If innovation is the most important factor in the growth and revival of many organizations, the biggest deterrent was often the lack of business ethics and governance.
Many successful organizations went through a slow period but by investing in right leadership and innovations, sooner than later they were able to bounce back and get back onto the path of superior performance. On the other hand, lack of governance and compromising ethics always ensured organizations to bite the dust. When executives and boards look at short term gains and compromise on the governance, the performance appears to get a boost resulting in bad adrenaline rush pushing further down a rat hole. If not salvaged in time, they perish in the worst possible manner.
If one were to choose between good governance and good performance, it is common sense to choose the former over latter. However, many organizations in the history have gone down the wrong path.
With ethical boards, organizations have a chance to innovate to get back onto the performance curve or at least go down gracefully. Lack of good governance will not only wipe out the organization but becomes a problem for the entire ecosystem leaving a bad taste for a long time.
It is interesting to look at two companies, Apple and Enron. Each of them chose a different path and their fortunes changed over time. Apple found its mojo after being on the death bed to become the most valuable company in the world. Enron Corporation after initial highs eventually filed for bankruptcy and disgraceful death.
|Pre 2000||Announced great results over the years, many times by fraud and finally to be listed as No.7 in the Fortune list in 2000||Struggled with performance, mgmt. changes. Keep fuelling its innovation engine. Broker life-saving partnerships with competitors to stay afloat|
|2001||Bankruptcy Filed.||Introduced iPod. Innovations paying-off.|
|2002||Probe Starts. CEO and Board resigns||Start and expand retail store. Unveil a completely redesigned iMac|
|2004 – beyond||Defunct.
Many of its erstwhile board and executives either gone into oblivion or committed suicide.
|Most valuable company in the world.
Sold 200 million songs on iTunes music store by 2004 and 10 billion by 2010. Resurgent and revitalized introducing iPod, iMac, iPhone, iPad etc
|Market Reception||Stock price moves from $90 to < $1||Stock price moves from $1 to > $160|
|Case Study||Bad-Governance and Ethics||Innovation and Leadership|
It is also interesting to note that on paper, Enron had a model board of directors comprising predominantly of outsiders with significant ownership stakes and a talented audit committee. In its 2000 review of best corporate boards, Chief Executive included Enron among its five best boards. Perhaps, Awards and Recognition does not really indicate the true composition of character as is evidenced in few other cases in recent history. So it is not just a set of popular names that companies need on their boards but a set of leaders with conscience and ethical conduct, and there is a need to strengthen the same.
Choice is ours and history is witness.
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