6 Hot Topics in Boardrooms Today

Culture Eats Strategy for Lunch – But What About the Other Meals?

I was meeting with a client recently, a director who has been serving on a public company board and its Nom & Gov Committee for about three years. He was just asked to take on the chair role for the committee and he confided, “I am willing, excited, and daunted all at the same time. What are the hot topics in governance these days that I need to make sure I am paying attention to?”

His question is the sign of someone with a great growth attitude. Ideally, everyone on the board is paying attention to rapidly changing norms and governance requirements. Let’s face it though: the rubber meets the road with the NGC, especially its Chair. This one is for all of you!

So, what are boards paying especially close attention to these days?

Prequel: Management Succession Planning perennially arises as a key concern for boards – in fact, it’s been their #1 challenge area for several years running. So, while it remains vitally important, it’s hardly an emerging hot topic. Noted in Boardspan’s Board Benchmarks, we have been shouting about this from the mountaintops and valleys for several years now.

Here’s what else we encourage you to think about:

1. Strategic Board Succession

Forward-looking Board Succession Planning is finally getting the attention it deserves. For a board, taking a long-term view of its own evolution and preparedness for the future, being truly strategic about how it contributes, and role modeling for the leadership team have never been more important. Board evolution can be driven by changes in the markets, industry, or company direction; committee needs; or as a result of natural refreshment. By planning for perpetual motion on the board, even when no immediate composition changes are foreseen, a board can get out of reactive mode, a hard place from which to generate great ideas, and prepare strategically for all of its future needs.

2. Board Dynamics & Culture

At Boardspan, we’ve always maintained that (i) who is on the board and (ii) what they know are key to a board’s effectiveness. Subsumed in that statement is the expectation that the board works well together; everyone knows this is a team sport. Imperfect board dynamics rarely are the cause of the scary “Ut-oh, we have a problem” email that board members get from time to time. Rather, they sneak up on the board when issues go unresolved or even unmentioned. It is human nature to be conflict avoidant yet being intentional about dynamics (how the board works together) and culture (what are the board’s values and norms) couldn’t be more important. It can be tricky to prioritize considering all the other challenges a board faces, nonetheless ensuring a respectful, open, candid culture is essential. It also sets the tone for the rest of the organization, like it or not.

3. Activists and Investor Relations More Broadly

Activist engagement has never been higher and more companies are finding themselves in increasingly challenging situations as a result. Activist shareholders create pressure on boards by seeking to unseat executives and board members alike, add their own nominees, pursue policy changes, leverage their say-on-pay rights, and more. It makes sense that public company directors are monitoring shareholders to know who they’re dealing with, educating themselves on investor priorities and concerns, and ensuring that strategic and financial decisions are communicated in ways that demonstrate their value. Further, boards are well served to challenge themselves to “think like an activist” to mitigate the risk of gaining the attention of one. Taking a thoughtful approach to policies, being able to rationally defend decisions or positions taken, and engaging in proactive board succession planning are among the strategies boards take to stay out ahead in this “new normal” environment.

4. Crisis Preparedness

From the global pandemic to catastrophic weather events, geopolitical upheaval and unexpected predicaments of all types, organizations have been facing an enormous array of threats to their wellbeing. As a result, being ready for the unexpected has become an increasingly important responsibility of boards. Unfortunately, this is still an evolving practice for many boards. It is not unusual that many board members are unsure of the communication plans, procedures, or types of events that would trigger board involvement and in what capacity. While meant as a signal of confidence, excessive deference to management ("we have a solid executive team and they’ve got it”) puts everyone at risk. Boards that utilize annual scenario planning, conduct tabletop exercises, and insist on clarity around procedures in the event of a crisis, deliver benefits to everyone, including management, their directors, and all stakeholders.

5. Keeping Up with Technology

Over the last few years, increasing consideration has been given to the need for technology-savvy board members. The pace of technological advancement, possible regulatory implications, and the sheer complexity of subjects like Cybersecurity and AI create potentially existential issues. Directors need to be equipped to ask insightful questions about tech strategies and risks, and not rely solely on management, who bring their own biases or consultants who lack context and a holistic view. As valuable as technical expertise is, though, adding “single issue” board members presents its own problems, such as limiting the breadth of experience, lacking cross-functional understanding, or precluding addressing other important talent the board needs. While boards will make different choices around specific expertise needed, all will want to ensure that directors generally have sufficient understanding to oversee the technology issues affecting the organization.

6. Giving Feedback to Directors

While “the whole is more than the sum of its parts” is especially true when it comes to boards, each part matters. Let’s face it, the stronger the part, the stronger the whole. It is no surprise that boards are increasingly focused on providing feedback to individual directors to ensure that their members’ expertise and contributions are aligned with evolving needs and changing governance standards. Many boards recognize that objective director evaluations can improve an individual’s effectiveness, inform decision-making, and benefit all parties: the individual director, the board as a whole, and the management team. Understandably, boards are turning to third-party experts to facilitate individual director reviews to bring objectivity, confidentiality, and rigor to their process, which ensures professionalism and constructive delivery. Honest respectful feedback and actionable insights are key to growth and development at all levels, including the board.

Back to My Client’s Question

Okay, okay, I admit – that’s a pretty long list of what boards are focused on these days. So, what do we recommend an NGC chair do with this info?

• These are the hot topics today and if the future is anything like the past, just as your board learns how to get good at all of this, new issues will arise.
  
  
• The real key to staying on top of it all is to proactively plan governance activities from board succession to group assessments to individual director evaluations so that nothing falls through the cracks. Maybe not all at the same time, however, cycling through different ways to manage your evolution is invaluable.
  
  
• And, finally, know that being intentional about your governance initiatives is the best way to avoid overlooking one of these important actions when the next “big thing” demands your attention.