What Should Boards Be Doing Now?

Amid the uncertainty and complexity caused by the ever-unfolding CV19 pandemic, one thing remains clear; strong leadership is in higher demand than ever.

CEOs and Boards of Directors (as well as political leaders and public authorities) are globally being put to a test of navigating through unchartered waters like never before.

Never has the world seen more rapid changes, the economy been more volatile, markets seen more disruption, the media scene been more ambiguous, and only rarely has the geopolitical situation been more complex.

Implications on businesses are tremendous. Opacity has become the default in any and all industries when it comes to how strategies are being determined and milestones being set.

Not surprisingly, this also carries direct consequences for leaders of businesses – not just among the C-suite but equally much for boards of directors. The days when business leaders only had to worry about making profits and steering clear of illegalities are long gone. Today, responsibilities and expectations on executives as well as non-executives are much more versatile and subject to significantly tougher scrutiny.

No board anywhere on the globe will claim it to be easy to prioritize today’s agenda of securing cash-flow, deploying initiatives to ensure health and safety for all customers and employees, overseeing strategic transformations, disruptive innovation, sustainable development, servicing shareholders and proxy advisors, formulating a meaningful why to furnish a strong employer brand, managing risks not only of operational but also of financial and digital nature, ensuring the highest possible standards of diversity and inclusion, mitigating geopolitical uncertainty and unexpected regulatory changes, staying friendly with banks and investors, and not least doing right while doing good, ie. keeping ethical standards high in leadership and business practices while also ensuring that the company engages actively in supporting (at least some of) the 17 UN Sustainable Development Goals.

It’s no wonder that boards across the globe increasingly show signs of mental respiratory distress as they try to keep afoot with the broader expectations of stakeholders at large.

Yet, a number of boards do succeed under this new paradigm while others don’t. What is the secret sauce in the recipe of the successful ones? Is it in the composition? The board dynamics? The leadership vision and practices of the chair? In the number of hours spent? Perhaps a combination of them all – or maybe something entirely different.

In January and February 2020, we asked around our sizeable global network of chairs and board members, and we gathered the findings in our report; Global Board Survey 2020 – The Purposeful Board. We are truly grateful for the input we received from 1.592 corporate chairmen and board members from 72 different countries and legal jurisdictions on all populated continents.

Even though the responses were recorded and the survey report published before the full impact of the Corona Virus was known, we firmly believe that our concluding advice still stands true, and we believe that these are the characteristics of "The Purposeful Board".

1)     Engage. Board members are individually as well as a group responsible for charting the course and setting the pace at any company. That implies responsibility for setting the Tone at the Top, and ensuring integrity values throughout the entire organization.

Adhering to sustainable business and production methods, and fully embracing stakeholder capitalism will ensure the dedication to building long-term value. The Business Roundtable Statement on the Purpose of a Corporation, signed in 2019 by 181 of the world’s most influential CEOs, incl. Larry Fink, Tim Cook, Mary Barra, Jamie Dimon, Ginni Rometty, Jeff Bezos a.o., states it very clear: ‘Businesses must have a purpose beyond profit’. A statement that resonates well in a number of countries that have long strived for supporting more sustainable business and societal models, like e.g. Singapore, Canada, Switzerland, New Zealand, Benelux and the Nordic countries. Now it is becoming a global trend.

This calls for engagement from the board – but can be done in numerous ways. Some might find it valuable to impose more frequent board meetings; some will take advantage of introducing Ethical Committees on the board; others again will charge individual board members with responsibility for particularly defined SDG focus areas – obviously in close collaboration with senior management. It can involve new incentive schemes for management, new board processes, new goal-setting structures, and many other initiatives. It is all about wanting to make a positive difference – for the company but increasingly also in a broader societal context.

The only thing that will not work is to stay passive and deliberate unconscious. Because investors as well as stakeholders will have no patience for that in the future.

2)    Innovate. Broadening the board’s insight to building of new revenue streams through executive training, study tours abroad, increasing gender diversity and hire new recruits are all good initiatives and often needed to broaden the insight and skillset of the board.

In addition, we also suggest experimentation. That could imply getting used to getting uncomfortable. It’s not easily done. Using a trial-and-error approach at board level is very much against the nature and upbringing for most directors that has focused on training them to be the custodians of the company, its shareholders, its creditors, etc.

But take the chance and try to build wholly new revenue streams on the edge of your organization. Start at small scale and learn before stepping up to taking big bets. Treat each and every idea passionately like a start-up would and man this division with people freed from the pull of the past, the corporate legacy and complicated internal politics. Let this group report bi-monthly to a specifically charged board member and use a venture capitalist’s assessment to determine whether to keep or kill the proposed initiatives.

3)    Glocalize. While globalization has been the driver of a tsunami of transformations not least in the production and assembly parts of the value chain, recent events, e.g. COVID-19, have highlighted the need for a more diversified and less vulnerable supply chain in major companies.

Hence, identifying, assessing and building alternative supply channels, preferably from another continent than the main supplier(s), is among our recommendations to boards. Other than contributing to better risk management, in many cases it will also prove to be more sustainable to source from countries closer to your main operations.

There might be enhanced costs attached to such an approach but it can prove much more costly to remain at a single supplier-setup, cheap as it might be.

Glocalization also goes the other way around. Many companies have in the past tried a universal go-to-market strategy and paid dearly for it. Stakeholder capitalism also involves taking all stakeholders, incl. those in every marketplace, into account. That may very well vary from market to market.

4)    Diversify. A decade and a half ago, most boards were composed by maybe five CEOs from other companies and possibly very different industries, one CFO, and one person with a legal background. That has surely changed. Diversification in terms of ensuring to have different functional backgrounds and competencies has long been a global board trend. Also, with regards to gender, ethnicity and nationality, we have seen great progress in many countries.

However, it seems less of a successful trend to try to recruit younger, digital-savvy candidates. That is essentially leaving many boards in the dark in terms of how to contribute with real value to discussions on AI, robotics, blockchain, virtual and augmented reality, deepfake, etc.

We cannot stress enough how important we perceive it to be to establish a truly diverse board – in terms of gender, nationality, competence, age – and most importantly, in thinking. Heterogeneity is a strong driver for better risk management and more innovation, while homogeneity almost only drives fast decision-making and execution. The latter capabilities are obviously good in times of imminent danger and crisis, but that should surely not be the everyday situation for any company. In such case, the problem is probably of a completely other nature.

We obviously remain at your service should you have any questions related to the above or on how we can help you become a Purposeful Board. Should you wish to obtain and read your own free copy of the report, please go here.

Sincerely,

InterSearch & Board Network