Earlier this year, BlackRock’s chief executive Larry Fink wrote a letter to CEOs of large corporations, including all those on the S&P 500, decrying the “short-termism afflicting corporate behavior.” As the world’s largest investor, Mr. Fink was using his $4.6 trillion megaphone to demand that leaders eschew quarterly reports, and instead demonstrate the visionary proficiency needed to realize long-term growth during uncertain times.
Many of us have sympathy with Mr. Fink’s critique. However, it may be that he aimed his missile at the wrong target. While CEOs have considerable power, the quandary of balancing short-term outcomes with longer-term imperatives belongs to boards. Leaders are responsible for extracting excellence from their organizations, including outstanding results, but boards have the duty to set the parameters for that excellence, so that it endures, and creates value for society as well as investors.
Governance is not a synonym for leadership. It is materially different because it is an institutional responsibility as well as an organizational one, aiming not simply to enhance results, but also upholding the norms of care and loyalty that represent the public good. In fact, governors don’t lead per se. They are instead entrusted with the more important task of creating stability from perspective, insight, and purpose, within which the leader and executives of the organization can best succeed and thrive.
Leaders are accountable for making things happen, for as long as they are CEO or President. The accountability for boards is to make sure things happen the right way, so that the asset grows in both resilience and value, over a much longer time horizon than the tenure of a single CEO.
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About the author
John Dalla Costa is the Founding Director of the Toronto-based Centre for Ethical Orientation. The author of five books exploring ethics, trust, integrity and governance in business, John has worked with boards and executives all over the world. He has spoken on business ethics at the Vatican as well as on Wall Street. He is a founding faculty member of The Directors College and teaches ethics.
