S2E1 - Andrew Escobar on defining good governance

TRANSCRIPT:MATT VOICEOVERHi everyone, this is Matt Fullbrook. Welcome to a whole new chapter of the Sound-Up Governance podcast where I'll talking to big thinkers in corporate governance and learning from them about the "how" of being a great corporate director or executive. Think of it as an interview show, but broken into really focused chunks. Each episode will zoom in one person's perspective on a very specific topic and will last just a few minutes. If I can keep up the pace, my hope is to also craft original music for every single episode. It might just be a quick, fun loop or maybe something more ambitious. I won't get too hung up on polish or details, so you may have to forgive a bit of, I don't know, unpredictability. Anyway, I'm super stoked to kick off this new version of the show with my great friend, the sincerely inspiring Andrew Escobar. In addition to having some really interesting board experience, Andrew's almost like an obsessive scholar when it comes to good governance. Many of you know that I'm pretty fixated on establishing clear definitions in the corporate governance space. My professional life essentially transformed when I finally had a concrete definition of good governance. So, let's start things off with Andrew's thoughts on whether and why it might be impossible to be a great director if you can't describe what good corporate governance is in the first place.ANDREW ESCOBARI think for yourself. Yeah, you... How do you do your job if you don't know what that job is? And isn't that isn't the job good governance? I'd hope so. And so if you don't know what good governance is, if you don't have that self awareness to know if "Hey, I went to the board meeting today, that was good governance." How do you operate as a board member?MATTOkay, but is it fair to say that you didn't have a confident, specific definition at the beginning of your...ANDREW ESCOBARI probably didn't have a definition of good governance for years.MATTYeah. So does that mean you did a bad job?ANDREW ESCOBARNo. That's interesting. No. Yes and no. There were times without that grounding definition or grounding idea that I was probably lost and other directors were lost and I couldn't ground myself or help them ground themselves.MATTRight. So okay, maybe then, given that, describe, and this is unfair, but try to describe the difference between that and what it's like to have a confident definition.ANDREW ESCOBARIf you have a confident definition of what good governance is to you, it isn't just about your work as a director, but it's about the group's work as a board. And I think it's hard to get to good governance individually. You need others to come along with you on that shared journey towards good governance. And if you don't have a good definition, if you don't have a good understanding, how can you possibly lead others towards that? Or honestly be led by others towards that direction? I think that's important.MATTOkay, so do you want to share your definition?ANDREW ESCOBARI don't have a precise definition, although - I think you know this - I tend to go back to the definition that you struggled with and worked on for a while because it's helpful. But I think I've extended it a little bit more. Intentionally cultivating the effective conditions for decision making. But beyond those those conditions, there was something missing for me. And maybe one of the conditions, it doesn't feel like a condition, one of those conditions for me is shared values. And that's a really touchy feely word, but that is part of it. Right? The values and understanding of your role as a director of the corporation or the not for profit or the cooperative, that's really important. What are we here to do? That almost needs to be the foundation for what comes next? Like, if we don't agree on what we're here to do, then... because it isn't good governance, like, we're not here to do good governance. That's not the end goal. Good governance gets us there. But where are we trying to get to? We're here to - and it might be something that I disagree with. It might be here to solely increase shareholder value. It might be just to make an impact in the world. It might be a mix of the two. But if we agree on that, then we can actually start working on what are those conditions, what do we need to change with how we approach our decision making towards that end goal. And so I tend to think about the end goal a lot more than I do the conditions. Because it's actually, I think, the end goal where you're going to get most disagreement, constructive disagreement with directors. Not on the conditions. Right. Like, you know, should we start a meeting earlier or later, or, you know, how do we, how do we frame this? Or how do we want our minutes to... Like, those are, those are all really interesting. In the end, there's a compounding effect to all those conditions, if you get them right. But without the foundation of what are we here to do, what are our values as we approach it, you can't do much more than that.MATTSo it's interesting you mentioned this, and we don't need to talk about this right now, but one of the challenges that I get a lot is "where does purpose fit?" And I'm just like, well, it's like the most important condition, right? It's still, to me, it's a condition. It's like why we're here to... If the governance part is decision making and we don't know what the decisions are for, then that's an important condition. Right? It's like defining the problem carefully and making sure we all agree on what the, the nature of the problem is and then considering options to approach solving it. And, and, and, and, and. But no, you're right. I'm, I'm trivializing by saying, well, everything's just a condition, you know.ANDREW ESCOBARBut it's useful to frame it as a condition. Maybe to me, it's the most important condition. Yeah, right. And you said. I've said values, you said purpose. I think we're actually talking about the same thing.MATTI think you're right.ANDREW ESCOBARBut it's. There's two layers to that. Like, what's our purpose? Like the organization, the Corporation's purpose. That's 1. 2. What's our purpose as a board? That's another one. And then what's my purpose as an individual director? You need. That is a condition that needs to be foundational to your work.MATT VOICEOVERWhat do you think? How important is it for directors and executives to have a clear, specific and confident understanding of what corporate governance is? What good governance is? Something they can express sensibly to their peers. How important is it for the whole board and leadership team to share the same concept? Do you have your own definitions? Do you think your peers agree with you? I think these things matter a lot, and I often wonder why they seem so rare. In the next episode, Andrew and I will talk more about what good governance might look like on a normal day. No crisis or urgency, just doing the normal work of a board, but doing it really, really well. That episode is available right now, and subsequent episodes of the show will come out every week or two. In the meantime, I'd really like to know your first reactions to this concept and format. I could even say that I need to know, because I'm doing this in hopes that you will find it interesting and useful and maybe a bit fun. If you do in fact find it interesting or useful or fun, then please say so by subscribing to Ground Up Governance and clicking the like button and maybe leaving a comment or sending me a private message. And most of all, by letting other people in your community know that you like it so that they might check it out too. Oh, and if you're interested in knowing more about the background music, I'll leave a few brief written notes at the end of each post with a bit of info. Thanks for listening. It's so good to be back.MUSIC NOTES:Just a moody little loop that I built on an MPC Live. It started by strumming some chill guitar chords and ended up being a bit of a raucous, driving…whatever. The bass line is doubled between an Ernie Ball Music Man Stingray 5 bass and a Gretsch Roundup guitar. There’s some additional guitar chords throughout. All of the drums and the stabbing synth shots are on the MPC. Get full access to Ground-Up Governance at groundupgovernance.substack.com/subscribe