Some Boardroom questions are harder than others. So, the Diligent Institute assembled a virtual panel of “accomplished global board directors” to share their thinking on some of the biggest challenges in board service, good governance practices, and stickiest boardroom situations.
These are the answers I gave them. I would welcome hearing yours.
Diligent: What bucks stop with the board around corporate culture?
I’ll admit that I felt differently when I was a CEO and holding my first Independent Director roles. But I now believe that corporate culture is absolutely the responsibility of the board for two key reasons: First, on average, board members serve the company’s shareholders longer than the CEO does. This is particularly true in my industry, technology. So, board service represents an opportunity for continuity in corporate culture over a longer term. And culture is more than a 5-year project. Culture is how Strategy happens.
One of the board’s two key outputs is the Strategic Plan. The Strategic Plan becomes reality only when front line employees make their dozens of daily decisions in alignment with that strategy. And every one of those decisions is governed by their understanding of the company culture: what is valued, what is rewarded, what is celebrated. So, any Board that wants to see its Strategic Plan move from PowerPoint to P&L will focus on company culture … definition, development and continuity.
Diligent: How are you handling social media risk?
My answer would vary a great deal by the company’s stage and profile — but I do believe that every company should have written employee social media usage policies that are appropriately enforced.
Having said that, social media has incredible value globally specifically because of its authenticity. I do not advocate that an organization’s goal should…or even could…be complete control of its social media. That toothpaste is out of the tube.
Company policies should state their preferences, provide guidelines and clearly educate their employees on the potential impact and consequences of insider posts. But companies can only manage social media risk (and opportunity) by investing appropriate resources in monitoring and responding to (good) and bad news in these channels. There’s often an element of truth, and a learning opportunity, in critical employee posts. Customer complaints are a gift. Successful companies are listening, learning and rapidly acting on this valuable, real-time feedback.
Director usage of social media is another thing entirely. You take on a sobering fiduciary responsibility with your board role and that should determine, if not dictate, what you communicate through public channels like Twitter, Instagram or Snapchat. The potential impact on shareholder value from Directors posting on social media is huge…as we’ve recently seen first-hand here in Silicon Valley. Obviously, there is also a very high standard that directors can, should, and will be held to legally.
Diligent: How should you handle a single negative thinker in the boardroom?
Usually, you should handle a single negative thinker by listening harder and asking probing questions to get to the root cause of the negativity. I am a firm believer that very bright people who are solving for the same objective and are armed with the same data usually come to the same conclusions.
Usually, if someone is a real outlier in the group, which can mean positivity or negativity, then there is a gap in one of those areas and it’s the board’s responsibility to ask penetrating questions to discover it. And usually, what happens is that you reveal some other set of data that exists that the board might want to look at, or there is a gap in understanding if that person missed a committee meeting or a presentation. This is not always the case, and that’s part of board diversity, managing to get consensus and good conclusions even without unanimity — the chairperson plays a big role in that.
The key to this logic is that all the board members are there solving for the same objectives, and I’ve been lucky enough to only be in boardrooms where everyone is there for the interests of the key stakeholders.
Diligent: Thinking of digital technology, how can the board plan for disruptions they don’t yet know are coming?
Boards have to put in place data collection processes and listening posts that give them a high probability of recognizing disruptions earlier than their competition does. At the board level, you have to agree on a number of things — what data streams you need to stay plugged in, listening points at places of data collection, who’s going to analyze it and interpret it for the board, how that data gets filtered and presented into the board conversation.
And increasingly, it’s important to click down a couple levels on sources of information, because it’s not your closest competitors who are going to disrupt you. It’s not even the startups in your industry. It’s innovators that grew up in another vertical and are coming for yours.
I work in FinTech and we’re talking about Amazon, I work in AI and ML -driven publicly traded companies, and we’re looking at what’s going on in the think tanks and in academia. In order to anticipate disruption, we have to think much more 360 degrees, where before it was easier to just know you’re industry really well. This adds even more pressure to make sure data sources are broad and providing you early signals.
Board members should provide assessments of quality and thoroughness of data and challenge for more or better where it’s needed, but this leads to another whole question we need to ask ourselves — what data should board members be collecting separate apart from and independently from management? What other intelligence are you gathering as a board member on industry development competitive moves, on new technology for business models in adjacent spaces, on social media review sites like Glassdoor to try to get raw unfiltered in the market information. This can all inform some challenging board room questions.
Finally, I always advocate for making this a part of each board meeting, typically that means talking about it quarterly, not leaving it to the once a year strategic planning offsite. Especially in the world of digital, if you’re waiting twelve months between digital strategy meetings, you’ve already lost your goal of foreseeing disruptions, and potentially putting early investment into what may be your core revenue generating business in three years time.
Diligent: What is your favorite response to “why is board diversity important”?
My personal experience…and all the research I’ve read…indicates that diverse teams make better decisions, more often. So, this question drives me to a very simple response: Boards make important decisions. Diverse teams make better decisions. Boards should, therefore, be diverse.
I strongly believe that any Board committed to fulfilling their fiduciary duties to shareholders, employees and customers will want to give themselves the advantage of diversity from different backgrounds, genders, race/ethnicity, ages and work experiences. Board service is a challenging job with outsized impact. It seems responsible to take advantage of every proven opportunity to do this important work better.