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The 2018 Boardroom: 7 Issues That Shouldn't Take You By Surprise

by The Boardspan Team

Our best advice for 2018: Don’t be daunted—be prepared! If 2017 taught us anything, it is that the work of boards is intensifying. The increasing complexity of business, rapidly evolving technologies, and widespread support for social changes are among the daunting issues that boards face. There’s a lot to stay on top of and a big price to pay when boards fail to anticipate what’s coming. To set you up for success, we reached out to some leading experts to learn where they see boards putting their attention. Based on their experience and our own domain knowledge, we’ve identified seven key topics likely to get air time in 2018.

1. Corporate Culture: The board’s job has long been tone at the top, but never has there been such a sense of urgency about getting that right. Cultural norms are changing at lightning speed and boards cannot delay responding to allegations of unsavory or unethical behavior on the part of anyone. It should go without saying that the board is obligated to ensure a workplace free of harassment but in the era of #metoo it is being said, loudly. A range of approaches can be taken, including proper employee training, increased oversight of hotlines and other feedback mechanisms, and cultural or even leadership changes. Some boards will consciously close the gender pay gap, promote more women into leadership, and add more women directors to the board to reduce power differentials that lead to sexual harassment.  “High ethical standards” has become a watch phrase for governance—the board’s composition, attitudes, and behaviors will be visible and influential throughout the organization and beyond.

2. Evolving Strategies: Behemoths like Amazon, Apple, Facebook, and Google, which have collectively reshaped commerce, communication, and consumer habits, continue to seed change in every conceivable marketplace. Further, advances in block chain technologies, artificial intelligence, robotics, digital currencies, and more promise to rapidly transform all industries. Layer on the mega mergers, and you begin to imagine brave new futures for healthcare, entertainment, transportation and many other industries. Given these mammoth shifts taking place, board members need to stay up-to-date not just on markets and industry news, but on these successive waves of new technologies, radically new business models, and companies wielding new power, so that they can help their organizations make smart, fast, strategic decisions.

3. Cybersecurity: The number, complexity, and consequences of cyber incidents continues to grow, as does the pressure on boards. The recent Equifax breach, involving up to 145 million Americans, proves the impact cybersecurity has on everyone. The company lost its CEO, spent nearly $90 million in immediate fixes, and is threatened with more than 100 lawsuits. Further, the disaster has encouraged lawmakers to give individuals more control over the data that has been the underpinning of credit reporting companies. This one breach could turn a business—or entire industry—upside down. Boards will increasingly communicate an expectation of vigilance, see that all possible protections are in place, and follow up regularly. Some boards have added cybersecurity experts to their ranks, others engage consultants to bolster their expertise. No matter how exemplary the efforts to protect the company, don’t overlook a range of risk management strategies and response plans in the event of a breach.

4. Geo-political Environment: Worldwide, businesses must pay attention to the continuing globalization of economies, the Trump Administration’s plans to renegotiate or repeal international trade agreements, political instability in a host of countries, evolving international influences, climate change, and more. Domestically, organizations must be attuned to the financial and market impacts of the new tax law, rising interest rates, the loosening of many regulations, and other issues. While a board’s responsibilities depend on the business it is in, few will be unaffected by at least some of these issues. Board members need to stay alert and ready to offer guidance on myriad scenarios.

5. Succession Planning:  Leadership matters, now more than ever. As we saw in 2017, there’s no guarantee that anyone will be in his or her seat next year.  And without thoughtful succession planning, an organization can be left rudderless, impairing morale, direction and results.  Succession planning is not something that can wait. Boards should regularly ask: Do we have the right CEO for the next several years? Do we have a successor who could take charge immediately, if needed? Does our plan take into account the dynamic nature of our industry and company, and does it inspire confidence? If the board is not active in talent assessment across the C-suite, and confident that future leaders are being groomed for more responsibility, then a more intentional approach is timely.

6. Investor-Board Relations: Shareholder activism, institutional investor demands (for greater board diversity, say-on-pay, etc.) and proxy holders’ influence are changing the dynamics of the boardroom. While boards rarely appreciate outsiders forcing their hand, more and more often they are finding they must acquiesce. Boards should anticipate the broad recommendations and demands of investors before they are leveled publicly.  When it comes to matters such as compensation, board independence and similar topics, there is an increasing sense that reasonable, transparent, and communicative approaches go a long way with investors. To that end, boards that proactively nurture relationships with investors are becoming more commonplace, a natural extension of the IR function.

7. Crisis Management: What a board does in the face of adversity is important not only for integrity’s sake —it also affects how others perceive the board. Social media and fast news cycles have changed the stakes for everyone—when crisis strikes, a company has hours, not days, to make things right. Boards need to be one step ahead, prepared should their organization find itself on the wrong end of a harassment incident, cyber attack, CEO scandal, public flogging by an activist, serious blunder, or just bad luck. Some boards appoint risk and crisis management committees and tap into consultants for advice; others work with management to create a comprehensive playbook for dealing with crises and engage in scenario planning to prepare for the worst, hoping they never see it. There are many ways to prepare, but ignoring the possibility of a crisis is the one-thing boards can’t do.

Conclusion:  The common theme around all of these topics can be summed up as Do the Right Thing. No matter what 2018 throws your way, a “triple bottom-line” approach will serve everyone well: look out for your constituents, do what is good for the business, take actions you would proudly model for others.

With thanks to Hilary Billings, Mary Cranston, Alison Davis, Pat House, Leslie Kilgore, Susanne Lyons, Eva Sage-Gavin, Anita Sands, Amy Schioldager, Linda Segre, Sabrina Simmons, Scott Sklar, Janet Wong, Steve Zellinger, and others who shared their wisdom with us.

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