and ask questions that enable the defect to be corrected prior to a formal meeting; or chat with the Chairman and highlight the issue if the Chairman has not spotted it.  He doesn’t play politics, is objective, even-handed and respectfully assertive. As a result, he has the respect of the company’s leaders and has been instrumental in saving the company many millions of dollars, as well as making the board and executives’ jobs easier.

There is a simple art to asking the right questions that make a real difference, every day, in every business. It is an art that has such impressive and immediate benefits that I call them Powerful Questions that Every Director, Executive and Manager Must Ask.

If you haven’t already seen Al Gore’s DVD An Inconvenient Truth, get it this weekend and listen and watch it carefully.

Then discuss it with your family and people at work, and ask ‘What can we do immediately to reduce our carbon footprint?’

Al Gore’s slide show contained one particular segment that was inescapable. That was where he juxtaposed global temperature fluctuations over hundreds of thousands of years with CO2 levels for the same period.

The temperatures rose and fell in a precise correspondence with CO2 levels. The CO2 and temperature fluctuations meant the difference between a nice sunny day, and a mile of ice over our heads during an ice age.  They were the natural cycles over a very long period of time.

You don’t have to be a rocket scientist to see and feel what’s happening.

You don’t have to look too far to see who is responsible. 

You don’t have to go too far to recognise who has to do something about it.

 Keep your eye on these websites

http://www.climatecrisis.net/blog/

http://globalwarningblog.com/

by Christo Norden-Powers     Copyright © 2007 Spandah Pty Ltd

The Australian Government is currently considering amending the Corporations Act to extend corporate duties, and civil and criminal liabilities, below Board and Executive levels to encompass other managers. If the amendments under consideration are enacted, managers will need to know how to ask the hard questions.

In 2005 the Government’s Corporations and Markets Advisory Committee (www.camac.gov.au) called for submissions on possible amendments to the Corporations Act that were recommended by the HIH Royal Commission following the collapse of HIH Insurance, leaving $5 billion in debts.

Recently we’ve seen some of the former Directors and Executives of HIH being sentenced to terms of imprisonment. The HIH Royal Commissioner, Justice Neville Owen, noted that many of the undesirable practices in HIH were undertaken by middle managers, that in larger corporations many significant decisions are made by management without reference to the Board and that managers should be liable for dishonesty even where their actions resulted from pressure from higher corporate echelons.

The Committee is also considering whether the general duties of Directors (e.g. good faith, proper purpose, diligence, business judgment and taking reasonable steps to ensure the veracity of statements and information) ought to be extended to middle managers.

In the Workshop and book Powerful Questions That Highly Effective Business Leaders Ask I foreshadowed this move to greater accountability further down the organisation. It will come in the form of either legislation or judicial decisions. It may be a few years yet before it is reality, but when it does come, it will be imperative that managers at all levels understand how to ask the tough questions - for their own protection as well as for the benefit of their organisation.

Various professional organisations presented submissions to CAMAC, including several of Spandah’s clients - Australian Institute of Company Directors, Chartered Secretaries Australia and Institute of Chartered Accountants Australia - who generally supported the extension of liability down the line beyond Board and executive levels.

ASIC also supported an extended liability, stating:

ASIC strongly supports the adoption of a functional approach to determining which people should owe duties to the corporation. Those who take responsibility (and reap the rewards) for making decisions or taking actions on behalf of a corporation that will have significant effects upon it should owe duties to the corporation regardless of their title or employment status. It is also important that there should not be significant opportunities for executives to avoid such responsibility through the design and use of corporate group structures.

The relevant Discussion Paper is available at the CAMAC web site, www.camac.gov.au , along with another Discussion Paper on Personal Liability for Corporate Fault which deals with liability under other legislation such as environment protection, occupational health & safety, hazardous goods and fair trading laws, of which the Australian Capital Territory’s 2003 Industrial Manslaughter legislation and similar NSW legislation are recent additions.

By Christo Norden-Powers          Copyright 2006 Spandah Pty Ltd