CFO Day: truth is vital to any company’s story

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Transparency and truth are vital ingredients for any company’s success, both internally and externally – and needs to extend all the way to board level, delegates at CFO Day heard.

During CFO Day on 14 May, former Coca-Cola Beverages South Africa CFO and current non-executive director Walter Leonhart explained that being a part of a board of directors is like being in a relationship with a friend or a partner. All relationships, he said, need several elements such as clarity, certainty, trust, respect and an element of predictability.

Walter said one of his key take-outs in terms of working on several boards before he retired was the need for transparency, which ties in with honesty and integrity.

Another aspect he highlighted was the importance of a properly prepared board, which enables its decision-makers to make the right decisions. “If you can’t prepare properly, it’s next to impossible to fulfil your fiduciary duties. Board appointments are statutory; it’s not a team discussion with our tjommies at work.”

This goes hand in hand with the need for management to tell the board what it needs to hear, and not what they think it wants to hear, said Walter. He explained that if management is always hauled over the coals for telling the truth, it will hide the truth from the board.

Claudelle van Eck, CFO Awards judge, non-executive director and founder of Brave Inflections, said when determining whether someone is lying, it is important to take into account the circumstances around the story and the person. For example, someone could be lying out of fear, which is often the case. This could be because the previous board was not mature and could not take criticism.

Other factors that could cause people to lie could be the deliberate hiding of information. She said one needs to carefully think about what is playing out and the motive or reason. Without determining the root cause, the solution won’t address the problem, which will go away when the root issue is resolved.

When it comes to working with other employees, Claudelle explained that “what is true for me may not be what is true for you. For leaders to be able to take a step back and view the picture is a fundamental skill.”

At the same time, Walter advocated for management to provide the board with sufficient information to enable decision making. “You need to think with a board hat on,” he said.

As part of ensuring that governance measures are met, companies and boards need to define who is responsible for what, and where that responsibility ends, said Walter. A delegation of authority document needs to be updated on a regular basis and senior management must be trained in terms of their responsibilities and limits.

Culture matters

Another aspect that came up at CFO Day was culture. Claudelle explained that there are layers of culture all the way from the board through the executive committee and management.

She said there cannot be one specific view on culture, as it is a combination of people coming together. Yet, she noted, “Leaders have a fundamental impact on how culture will play out.”

Getting to understand company culture requires a deep understanding of the people working there. A questionnaire is one way, but is very simplistic – just a dipstick that doesn’t provide a full view, she said.

There may be instances in which a company wants to root out someone who is causing a toxic environment at the business. To do this, explained Claudelle, it’s important to go deep into the company and have conversations to understand who is contributing to the negative environment.

Many people have work-related illnesses such as high blood pressure because of toxic environments, said Claudelle. She added that it is vital to dig deep into a company and have conversations with people to understand who is contributing to the toxic environment, while keeping in mind that often what is happening, is a combination of things going on, as people have different backgrounds, perceptions, and blind spots.

“Only 10 to 12 percent of what is going on in the mind is consciously aware to people, as there is always noise, such as a fight at home that plays itself out in the office as being nasty to colleagues,” said Claudelle.

She added that it’s key to understand the ripple moving through the company when it comes to working out where negative sentiment stems from, and not just kick staff out, as people sometimes just need to understand the impact of their actions. Counter-intuitively, Claudelle believes it’s not always necessary to suspend someone if the problem can be resolved, and restorative justice may be the better solution.

“We need to think deeper than just what is in front of us,” she said.

Your public profile

Turning to public perceptions of truth, Gail Schimmel, CEO at the Advertising Regulatory Board (ARB), said, “Advertising has to be the most truthful story your organisation tells.” She adds that the only way to do this is to operate in a regulated environment, one in which consumers and companies alike can take complaints to the ARB, in South Africa’s instance.

A statistic Gail pointed to was one from the International Council for Advertising Self-Regulation, which noted that anywhere between 33 percent and 50 percent of a company’s market capitalisation was based on brand reputation. This is why consumer trust in the brand is critical to corporate success.

Gail noted that many companies wish to join the ARB because of the ethical framework that it provides. However, this doesn’t mean that the business-funded organisation will rule in favour of a company that helps fund it, she added.

“If we can communicate clearly in one space, we can communicate clearly in all spaces,” said Gail.

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