Interview with Geoff Walker, one of Water Street’s three founders, responsible for the overall growth of the business
“In many companies, JVs account for 10-20 per cent of the company’s assets, revenue, or income. This is especially true in in the GCC, which is probably the most JV intensive region in the world and where these numbers are much higher.”
How does a joint venture (JV) directorship differ from a standard corporate directorship?
Where should we begin? The fundamental difference between JV and corporate directorships stems from the relationship between the joint venture and its owners. Non-executive directors on JV Boards are almost always executive officers of one of the shareholders. This relationship creates all kind of potential conflicts for JV directors around issues like the strategy for the business, investment decisions and commercial relationships – where the interests of the venture and its shareholders may not be aligned.
What are some of the biggest pitfalls to avoid when taking up a JV directorship?
There are a number of pitfalls that are both predictable and avoidable. First, companies can do a better job of preparing their JV directors to recognize and navigate the unique challenges that JVs introduce. We see this as a huge opportunity. Second, JV Directors need to realize that often the most important contribution they can make happens outside of the boardroom – ensuring that their shareholders deliver on the promises they have made to the JV. Too many JV Directors underinvest in this aspect of the role. Third, it can be difficult to get good feedback on your performance as a JV Director. Unlike corporate boards, very few JVs conduct regular governance assessments. So JV Directors need to be especially proactive and honest in evaluating their own performance in the role.
What are the company-wide consequences of ineffective JV directorship?
One of the things that makes the role of a JV director so exciting is that these tend to be frontier businesses, taking the shareholders into new markets, new parts of the value chain, or new technologies. The biggest risk of an ineffective JV director is that the business fails or, more likely, muddles along below expectations. There is a very strong correlation between the strength of a JV’s governance and the strength of its overall performance.
How can effective JV directorship training directly affect the bottom line?
Let me use some rough numbers to try to dimension the size of the prize here. Our research and practical experience working with hundreds of JVs suggests that there is often 10-30 per cent upside in the economics of a venture by making some targeted changes. In many companies, JV account for 10-20 per cent of the company’s assets, revenue, or income. This is especially true in in the GCC, which is probably the most JV intensive region in the world and where these numbers are much higher. So a highly effective JV director is in a position to unlock tremendous value for their companies.