Governance, Leadership and Management

Consideration and debate regarding sustainability in the 21^st century has involved integrating long-standing concerns about economic growth and social equity with concern for the carrying capacity of natural systems.[1]  Interest in corporate sustainability surged in the late 1980s and during the 1990s academics and practitioners began to argue that corporate sustainability required simultaneous attention to, and satisfaction of, environmental, social, and economic standards.[2]  Today corporate sustainability is understood to be an organizational practice that is integrated into the entire business and business strategy of the company with the goal of reducing the adverse environmental and social impacts of the company’s business and operations.  Corporate sustainability requires organizations to look beyond traditional economic performance to consider the impact of their activities on the environment and society in which they operate; however, pursuit of sustainability relies on many of the same basic governance, leadership and management processes that have been developed in the business world.  As such, in order to prepare themselves to implement principles of sustainability management, directors, executive officers and senior managers must understand several fundamental topics: corporate governance, leadership and management.

Corporate Governance

Corporate governance can be thought of as the way in which corporations are directed, administered and controlled and the actual activities of the directors and senior executives, the persons responsible for the governance and management of the corporation, have been referred to as steering, guiding and piloting the corporation through the challenges that arise as it pursues its goals and objectives.  At the board level, the focus is on leadership and strategy and directors are expected to deliberate, establish, monitor and adjust the corporation’s strategy, determine and communicate the rules by which the strategy is to be implemented, and select, monitor and evaluate the members of the senior executive team who will be responsible for the day-to-day activities associated with the strategy.  In addition, directors are expected to define roles and responsibilities, orient management toward a long-term vision of corporate performance, set proper resource allocation plans, contribute know-how, expertise, and external information, perform various watchdog functions and lead the firm’s executives, managers and employees in the desired direction.[3]

Setting the strategy for the corporation obviously requires consensus on the goals and objectives of the corporation’s activities and the parties who are to be the primary beneficiaries of the performance of the corporation.  Traditionally, directors were seen as the agents of the persons and parties that provided the capital necessary for the corporation to operate—the shareholders—and corporate governance was depicted as the framework for allocating power between the directors and the shareholders and holding the directors accountable for the stewardship of the capital provided by investors.  In that framework, based on “shareholder primacy” famously championed by Friedman and others, the principal participants were the shareholders, management and board of directors; however, the scope of corporate governance began to change during the 1990s as new and different goals for corporate activities were suggested that brought an array of other participants, referred to as “stakeholders” (i.e., employees, suppliers, partners, customers, creditors, auditors, government agencies, the press and the general community), into the conversation.  The ascendency of the stakeholder perspective to challenge traditional shareholder primacy has led many to observe that corporate sustainability and governance have actually converged and the challenges for companies have gone beyond deciding whether they have duties to be socially responsible to developing new business and corporate governance models for long-term sustainability.[4] 

Leadership

Governance is the means by which companies can be effectively led and the key players in the governance structure—the directors and executive officers—must accept and embrace their leadership responsibilities.  Leadership has been rigorously studied and discussed for centuries; however, a consensus regarding how the term “leadership” can and should be defined has been elusive.  For purposes of this discussion, we follow the researchers involved in the influential Global Leadership and Organizational Effectiveness project who defined leadership as “. . . the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organizations of which they are members”.[5] 

Based on the research and observations on the subject, all leaders, regardless of their position, are engaged in certain core roles and activities including selecting and defining goals and objectives for the organization; designing strategic plans to achieve those goals and objectives; and identifying, promoting and managing changes required to achieve future goals and objectives; communicating ideas about their vision for the organization and providing directions to other members of the organization regarding actions to be taken to realize the vision; designing and implementing an organizational structure that promotes efficient flow of information and collaboration among members of the organization to develop new products and services and solutions for problems and issues raised by customers; implementing human resources management practices that support their vision and provide members of the organization with access to training necessary to maintain and improve the skills required for them to positively participate in the execution of the vision; engaging in behaviors that support organizational members and enhance their feelings of personal worth and importance; and engaging in behaviors that facilitate interaction among organizational members, encourage members to develop close and mutually satisfying relationships, create high quality teams and motive members to achieve excellent performance and fulfill the goals of the organization.[6]

Leaders should be prepared to use a range of techniques such as formal authority, role modeling, delegation of authority, setting specific and challenging goals, and adroit and intelligent use of rewards and punishments, and must be able to effectively coordinate, plan and schedule and provide organizational members with the requisite tools, materials and technical knowledge necessary for them to do their jobs.[7]  While there is arguably consensus about the core leadership roles and activities, execution depends heavily on “leadership style”: how the leader interacts with his or her followers and his or her “manner and approach of providing direction, motivating people and achieving objectives”.[8]  There a number of different models of leadership style; however, “transformational leadership” has been identified as being particularly relevant to sustainability and relies on the leader’s ability to communicate a clear and acceptable vision and related goals that engender intense emotion among followers that motivates them to buy into and pursue the leader’s vision.

Management

One of the simplest, and often quoted, definitions of management was offered by Mary Parker Follett, who described it as “the art of getting things done through people”.[9]  As for the specific tasks and activities associated with management, there is consensus that all managers, regardless of whether they are overseeing a business, a family or a social group, engage in planning, organizing, directing, coordinating and controlling.  In order to be effective, managers must recognize and master a number of important “managerial skills”, including development and nurturing of peer relationships (i.e., liaison contacts), negotiation and conflict resolution skills, the ability to motivate and inspire subordinates, establishment and maintenance of information networks, the ability to communication effectively when disseminating information, and the ability to make decisions in conditions of extreme ambiguity and allocate resources.[10]

There is no single management style that applies in all instances and the style that might be used in any particular situation, and its effectiveness, will be influenced by a number of factors including the type of organization, business purpose and activities of the organization, size of the organization, operating environment, corporate culture, societal culture, information technology and communication and, finally, the personal style and behavior of the owner or chief executive.[11]  Moreover, management styles will change as firms transition to new business models based on changing trends in the marketplace, such as greater emphasis on quality and customer service and satisfaction.[12]

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This article is an excerpt from the author’s forthcoming book on Sustainability Management, which will be published by Routledge in late 2020.  For further information, visit the following page on the author’s Sustainable Entrepreneurship Project website: https://alangutterman.com/topics/governance-management/

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About the Author

This article was written by Alan S. Gutterman, whose prolific output of practical guidance and tools for legal and financial professionals, managers, entrepreneurs and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  His cornerstone work, Business Transactions Solution, is an online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which includes almost 200 book-length modules covering the entire lifecycle of a business.  Alan has also authored or edited over 90 books on sustainable entrepreneurship, leadership and management, business law and transactions, international law and business and technology management for a number of publishers including Thomson Reuters, Practical Law, Kluwer, Aspatore, Oxford, Quorum, ABA Press, Aspen, Sweet & Maxwell, Euromoney, Business Expert Press, Harvard Business Publishing, CCH and BNA.  Alan is currently a partner of GCA Law Partners LLP in Mountain View CA (www.gcalaw.com) and has extensive experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, including Berkeley Law, Golden Gate University, Hastings College of Law, Santa Clara University and the University of San Francisco, teaching classes on corporate finance, venture capital, corporate governance, Japanese business law and law and economic development.  He has also launched and oversees projects relating to sustainable entrepreneurship and ageism.  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge.  For more information about Alan and his activities, and the services he provides through GCA Law Partners LLP, please contact him directly at alangutterman@gmail.com, follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/) and visit his website at alangutterman.com.

About the Project

The Sustainable Entrepreneurship Project (www.seproject.org) was launched by Alan Gutterman to teach and support individuals and companies, both startups and mature firms, seeking to create and build sustainable businesses based on purpose, innovation, shared value and respect for people and planet.  The Project is a California nonprofit public benefit corporation with tax exempt status under section 501(c)(3) of the Internal Revenue Code dedicated to furthering and promoting sustainable entrepreneurship through education and awareness and supporting entrepreneurs in their efforts to launch and scale innovative sustainable enterprises that will have a material positive environmental or social impact on society as a whole. 

Copyright Matters and Permitted Uses of Work

Copyright © 2020 by Alan S. Gutterman.  All the rights of a copyright owner in this Work are reserved and retained by Alan S. Gutterman; however, the copyright owner grants the public the non-exclusive right to copy, distribute, or display the Work under a Creative Commons Attribution-NonCommercial-ShareAlike (CC BY-NC-SA) 4.0 License, as more fully described at http://creativecommons.org/licenses/by-nc-sa/4.0/legalcode.  Gutterman Law is a service mark of Alan S. Gutterman, P.C.

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[1] T. Dyllick and K. Hockerts, “Beyond the Business Case for Corporate Sustainability”, Business Strategy and the Environment, 11 (March 2002), 130.

[2] See P. Bansal, “Evolving sustainably: A longitudinal study of corporate sustainable development”, Strategic Management Journal, 26(3) (2005), 197; and T. Gladwin and J. Kennelly, “Shifting paradigms for sustainable development: Implications for management theory and research”, Academy of Management Review, 20(4) (1995), 874.

[3] K. MacMillan, K. Money, S. Downing and C. Hillenbrad, “Giving your organization SPIRIT: An overview and call to action for directors on issues of corporate governance, corporate reputation and corporate responsibility”, Journal of General Management, 30 (2004), 15; A. Cadbury, “The corporate governance agenda”, Journal of Corporate Governance, Practice-Based Papers, 8 (2000), 7) and J. Page, Corporate Governance and Value Creation (University of Sherbrooke, Research Foundation of CFA Institute, 2005).

[4] M. Rahim, Legal Regulation of Corporate Social Responsibility: A Meta-Regulation Approach of Law for Raising CSR in a Weak Economy (Berlin: Springer, 2013), 13, 44 (citing M. Blowfield and J. Frynas, “Setting New Agendas: Critical Perspectives on Corporate Social Responsibility in the Developing World”, International Affairs, 81(3) (2005), 499, 504).

[5] R. House, P. Hanges, M. Javidan, P. Dorfman and V. Gupta (Eds). Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies (Thousand Oaks CA: Sage, 2004), 15.

[6] A. Gutterman, Practicing Leadership (New York: Business Expert Press, 2018). 

[7] Id.

[8]  C. Fertman and J. van Liden, “Character education: An essential ingredient for youth leadership development”, NASSP Bulletin, 83:609 (October 1999), 9-15.  See also R. Ashkenas and B. Manville, Harvard Business Review Leader’s Handbook (Cambridge MA: Harvard Business Press, 2018).

[9] M. Follett, “Dynamic Administration” in H. Metcalf and L. Urwick (Eds.), Dynamic Administration: The Collected Papers of Mary Parker Follett (New York: Harper & Row, 1942).

[10] H. Mintzberg, “The Manager’s Job: Folklore and Fact”, Harvard Business Review, 53(4) (1975), July – August 1975, 49-61.  .  Information regarding Mintzberg’s own studies of managerial work was collected in H. Mintzberg, The Nature of Managerial Work (New York: Harper & Row, 1973). 

[11] T. Quang and N. Vuong, “Management Styles and Organisational Effectiveness in Vietnam”, Research and Practice in Human Resource Management, 10(2) (2002), 36-55.

[12] S. Dolan and S. Garcia, “Managing by Values: Cultural Redesign for Strategic Organizational Change at the Dawn of the Twenty-First Century”, Journal of Management Development, 21(2) (2002), 101-117.  For further discussion, see A. Gutterman, Practicing Management (New York: Business Expert Press, 2018).