You’ve authored the book “Secrets of the Boardroom,” delving deep into corporate governance. Could you share some key principles emphasized in your book and explain why these principles are crucial for the success of companies and organizations?
Herman Daems: In my book, I dissect the functions and ideal roles of a board of directors. It highlights four pivotal roles a board should assume: shaping the company’s strategic direction, overseeing the allocation of the company’s resources, ensuring the company behaves responsibly in society, and taking responsibility for the company’s outcomes. These are the primary roles, but there are others as well. Directors, especially the chairman, may need to mediate conflicts within the company’s top leadership or, more critically, when disputes arise among shareholders. The book underscores that the chairman’s primary duty is to maintain a healthy equilibrium among the various interests collaborating within the company.
How has your extensive international expertise contributed to your understanding of corporate governance, and what is your perspective on the global evolution of governance practices?
Herman Daems: Discussions on good governance are often dominated by legal experts, which is essential. However, they primarily prescribe what should happen in a boardroom, not necessarily what actually occurs. Furthermore, providing clarity about how a board truly operates is challenging because one can only grasp the inner workings by actively participating in board meetings and decisions. Fortunately, I’ve had the privilege of serving on various boards for many years—ranging from publicly traded companies to family businesses, from nonprofit organizations in culture and healthcare to ventures both in Flanders and Wallonia, and even in Belgium and Silicon Valley in the United States.
Could you provide us with some practical examples of corporate governance challenges you’ve encountered in your career and how these challenges were addressed?
Herman Daems: One of the paramount requirements for a board member is discretion. What one experiences or learns should only be discussed within the boardroom. Remember, a board member’s foremost duty is to serve the interests of the company. Therefore, I haven’t penned a “kiss and tell” book. However, I do discuss the types of issues that board members must confront. Two of the most daunting challenges, in my opinion, are top-level tensions and acquisitions. Tensions at the top arise when leadership falters and fails to achieve results. The question then becomes whether the issue lies with the leadership, external market forces, new competition, or emerging technologies. Board members must delve into these matters: will new leadership be the solution, and if so, who should lead? When and how should such decisions be made? Acquisitions are also complex, encompassing both strategic and financial aspects. While management typically supports an acquisition, the questions revolve around the price and the financing structure. To complicate matters further, how does the financing affect shareholders and the ownership structure? Of course, there are many other challenging issues, but these, I find, are among the most formidable.
We extend our heartfelt thanks to Herman Daems for sharing his insights with us. His wealth of experience and expertise in corporate governance has illuminated the path toward better practices and governance globally. We look forward to his keynote at The 5th Conference, where we anticipate further enlightenment and inspiration for our audience.