Academic rigour, a practical focus and a willingness to challenge conventional thinking. These are some of the hallmarks of the UCD Smurfit Business School professional diploma in corporate governance, according to Dr Margaret Cullen. An assistant professor on the programme for the past 13 years, Dr Cullen lectures on the subject areas of executive remuneration and behavioural aspects of boards.
She says it would be wrong to view the programme as purely academic. “It is very practical as well. It’s a rich blend of the two.”
The aim is to bring the critical thinking of academia to an area that is constantly evolving. “Some people want to give their view of the world on what should be best practice,” Cullen notes. “But the literature on the area is vast. As academics we want to stand back and look at what will help people arrive at the best decisions when dealing with the situation in front of them. We don’t want to lead people’s thinking. The world is not black and white – it’s grey. We want to help people navigate through the grey world.”
And the programme itself evolves in response to changes in the corporate landscape. “I came into the programme in 2007 to teach the module on the behavioural aspects of governance,” she says. “I took over the Responsibilities of Directors module last year and I introduced ESG to it. That’s what makes it a great programme, it’s so agile. We are seeing a whole new body of literature being produced on ESG and executive remuneration and other areas. The faculty ensures that is reflected in the course content.”
‘Pracademic’
She refers to the fusion of academic learning and practical application as pracademic. “Many of the lecturers are directors themselves. That really adds to the classroom experience. I found that myself when I became a director in 2012. You move out of the ivory tower to live the experience. The programme begins with an academic introduction to governance and company law and so on and then moves on to the practical aspects of risk, remuneration, business strategy and other areas.”
Peer learning is another important aspect of the programme. “We leverage the expertise in the room to the advantage of all,” Cullen explains. “You could have a HR executive in the class bringing a different perspective to the behavioural aspects. I don’t think I have ever walked out of a class without writing a note to myself on the learning I want to use next time. That’s another really amazing thing about the programme. Academic rigour coupled with experience of the faculty and combined with the experience in the classroom, that’s the real sweet spot.
If you go back to the early 1990s, the average CEO salary was 45 times average pay in a company. Now the multiple can be in the thousands
“You can take any area – executive remuneration, for example, and you can just say ‘here is how it’s done’,” Cullen continues. “But why not challenge conventional thinking? People need to understand the difference between incentivisation and reward and the talent marketplace aspects that must be taken into account.”
Agency theory
And the topic is further complicated by agency theory. This refers to the problems that can arise when the directors running the company are not the same as the shareholders who own it. The directors are the shareholders’ agents, but they may not always act in their best interests. Boards frequently use incentives to influence the behaviour of directors and ensure it aligns with their interests.
“We bring in psychology to look at this,” says Cullen. “We look at what Dan Pink and others have to say about it. The best CEOs are the ones who are intrinsically motivated to do the job they are paid to do. That is not to say that money isn’t important but it’s not the only motivator.”
Hot topic
With executive pay high on many activist investor and other agendas, this is very much a hot topic. “If you go back to the early 1990s, the average CEO salary was 45 times average pay in a company. Now the multiple can be in the thousands. People have to ask themselves if they think it’s palatable that a CEO earns 500 times the pay of an average worker in the company. And in the context of ESG there should be more of a direct link between what we say and what we do.”
She describes teaching on the programme as an “absolute joy”. “The variety in the classroom never ceases to amaze. We have a director of a publicly listed company; the founder of a number of small companies; a financial services executive who has the wars in the financial crisis and its regulatory aftermath. They all bring their perspectives. There is no universal truth. It’s all about looking at issues in context.”