High Performance Boards, 2nd Edition

CHAPTER 2Governance Challenges around the World

Governance is the ability to take the right decisions at the top of organisations, and it is fast becoming a competitive differentiator and a driver of performance. In an increasingly chaotic, rapidly changing environment, good governance is vital to giving organisations the wherewithal to make the right choices and the resilience they need to withstand shocks. Governance drives organisations’ efficiency, integrity, and social impact, all of which are necessary for sustainable success. Yet there are numerous examples of poor governance, around the world and well into the twenty-first century, in the corporate, public, non-governmental, and inter-governmental domains.

The case of Volkswagen (VW) shows how a rift between the chair and CEO can result in major governance failures. In April 2015, VW Chair Ferdinand Karl Piëch, the 78-year-old grandson of Ferdinand Porsche (who founded Porsche), made the following comment to Der Spiegel – online – without forewarning the board: ‘I am distancing myself from [VW CEO Martin] Winterkorn.’ This caused tension among the board members, who began to speculate whether it would be the chair or the CEO leaving the company. VW's executive committee (as well as supervisory board member Wolfgang Porsche, also a grandson of Ferdinand) urged Piëch to soften his statement, and publicly reiterate his support for Winterkorn. Piëch agreed – allegedly on the condition that the committee recommend that he ...