When Governance Matters: Purpose, Timing, and Stakeholder Value with Keyaan J. Williams - Ep. 32 Part 2

Speaker A: Foreign.

Speaker B: Welcome to Leadership Luminaries Lounge with Carrie Bass and Peggy o', Neill, a podcast about the connection of leadership philosophy, practice and impact on society. Get ready to be illuminated.

Speaker C: Hello and welcome again to another episode, but it actually is part two of our conversation with Keon Williams of Class llc. Keon is the, uh, managing director of Class llc and he is a governance and risk mitigation expert. I shouldn't say mitigation prevention expert, uh, because I think you were making a point about that in part one, which I recommend you go back and take a listen to or look at. But, um, Keon, uh, has a great perspective on being able to help organizations be able to identify where are they in this spectrum of, I like to use your term, exposure to the environment. And where do you want to be for the outcomes that you want to achieve? And so once again, Kian, thank you for being here again as our featured guest.

Speaker B: Yeah, it's a pleasure to be here.

Speaker A: Mhm.

Speaker D: Yeah, thank you. Kian, Um, I know that or you've told us in the break earlier that, uh, one, something that really matters to you is that you want your work or your life. I'm not sure how to characterize it exactly, but I'm, um, going to invite you to explain it to us to make the world a better place. And I'd love to hear that that come from of you, that desire of you, and then how that relates to the work that you do.

Speaker B: Sure. So in the first part of the conversation, and I agree with Kerry, I encourage you to go back and listen to part one. Uh, there was a little bit of conversation about the impact of the Bible and we also talked about integrity. When we start talking about why does Keon do what he does? Part, uh, of the answer to that question is I honestly believe everything in the Bible from Genesis to Revelation is true. And because I believe those things are true, that's how I live my life. But one of the things that they say in the Bible, it's one of my favorite quotes, but in Galatians it says, I set you free for freedom's sake. And so there's not really anything that I can do to please God. Everything about my life is what he designed for my life to be and for what it is meant to represent. And what it does is it puts me in a freedom position where I don't have to chase money, I don't have to chase opportunity. I get to just hang out, have a good time, and be thankful for the grace and the mercy that was shown to Me, what that does in terms of the work that I do is it really does position my team and I to focus on adding value wherever we have the opportunity. Um, when we do commercial work we charge a reasonable fee. That's not the big four fee, but it's enough to cover costs. But it also allows enough freedom to, to volunteer time, to donate wisdom, to give things away. At the end of the day, if more people understand what is the intersection of risk and governance and how does it lead to good outcomes in the marketplace, everybody's going to benefit. And when I expire and nobody's even thinking about me anymore, my grandchildren's grandchildren are going to benefit from this conversation about risk, governance and other conversations that cause organizations to think more intentionally about how do we reduce risk to an acceptable level so that we're delivering what we promised to our stakeholders, especially when those stakeholders need clean water, efficient energy, good use of natural resources and everything else. Because our conversation isn't just commercial, it applies to every organization that exists.

Speaker C: I like that term. And uh, I do a lot of thinking and talking about uh, sustained value, uh, and shared value where it's not just economic value, we're talking about ecological value, we're talking about societal benefit and societal value, uh, and sometimes those uh, have to be brought into balance. Another example that I like to use is the energy industry where we understand that hydrocarbon petro based fuels provided a lot of benefit and they still, they still do provide a lot of benefit uh, to society. But we're learning more about the cost of that, that um, that benefit. And so weighing then the cost of that benefit and the risk to my organization by relying too heavily on that at a time when there's other alternatives, uh, gets to be a real decision point that organizations really need to be addressing right now. Enough of my pontificating. But what I tried to get to was the question about timing. You've been uh, having a series of discussions on uh, decisions in uh, time based decision making that organizations need to address. I'd like you to spend just a minute talking about uh, the considerations of time that organizations, particularly boards and governance boards need to think about uh, as they go through their governance activities.

Speaker B: If, if we make it very succinct, I think one of the mistakes that people make in governance when they are positioning the board of directors and the corporate officers to make decisions, there's not enough lead time, there's not enough thinking time and you're not really doing governance when there's not enough time to put in thought and decision making. Um, what generally happens for those that don't know for a, um, for a public company that has an independent board of directors, the board generally meets quarterly. You have standing committees, so you have nominating and governance. You, uh, sometimes you have risk as a standing committee, sometimes it's a select committee. But the purpose of all of those committees is to provide oversight so that when the full board meeting takes place, everything that's reported in the board meeting is on the record. What tends to happen is the committee doesn't receive enough information from management and staff to actually deliberate and consider options. And what you'd normally end up with is, hey, board, committee, we have an emergency and you need to choose A. And we're not even going to tell you about B or C because if we don't choose A right now, people are going to die. That time based decision making is not really decision making. It's a decision under pressure. And, and it's evidence that governance doesn't exist. The more ideal circumstance is that you have good boundaries for decision making. The board is going to say we want to operate within this boundary of exposure or risk. As we approach the boundary, we need enough time to consider what are the options that are the best response. And then management is going to have authority to make decisions that are insignificant. But if it's material, based on the accounting and the SEC definition of materiality, well, the board needs plenty of time to consider all of the options so that they're choosing the best option, not choosing the emergency option that was decided for them. And what's going to start making that more and more important is the Chancery Court of Delaware has a standard that they call Caramark. And it goes back into some, um, historical things. But, but there was a landmark Karamark case where Blue Bell Creameries had their board directors held personally and criminally liable because ice cream killed people. And you think to yourself, how does ice cream kill people? And it was a food safety issue. And the courts said because you are independent directors acting as fiduciaries on behalf of the stakeholders of ice cream eating people of the world, you have a responsibility to make sure that listeria is not part of the food manufacturing process, that the outcome that you produce by your organization is safe for consumption and if there is a problem, you act in enough time to clean it up. Because we see food recalls all the time. You know, there's uh, I went into uh, foodborne illnesses, but I know a couple of things about that from my time at the cdc. But what tends to Happen is it is easy if you measure and provide good oversight to identify that foodborne illnesses are existing outside boundaries that are acceptable. You shut the plant down, you clean everything up, uh, you sanitize it, you bring in inspectors. When everything is clear, you turn the plant back on, you go back to producing food. In the Bluebell case, the things that should have happened didn't happen and the board didn't provide adequate oversight. And it all comes down to timing. Because they didn't get the right information in the right format at the right time, they didn't have the opportunity to make decisions and provide effective oversight and make sure that the right things happened. So ice cream legitimately killed people and the board was held liable for their failure and their oversight duties. I do not think that that is ever going to become a driver for cybersecurity, which is an area that I've spent a lot of time. But if we use that Bluebell case and, and the Karamark standard that they identified, what it highlights is that the board needs information in the right format in the right time to make an oversight decision. Regardless of what the company is. It could be oil and gas, it could be transportation, it can be electricity. What we find is that when the board doesn't receive the right information with enough time to choose an action, the actions are decided for them and they're not really doing governance anymore.

Speaker C: Well, I can see a real example of how that can enter into cybersecurity real quick. Right now, Waymo is everywhere self driving cars. Um, imagine the uh, accountability if they did not put in adequate, uh, systems and network and data protections such that, uh, the cars did crazy things like they kidnapped people and drove them to kidnappers because the company did not put in adequate safeguards to protect, uh, the identity and the, uh, other information of their passengers. What if they just let them all run out and run off of bridges or whatever because they did not provide the oversight to ensure that the GPS mapping stays up to date. Uh, so it's very critical, I would imagine right now to make sure that you're dealing in real time. Um, again though, one of the questions that I had with that and going around to timing, um, is balance. How does a governance organization not become managers, uh, in order to ensure that they have the time to make the right decisions? Um, I'm sure some of it has to be trust, but how do you achieve that balance of making sure that you're making the right decisions or that you have the information that you need to be able to make the right Decisions.

Speaker B: One of the things, one of the cliches of governance is that the primary role of the board is to hire and fire the CEO.

Speaker D: Mhm.

Speaker B: And while I agree with that perspective, there are a lot of other things that the board does. The board should, uh, establish boundaries for risk taking. You know, the board should say, how much exposure are we willing to accept for how long. In pursuit of a business outcome or objective, the board is going to establish culture within the organization and then hold people accountable to operate according to that culture. There's a lot that the board is going to do for setting the direction for the company to travel. To complement that, what becomes very important is that you have feedback loops or some kind of reporting mechanism. Part of the reason that you have quarterly board meetings is because you have to meet regularly enough to provide oversight and to understand what's going on. But the quarterly board meeting is not the only time that the board should be engaged. I have been a participant in committee meetings that meet on a regular basis. You know, there's an organization that, that I serve on the finance committee and the organization is in a cash shortage. So we meet monthly. We don't wait every 90 days to get together to talk about the cash shortage, where cash shortage is a specific definition of a situation. And cash shortage doesn't mean that the company is broker insolvent. It means that operations need to be adjusted because operating capital is not sufficient enough for us to continue operating past a certain amount of time. And so some companies that do very, uh, robust and mature finance might say that we need to have six months of operating capital on hand. Otherwise it requires a different type of operation until we have enough cash reserves so that we can withstand a storm. And so I don't want the audience to think that this company is in a bad situation. But it does highlight that there are specific instances where the organization has to meet more frequently than once a quarter. You know, if I had a cyber incident, I, I try to stay away from cyber incidents as much as possible. But every now and then my board buddies call me and say, hey, we had a problem. And, and there was a situation where a friend of mine is the board person in a financial institution and he was concerned that the information that he was getting was not awesome. And so we had multiple off the record deliberations. But then they formed a committee and they were meeting daily until the situation was solved. And so timing is going to expand and contract based on the situation, but you have to have things in place to say when X happens. That is A trigger for Y to be the next step so that you're going in sequence X leads to Y leads to Z, so that the board knows what's going on so that they can provide input about the next steps. This becomes extremely important because one of the things I think people forget is that every organization has limited resources. And so you can't have something that is significant or material exhaust all of the resources of the organization. And the people that are supposed to provide oversight have no idea that it's going on. So if we start getting into resource exhaustion, that's going to be detrimental for the company. You need to call somebody and let them know if it's insignificant, let management handle that. You know, if it's very insignificant, just tell staff, hey, we have a procedure when you see A, do B. But if it starts to escalate into the realm of meeting the definition of material, you need to start notifying the right people at the right time so that there is enough window Runway for them to make the right decisions.

Speaker D: And you mentioned material, definition of material. Would you talk more about that? Because earlier you said that a lot of people don't quite understand that. So would you? Yeah.

Speaker B: Um, so I have a friend named Malcolm Harkins. He used to be the chief security officer for Intel Corporation. Uh, for those that are interested, he possibly has the best definition of materiality that I've ever seen. And while he was a security person, he started out as a finance person. But he has a really good series of articles called, uh, materially, Material Materiality Matters. And using his definition, what becomes very easy is that something is material if it is significant and required for the organization to deliver what it promised. And so if we use food safety, because I mentioned, um, Blue Belt Creameries, the way that you get the milk from the cow to the pasteurization process into containers on a truck, and then into the refrigerator or the facility or wherever you're going to use it. Every part of that process is material because any failure in that process is going to lead to a food safety issue. And so what tends to happen is people think materiality only in terms of finance or only in terms of technology. But I've seen Malcolm, um, elegantly break down if the thermometers on the truck leaving the farm, going to the facility aren't working properly, you have a material food safety risk because milk that's not maintained at the right temperature starts to grow bacteria. And then that bacteria affects the people that drink the milk. And so if refrigeration on shipping was broken. And then you take bad milk and put it into refrigeration in the storage facility that is working now we have an exposure because we're harming people and don't even know it because we haven't mapped out the full business process and identified every place that there could be a breakdown and, and every place that there could be a breakdown in my milk example could lead people to be harmed up to and including death. And so it becomes very important that organizations start thinking about what is essential or material related to what we promised. Do we understand how everything works? Have we formally documented all of our business processes? Do we understand every obligation related to that business process? And then can we measure end to end? Is it working properly? And how much time do we need in advance to know when something has broken so that we can jump into action and fix it?

Speaker C: Go ahead. I'll let you go ahead.

Speaker D: So what you're talking about has a lot of components to it. So is there a good resource where somebody could, uh, I mean, maybe your website and articles on the website or your substack, or are there other resources that people could use to go through everything you're explaining and think about how do I apply all of this to my business? Because it's not food or it's, you know, it's some. Maybe just a coaching business, you know what, or a consulting business. How do I apply what Tian's saying here to my business? They're a good resource at a high

Speaker B: level is just regular business management. Um, there's formal standards for business process model and notation. You know, there's a thing called the Open Group Architecture framework. They call it togaf as a pronounceable word. But if you took togaf and applied it to any organization, you're going to identify your business processes, document them end to end. Consider the communications layer that's required, the technology layer that's required. You can build cybersecurity on top of that. One of the things that's interesting that I found, especially when I was a, um, graduate professor, is, is that most organizations do not know how the organization works. Uh, you had some people that had a great idea. They got some cloud solutions, they did vibe coding and built an application. Next thing you know, they're making $5 billion a year and nobody knows how anything works. But the lack of awareness about business process and how the company works is really the root cause of most of your exposures and is the starting point for most of your catastrophes. And so I recognize that most businesses don't start well planned, well documented and structured and have change control and change management. But there becomes a point in the lifetime of the business when you transition from startup to corporation that you then have to go backwards and say, hey, let's make sure we understand how everything works and we understand single points of failure and we understand exposure. There could be regulatory exposure or a contractual obligation that would be detrimental if we didn't satisfy it, or it could just be operational inefficiency. Do we have power that exceeds the amount of money that we have available? And now we can't pay our bills and now we lose the business because the plant shut down? There are a lot of aspects, but everything that I've talked about is just Business School 101 kind of considerations.

Speaker D: Common sense. Mhm.

Speaker B: Which is the reason that you have an operations executive and a financial executive and a human capital executive. As businesses get larger, all of those executives have to sit at the table and be part of the conversation. Because your technology people are not going to know everything about human capital management and your tech and human capital management people aren't going to know everything about operations. So the right people at the table for a company are going to help explore what are all the processes, what are all the dependencies, what are the places that we have systemic exposure that requires, um, something from the company? Because the answer to every problem involves resources and resource utilization becomes important. We can't take all of our cybers, we can't take all the business money and spend it on cybersecurity at the expense of human resources and information technology. And we can't spend all the human resources money and not have anything left for cybersecurity, regulatory compliance. And so there's a lot of overlap and intermingling that requires leadership to involve the right players in the company so that they're all coming together and devising something. It's a good opportunity to say the word bespoke. We're building custom suits for individual organizations. There's not really a cookie cutter approach that's going to lead to success.

Speaker D: Mhm. Great, thank you.

Speaker C: You mentioned that nobody knows all of this stuff, but I'm thinking in terms of, you'd also talked about earlier a, uh, smaller organization or an entrepreneurial firm or whatever. This responsibility rests with the business leader, the business owner or the founder. Um, talk for a minute about seeking, uh, counsel and, and also, uh, if you don't mind, let folks know how they can seek your counsel, uh, to be able to, uh, address some of these issues.

Speaker B: Well, if people want to find me, I'm easy to find on LinkedIn. I write regularly on Substack. Substack is new, so you're not going to see a ton of stuff. But I am pushing content out every week and I'm just giving it away to help people be smarter. But you know, I mentioned earlier in the conversation, I believe what the Bible says in proverbs. It says that smart, ah, people are going to make decisions with the advice of counsel.

Speaker C: Yeah, exactly.

Speaker B: I spend a lot of time with attorneys because of the intersection between my work and in house counsel. But even firms that have a general counsel still seek outside counsel from attorneys who are experts in different areas. And so on one hand, even if you're a smaller business, you have to recognize that nobody knows everything. I have two attorneys on retainer, I have a CPA on retainer, I have a bookkeeper on retainer. And my business is not tiny, but I have outside people who are experts in specific areas where I have no knowledge or I'm not an expert. I know a little bit about everything, but I'm not an expert in very many things. And so I bring in outside people who know what they're talking about. And I've even brought my, uh, CPA and my in house counsel together so we can make sure that I understood the legal implications and the tax implications of a decision that I made. A lot of people don't do that and I think it's setting them up for failure. And so it's very valuable if you're doing digital transformation, find a digital transformation expert to at least evaluate your plan. Even if you know what you're talking about, if you're doing something and you're going into a new marketplace, you know, have you talked to, uh, a business development firm that says, I know the requirements for you to host a meeting in Singapore so that you can leave the country at the end of the meeting and they're not holding you hostage because you didn't pay taxes. There's a lot of nuance.

Speaker D: I lived in Singapore.

Speaker B: I love Singapore. It's an easy place to visit if you're doing something as a tourist. But there are specific requirements that people overlook for your visa. Uh, if I'm doing business and generating economic activity because Singapore wants a cut because you did economic activity in their country. And, and the rules are different in every country. And so what ends up happening is any business of any size has to understand the obligations that they're subject to. And if the business owner or the board is not an expert in those areas, then you have to seek outside counsel. And even boards on public companies bring in outside advisors to point them in the right direction. And so of the most profitable companies in the world bring in outsiders to provide wise counsel. Smaller businesses, as we start going down the pyramid, should consider that maybe I should bring in some outsiders to point me in the right direction so that I stay out of jail or I can leave a country that I went to visit and come back to my home country.

Speaker C: Peggy?

Speaker D: Yeah. So, um, I don't think you told us. And did you answer Carrie's question about how to reach you in this session? Sorry, I'm gonna have to put two questions together so that. And then. And then I know you came to tell us three books as well.

Speaker B: You.

Speaker D: You have, uh, some books you'd like to share that you think would recommend of leaders in business, especially in today's, uh, market and economy, the global issues, I don't know if they're directed in that direction. I just put all that in there. But anyway, you came with three books to offer our listeners and viewers. So how to read.

Speaker B: I'll say my top three books. Book, um, number one is the Bible. You don't have to believe what I believe, but I do think that people benefit significantly from having faith and paying attention to their faith and exercising their faith. So if you ignore the Bible, pick up the Torah, the Quran, or pick something and read it because you need an outside perspective for whatever you're doing. Linchpin, um, by Seth Godin was the last book before I got my first executive job. And I love Linchpin because it highlights that you can be indispensable in an organization regardless of where you're placed on the organizational chart. And Integrity by Henry Cloud is a great book because it talks about your personal composition. So, as we said in the first session, integrity in this context is not about telling the truth, but it's about what makes you who you are and are you your authentic self in everything that you're doing? If I'm. If I define myself as X, and in everything that I do, I am, um, the exhibition or the manifestation of X, I'm going to be able to at least hold myself accountable and say, hey, I said I was going to always tell the truth no matter what, and I lied to these people. So I need to make a decision. Uh, do I need to change my standard or do I need to go back and apologize because I didn't do what I said was the personal thing that I used to Measure myself. If we measure ourselves, then it causes us generally to produce good outcomes.

Speaker C: I, I was laughing because I was, I was trying not to go down that path of, of honesty, uh, and integrity. Uh, and I think the world is in a very, uh, at least people in several societies and democracies around the world because we have um, reduced our expectations of honesty, uh, for outcomes in some other areas. And so consequently then we wonder why uh, there's a lack of integrity that you can't count on what other people are doing when you don't expect your leaders to have integrity or honesty either. I understand, like you said, honesty is not necessarily the same thing as integrity. But if honesty is a core value, then you need to live in that. Um, as you pointed out, um, because um, the, there is so much interesting, uh, uh, available information in the world today that if you're dishonest, it can find you out very, very quickly. Matter of fact, uh, you know what? I got the uh, the, the honesty checkers. Anything that you say on the online nowadays can be verified uh, really quickly. So you need to be careful about that, particularly if you're an organizational leader standpoint.

Speaker B: Yeah, I'm in a unique position because my father was a warrant officer in the army, my mother was a sergeant in the Army. Both of my grandfathers were in the military. My whole family is a military tradition and I served for a little bit, but they, all of them did much more than I did. But I think about this conversation and we think about the um, integrity and the composition of the individual. But I got a ton out of just eight years in the Army. So the army has core values. They have a uniform code of military justice across the entire U.S. army. Because I can't speak for any other branch. What you have is consistent behavior whether it's peace time or wartime, whether it's easy or, or under pressure even the army values kind of define how you're going to act because it's loyalty, duty, respect, selfless service, honor, integrity and personal courage. But those things mean something. So if I'm walking the street and I uh, run into somebody that needs help, those seven core values are going to say, hey, I need to stop and help that person. Because I have ascribed or subscribed to the values of the organization that I'm a part of. But then it becomes, you know, how do I treat my enemy in war if somebody is surrendered, you know, you're waving the white flag, I'm going to take care of you, I'm going to feed you, I'm going to give you shelter. I'm not going to destroy you if you take that out of the military perspective. But then say that we're going to apply this to every individual. The people that communicate their values and live by their values tend to produce consistent and observable outcomes. The people who have built their house on sand are kind of shaky and they're all over the place, and you have no idea what to expect. But it makes it very difficult in a marketplace that is intermingled. And we all have to depend on each other to actually depend on people. If you don't know where they stand, you don't know what they stand for, and you don't know the outcome that's going to be produced. So if nothing else, leaders have to lead by example and say who they are and live by what they said. The beauty is that we all have a choice. Nobody has to choose the army values that I mentioned. Nobody has to choose to live by what the Bible, um, says. But everybody can choose to live by something. But doggone it, you have to live by what you said you were going to live by so that people know what to expect when they're working with you.

Speaker C: Yeah. Yeah. Being true to who you say you are is really, really important. Once again, we've had a wonderful conversation. Um, and Keon, thank you so much for being our featured guest. Uh, Keon Williams, the managing director of Class llc. We will make sure that you have his bio and contact information available in our credits. But, um, Keon provided a lot of enlightenment in this conversation and, um, um, a lot of times, I guess, you know, kind of preaching to the choir because I really, uh, Keon and I and I haven't uh, known each other very long, but, uh, we seem to identify and I seem to, uh, providentially be gravitating toward people of, uh, similar backgrounds that seem to enrich my spirit. And so, uh, I get enlightened by these conversations, and that's why I do them, is because I find value. I'm hoping that you find value in them. And if you do, I would like for you to let that light that you get from these conversations be manifest in the world. So let your light shine where you have the opportunity. Thank you for being with us today. Look forward to seeing you at another opportunity at the next episode of the Leadership Luminaries Lounge. Thank you all.

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