12/12/24 – Issue 9.46 – Your weekly news on all things board. 

The future is now! With the complexities of 2025 on the horizon, boards face a pivotal challenge: finding the sweet spot between oversight and autonomy. In an era where nimble decision-making is paramount, the best boards are not just passive onlookers but active participants in fostering effective management. The emergence of the Lead Independent Director (LID) is set to redefine this dynamic— empowering boards to meet escalating independence requirements while ensuring accountability in a rapidly evolving corporate landscape. Next up, proxy season when it becomes critical for boards to arm themselves with insights and strategies that will guide them through meticulous negotiations and shareholder relations. A keen focus on skill prioritization—particularly in technology implementation, cybersecurity, and auditing—helps directors positioning as catalysts for growth. Lurking beneath the surface, however, are significant risks. The road ahead is both treacherous and filled with opportunity, where strategic insights from 2024 will illuminate the path forward for empowered directors ready to drive lasting success.

In the Spotlight

How the Best Boards Engage with Management

Boards today face a thorny challenge: how to provide proper oversight of management while allowing it the autonomy it needs to be effective

“Our research on governance practices reveals that most boards maintain a single mode of engagement at all times, regardless of the type of decision to be made or its importance. This lack of flexibility can significantly undermine board effectiveness, especially in complex and rapidly changing situations. A board that defers to management during a major strategic acquisition, for example, leaves executives unsupported and may expose itself to legal liability.” HARVARD BUSINESS REVIEW

The Rise of the Lead Independent Director

As companies face mounting board independence requirements, the Lead Independent Director (LID) role emerges as a powerful solution to ensure robust oversight and accountability

“The LID must be independent of the entire board, but especially of the board chair, and free of any conflicts of interest that could arise if the LID must challenge the board chair at a later date. Therefore, the LID should not be appointed by the board chair. Instead, the LID should be elected by all shareholder-elected board members in an independent role that complements the board chair… In regular times, the LID is an essential point of contact for the company’s investors to raise questions and concerns. Talking to the LID is also crucial if the dialog with the board chair has not led to a satisfying solution or if contact with the board chair would be inappropriate.” S&P GLOBAL

Preparing for Proxy Season

Top reminders for boards navigating the upcoming proxy season

“If you have board composition vulnerabilities related to diversity, independence, overboarding or tenure – or if you have received investor pressure on refreshment – consider adding proxy disclosure regarding director skills and recruitment, as well as evaluation of time commitments and tenure… Plan for after the meeting, including a board session to review the results of the meeting and proxy season more broadly. If you expect negative outcomes, prepare your senior management and the board, then develop a response strategy.” GOVERNANCE INTELLIGENCE

From Boardspan this Week:

How the Best Boards are Built

Maggie Wilderotter joins Boardspan founder and CEO Abby Adlerman for a conversation on how the best boards are built

“Composition is one of the most important things for the right dynamic—for a board to perform its duties well, including to protect shareholder value and make sure the company has the right strategy and leadership. Having just a cou­ple strong people can sometimes carry the day when there are no se­rious issues facing a company, but all companies go through cycles of ups and downs. Long-term success­ful boards require different capabil­ities, experience, thought process­es and participation based upon what’s going on with a company, so a continuous review and refresh process is necessary.” BOARDSPAN

Across the Board

Appeals Court Strikes Down Nasdaq’s Board-Diversity Rules
The exchange had set diversity targets for listed companies and sought to require them to disclose the gender and racial makeup of their boards

“A federal appeals court rejected Nasdaq’s yearslong push to set racial and gender targets for the boards of its listed companies, dealing a major blow to one of most prominent efforts to promote diversity in corporate America… Nasdaq had denied that its diversity targets were a mandatory quota, citing the provision that let companies provide written explanations if they didn’t meet the targets. The exchange had argued that its diversity rules benefited investors, pointing to studies that show greater boardroom diversity is associated with better financial performance.” WALL STREET JOURNAL

Looking Forward: Board Skill Prioritization for 2025
Increasingly, directors will need experience in tech implementation, cybersecurity and auditing

“Many boards are engaging in scenario planning and developing customer service strategies to strengthen brand loyalty… Boards are also concerned about a heightened exposure to third-party risk with the expanded use of new and broadly available technology and the increased sophistication of cyber threats. As a result, diligent boards have become more heavily involved in working with management to stress-test and improve upon existing enterprise risk management strategies.” DIRECTORS & BOARDS

How Directors Are Driving 2025 Growth

Oversight of governance and compliance is a major component of what corporate board members say will help them drive growth in the coming year

“Directors on highly functioning boards report spending an annual average of 285 hours on their most challenging board, with roughly 30 percent of that time in board meetings… The description of the amount of time peers say they are devoting to various responsibilities can serve as an informal measuring stick for directors trying to decide if they are personally doing enough in certain areas to stay competitive with other boards in their industry.” CORPORATE BOARD MEMBER

Key Boardroom Risks and Strategic Insights from 2024 

Identified top risks for boards are cybersecurity, ESG, and compliance concerns

“The report identifies cybersecurity as a top risk, with 45% of respondents citing it as a primary concern for boardroom discussions. Regulatory compliance and environmental, social, and governance (ESG) matters follow closely, with 41% and 35% highlighting these issues, respectively. Despite the emphasis on cybersecurity, 60% of surveyed companies rate their preparedness for such threats as moderate or low.” INSURANCE BUSINESS

Case Study: The CEO Suffered a Breakdown. Now What?

Experts weigh in on a hypothetical CEO transition

“Alex Reinhardt was brought in to turn around a renewable-energy company that had been on the verge of bankruptcy until the German government bailed it out. After he fainted from overwork and burnout and had to take a medical leave, the board appointed an interim CEO. Now Reinhardt insists that he’s ready to return, and the board must decide whether to retain or replace him.” HARVARD BUSINESS REVIEW

Seat at the Table

• Lockheed Martin adds to its board Admiral John Aquilino, former commander of the United States Indo-Pacific Command

• Corebridge Financial welcomes to its board Gilles Dellaert, Global Head of Credit and Insurance at Blackstone

• Hologic elects to its board Martin Madaus, Operating Executive at the Carlyle Group

• Healthcare Realty Trust appoints to its board David Henry, former Vice Chairman and CEO of Kimco Realty Corporation; Glenn Rufrano, former President and CEO of Cushman & Wakefield; and Don Wood, former EO of Federal Realty

• Electronics firm Knowles adds to its board Laura Angelini, former General Manager of the Renal Care Global Business Unit at Baxter International

• Liberty Media welcomes to its board Chase Carey, former Chairman and CEO of Formula 1

• Transportation firm Dana Incorporated appoints to its board Nora LeFreniere, EVP and General Counsel of Otis Worldwide

• Outdoor firm Clarus elects to its board Mark Besca, former Senior Advisory Audit Partner at Ernst & Young

• Automotive parts firm LKQ adds to its board James Metcalf, former Chairman and CEO of Cornerstone Building Brands

• Regions Financial welcomes to its board Roger Jenkins, President and CEO of Murphy Oil

About Boardspan
Boardspan helps boards raise the bar on their critical governance mandates by combining cutting edge digital capabilities with high-touch consulting services. They are leaders in board assessments, individual director & CEO evaluations, board succession strategy & search, skills & composition analyses, and bespoke advisory work. Boardspan only works with boards, bringing deep experience, objectivity, an analytical orientation, and insight-driven recommendations. Clients include Blue Shield (CA), Colgate-Palmolive, Deckers, Dynatrace, elf Beauty, HubSpot, Ingersoll Rand, KKR, Lam Research, the PGA, Roblox, Salesforce, Synopsys, the USOPC, and scores more.