Clear as an unmuddied lake

Investment managers firms woke this week to new rules from the Financial Conduct Authority governing claims made about ESG funds. They include: an anti-greenwashing rule to ensure ESG claims made by firms are not misleading; new product labels so investors can understand where their money is going; and new rules about naming products so they don’t look like they’re having a positive impact on sustainability when, in fact, they’re doing nothing of the kind.

This is a big moment for investors, amid growing concerns about claims made for funds and whether they really are as ESG as they claim. The Investment Association, a club for investment funds, says the new rules should bring “welcome clarity” about “regulators’ expectations” for ESG claims. Of course, regulatory clarity is always a blessing but what’s so hard about not making claims you can’t stand up? Sometimes it takes a watchdog to point out the obvious, even to “masters of the universe”.

What did you say?

Alarm in Board Agenda’s ivory tower this week after an opinion piece in the Financial Times from governance boffin Anand Narasimhan, who points out that many boards fail to provide “psychological safety” for communication among board members.

Narasimhan, a prof at IMD Business School in Switzerland, recommends directors pinpoint a list of specific behaviours that block or foster communication for review at the end of a board meeting. Though to be fair, Board Agenda has definitely been in settings where talks about talks were shut down as quickly as a Twitter, sorry, X, account.

Which brings us to a further question. If your proprietor publicly tells your major clients to “go fxxx yourself”, you’ve got to wonder how much of a safe space the boardroom is ever going to be for, you know, the chief account managers.

Narasimhan has one answer: encourage the individual to become “more self-aware” and practise the use of “non-confrontational simulations”, supervised by coaches offering feedback.

All well and good, but self-sabotaging behaviour can be tricky. It is best dealt with by spotting it early, Narasimhan writes, but also by recognising it as a kind of “collective behavioural phenomenon”.

Sage words from Narasimhan. Though we suspect all these methods have their limits in certain situations. Nevertheless, Linda Yaccarino, CEO of Twitter, sorry, X, might want the prof on speed dial for the foreseeable future.

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The crisis at OpenAI, which saw founder CEO Sam Altman leave and then return within the space of about a week, has “exposed the fragility of governance in high-speed tech organisations”, according to profs at business school INSEAD. Written by Theodoros Evgeniou, Yann Lechelle and Ludo Van der Heyden, the article sums up the ways to improve governance with appropriate, if breathless, metaphors.

“Founders should bear in mind that good governance depends on reliable ‘hardware’ (structural arrangements such as shareholder agreements, corporate structure and boards), great ‘software’ (processes and ability to communicate clearly and openly), and good ‘peopleware’ (people who can work together, have diverse viewpoints, are not excessively biased and are competent in their ownership and governance roles).”

Failing that, Board Agenda would advise turning it off and on again. Mostly works for us.

Shopfloor smarts

Now for a little bit of good news. German researchers find that companies with workers on their boards are much better at making important information publicly available.

Firms with workers in the boardroom tend to have more detailed management guidance and more detailed financial reporting. It also appears there are smaller errors in analyst forecasts when boardrooms also host someone from the shop floor.

“Overall,” the research reports, “our results indicate that firms with worker representation have a more transparent information environment and that worker representatives in the boardroom have an important informational role that reduces information asymmetries.” Power to the people!