Nokia was the leader in the mobile phone industry and then they almost went bankrupt, while the reasons are numerous, there are lessons to be learned. In the book Transforming Nokia by Risto Siilasmaa published by McGraw Hill, NY, 2019 the author offers some views. Mr. Siilasmaa was the Board Chairman for a number of years.
In many ways, board members and investors are similar because each is dependent on the information provided by management. In most cases, management wants to give positive information, that is normal. Mr. Siilasmaa says if the culture allows it, and many do not, you need to know:
Are we discussing the right things?
Are we discussing the right topics the right way?
Are we comfortable challenging the leader’s opinions?
It is more enjoyable to discuss good results but how do you make profits and why is that going to continue at the margins the company is doing? Is a great things to know before you leave.
We all love success and want to be more successful. The problem with success is not examining the downside:
Bad news does not teach you or your team. If someone is replaced because they brought bad news then bad news will not be brought up in the future.
Your team does not dig for negative or bad news. This is a two way street.
Decisions are constantly postponed and watered down.
There is often just a single plan with no alternatives. To see alternatives and present them to others requires trust, the ability to discuss bad outcomes and an open communication.
Linking to dividend paying stocks, we all like to hear good news, however if you never hear bad news in good times when the economic cycle changes how will you be prepared to tackle the coming changes? As investors you can make money if stocks go down, fix themselves and come back, sometimes this means a culture change at the top, do you see it now?
There are more questions than answers, till the next time- to raising questions.