The following post is a speech delivered by Mrs. Rani Narace, Executive Chairman, TRINRE and Member of the Caribbean Corporate Governance Institute on September 20th, 2013 at the Making the Transition Leadership Conference. The conference took place at the Hilton Trinidad Conference Centre and was organized by NEM Leadership Consultants. The seminar series focuses on leadership, planning and development whereby persons at executive and leadership levels are encouraged to engage in critical thinking and to excercise foresight. This year's theme was Leaderhip Matters: Inspire your Leaders.

Did you know that throughout history "good leadership is one of the most valued and one of the most mysterious of human activities, wrapped up in a notion of charisma, that diversely bestowed magnetism and talent with which some people have been graced – almost magically it would seem to win the staunch devotion of others and to get them to work together."? These words were taken from the book Executive Leadership authored by Elliot Jaques and Stephen Clement, who challenge that notion as simply incorrect and further dispel the belief that, and I quote "if you are born with only a limited amount of God–given leadership personality, then you must rest content with giving only a limited amount of leadership in your lifetime." End of quote.

When you think about it, wouldn't you agree that many times, we confuse the biography of the leader with the actual act of leadership – so intent are we to idealize leaders, leadership and their many "followers". As someone poetically describes it, it's like portraying leadership as something "that is a golden chalice that we are continually chasing, filling out surveys, following prescriptions so that we can reach leadership nirvana" (Simon Western).

I want to use this provocative beginning stimulate an answer to today's question- Corporate Governance- Leadership challenge or trait? I propose to share with you some more thought provoking research and perspectives on leadership, traits, and corporate governance, and I will attempt to draw some conclusions for your consideration.

I find this argument very very interesting that since leadership does not take place in a vacuum but in relationships with people, and given that there is no social construct as a leader-follower role relationship, then there can actually be no such thing as a leadership role per se. There are for example, parent-child role relationships, manager-subordinate, teacher-pupil, doctor-patient role relationships. So why then is there no leader-follower relationship? because apparently the genesis of leading and following came from Anglo-Saxon terminology that meant the same thing - going along together. So that infers that leading and following are synonymous with each other. The concept of leader having followers came much later.

So based on this premise, Jaques and Clement offer the intriguing view that leadership is actually a process that is performed as part of being in the role of managerial leader or political leader, and that being the case, "everyone is capable of exercising effective leadership... so long as they value the role, have basic requirements for it, and so long as that role is properly structured and the organization has proper instituted practices."

So many, if not all of you here today are in managerial leadership roles, and may be responsible for other managerial leaders. Would you agree, or at least be prepared to consider that if your organization had better instituted practices that you and your teams would be able to perform more effectively and by doing so, be regarded as better leaders?

And if there is no such thing as leadership per se, then leadership traits can't apply. How many times have you been haunted or taunted by yourself, or your manager, or your subordinates about the leadership traits that you have, don't have, or should have? How many books have we all read, seminars and conferences attended on leadership; and of course beautiful quotations. I personally agonize over this every day and I am constantly looking at leadership development for my team!

Let's examine a world-renowned figure. Was Winston Churchill a great leader? During World War II, he was acclaimed for his charisma, great leadership presence, communication and personality. He was able to set a clear direction for Britain and galvanize the citizens around his plans. As a wartime commander Prime Minister, he was extremely effective. Did you know that he was not nearly as successful pre-war, or post-war? As a peace time Prime Minister, his efforts failed and he was unable to move Britain or the British people forward. What happened? Did he get injured in the war and suffered a personality change? Did he get tired of the job? What is evident is that his leadership success as wartime commander was not transferable to Britain in peacetime; because his role and requirements for the role were so different. Is it reasonable then to rush to label people either good or bad leaders?

Let's now look closer at home. For years Lawrence Duprey was admired for his bold moves and success in growing CL Financial into the empire that it became. What happened? As the conglomerate grew in scale and complexity, the requirements for the role of Chairman obviously changed, so too for the structure and practices of the organization which needed to be redesigned in order to protect shareholders and policyholders against any self-interest and whimsical decision-making of management.

In case you are still not prepared to accept that there's no such thing as leadership traits – let me share the research conducted on the study of identical and fraternal twins to determine whether leaders were born versus made. Using a behavioral genetics approach, they concluded that the life context, in which one grows up and works in, is much more important in determining whether and how your leadership will emerge during your career. They also concluded that these leadership qualities are more or less embedded by your 20's. This raises the question of the possible futility of leadership training as we know it.

So if we were instead to re-direct our focus and attention from the elusive grand leader to role clarity and a leadership process that requires basic competence and a framework of practices, are we then describing or making a case or indeed establishing that there is clear correlation between good governance and leadership? I think we are.

According to Adrian Cadbury, leading corporate governance expert and author, "The main governance issues are those of power and accountability. They involve where power lies and what degree of accountability there is for its exercise". He notes that "the fundamental reason why corporate governance has so recently moved into the economic and political agenda worldwide has been this rapid growth in international capital markets, as countries wishing to attract investment need to convince potential investors that reliable governance structures are in place."

By the way, the word "governance" has Latin roots and means "to steer".

Corporate governance distinguishes the governance of publicly held corporations from government of nations and according to a former President of the World Bank – The governance of corporations is now as important in the world economy as the government of countries.

The sheer size and economic power of some global companies rival that of some small nations, fuelling the emergence of corporate governance codes for these public companies which are really codes of best practices for board effectiveness and corporate accountability, including policies such as whistle blowing.
An important distinction between leadership and corporate governance is that the latter has rapidly emerged as a prescriptive response, and is defined by the OECD (the Organization for Economic Co-operation and Development) as a "set of relationships between board, management, shareholders and other stakeholders. Corporate governance provides the structure through which the objectives of the company are set and the means of attaining these objectives and monitoring performance are determined."

According to Sir John Harvey-Jones: "if the Board is not taking the company purposefully into the future, who is? It is because of Board's failure to create tomorrow's company out of today's that so many famous names in British industry continue to disappear. The Board is the link between shareholders and managers. The Board is at the center of the governance systems and the Chairman of the Board is critically responsible for the performance of the Board".

With a growing attention from multilateral agencies, how are we as a region responding? In 2003, a decade ago, there was a Caribbean Corporate Governance Forum held in St. Kitts, in which twenty-four countries in the region participated. The report admitted that the "Caribbean voice" was missing from the worldwide debate on corporate governance and cited challenges faced by the Caribbean as, and I quote, "embedded in the evolution of the historic and economic development of the region's societies, these being:

1. The judicial systems are poorly equipped to address healthy governance practices;
2. The ownership structure of the corporate sector is very complex (I'm not sure what that means);
3. There is an interlocking relationship between the government and the financial sector;
4. Governments often intervene and interface with Boards and this has hindered their effectiveness.

Interestingly, it mentions, "that Caribbean governments need to lead by example and adopt good corporate governance practices and that the private sector also ought to be the catalyst for building the effective demand for corporate governance. So the push would come from regulators and the pull would come from business associations, companies, shareholders, investors and banks.

So where are we today? What has happened since that forum ten years ago?

Well, CLICO happened and it reverberated throughout the region; Hindu Credit Union happened; Motor and General Insurance Company and Citizen Insurance all happened. So are these examples of poor corporate governance, or poor managerial leadership? I say both.

You will recall that corporate governance was really designed for listed companies to ensure effective oversight by Boards for the best interest of all stakeholders, particularly external shareholders. So what about unlisted companies?

It is a fact that the business sector locally, regionally and globally is made up primarily of small and medium sized enterprises owned by single individuals or families. There are only thirty-four companies listed on our own stock market; so the rest are unlisted companies that employ thousands of employees and serve even more customers. Of course there are also huge local and international and transnational companies that are privately held like CL Financial and SM Jaleel. Sustainability of these companies is critically important not only for their economic value, but also for their contribution to society.

This is confirmed by the Institute of Directors in the UK that says "good corporate governance in unlisted companies is not primarily about Boards and external shareholders, or more about rigid compliance with formal rules and regulations, it is more about establishing a framework of company processes and attitudes that add value to the business and help build its reputation and ensure long term continuity and success."

While I was President of ATTIC, I got a firsthand understanding of the issues that plagued several general insurance companies which led to their eventual demise. I know that the new insurance legislation has forced attention on corporate governance and this is a good thing. Having said that, regulators must not be so invasive as to cross the line into the management of companies and this Bill has such tentacles. Historically, when regulators react to crises, stifling overregulation becomes the easy and popular solution which in turn has a deleterious effect of over focusing companies on too much rigorous compliance, escalating costs and reducing resources that could be better spent on business strategy and risk management.

Fortunately at TRINRE, our evolution was different. From the time I was appointed by the parent company in 2001, as Executive Chairman, our Directors were all both competent and independent and because my mandate was to turnaround the company, it was essential to build trust and instill confidence with all the stakeholders – the then Supervisor of Insurance, brokers, customers, the public at large. A reputable board in our case was and continues to be the heart of our governance strength. We were also very privileged to have on our board until recently, Dr. Axel Kravatzky, who is now the Chairman of the Caribbean Corporate Governance Institute (CCGI). His commitment must be commended for advancing corporate governance and I encourage you to support the CCGI.

So here we are – Corporate Governance – Leadership Trait or Challenge?

Having started with Jaques and Clement's view that everyone with basic requirements is capable of being an effective leader in organizations with properly instituted practices; followed by findings that say that the trait theory of leadership is not proven by research, then it seems logical to conclude that corporate governance is neither a leadership trait nor a leadership challenge. It is the bedrock upon which business strategy must be built for sustainable success. Let's keep in mind that Governance may be the latest mantra but governing has been here from the beginning of time – it's about being wise and responsible and when these work in sync, transparency and accountability would naturally be derived.

As I close, I'm faced with a dilemma. I'm compelled to consider new insights; fresh new qualitative research on the causes of the 2008 financial meltdown. Discussions and focus groups with over three hundred business leaders across three continents identified that the CHARACTER of the leader played a prominent role in business leadership and governance. It recommends that character be considered as highly as competence in the recruitment of directors and executives. Ladies and Gentleman have you assessed your character lately?

In light of this new revelation, I must ask your indulgence to re-open the discussion at another time, because surely you will ask how was character defined. There are three components – values, virtue and inescapable... traits. So until we meet again, I ask you to consider the possible impact on your organization if leadership were to be treated as a process and corporate governance as an essential foundation towards its implementation.

Let me end by thanking Nigel at NEM Consultants and the CCGI for the opportunity to share the spotlight with a wonderful team of professionals on such an important topic.

Thank you for listening.

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