We’re asking too much of board directors
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ONE THING is for the busy (speak of the devil) Future Director, in which Founder Paul Smith picks just one thing Future Directors oughta know or do or stew on for the next month. We hope you get something (at least one thing) out of it.
Last month, the Global Network of Director Institutes released their “The Future of Board Governance” report. The GNDI is a collection of 24 national governance institutes from North and South America, Asia Pacific, Europe, Africa and the Middle East, with combined memberships of 150,000.
The report is a snapshot of current thinking, trends and insights into the inner workings of corporate boards in those regions.
To get you in the mood, here’s some key stats I pulled from the report:
66% say long-term strategy focus is the most critical priority for their organisational success
50% say board evaluations are critical for improving board performance, but only 30% are considering upgrading their evaluation processes within 3-5 years
83% see technological transformation as critical from 2030 and beyond, despite over half citing cybersecurity and digital innovation as two key areas where boards lack expertise
42% recognise the need for greater board diversity and inclusion, but only 25% see this as a top priority in the short term.
My first reaction. There is nothing surprising or new in these findings.
The outgoing Chair of the GNDI said, “This report provides interesting thought-provoking reading as directors continue to grapple with a fast and ever-changing operating environment.”
Why are we still grappling?
Why are key issues being lobbed into the long-term bucket? Critical issues like board composition, technology and climate change all impact financial sustainability. These risks only increase when we put them on the back burner.
There are possibly two reasons why boards are struggling.
Here’s the first. Boards move too slowly.
Reference the stats above and how boards are “considering” changes over the next 3-5 years, or focussed from 2030 onwards. Think back to what the world was like 3-5 years ago.
Ok, before you get frustrated with me and start racking up your list of achievements on your boards (and trust me, it was my first reaction), let’s refocus our lens through a filter of empathy and compassion.
Maybe boards are too cumbersome to keep up.
At all levels, from the highly paid listed company director to the unpaid charity board member, it’s not for the faint of heart. Perhaps we can forgive a bit of lagging behind the world. Right?
It could be structural. The boardroom hasn’t changed much in a few hundred years. A group of people gather periodically to make decisions about the future based on information from the past.
More likely, it’s incentives. Do we have the wrong systems of incentives to allow boards to think more innovatively about governance and future-proofed stewardship?
Here is the second possible reason for the lag. Being a modern board member is damn hard.
Governing has gotten far more complex in the last ten years. The amount of new knowledge needed to keep up, let alone get ahead, is enormous. Demands from internal and external stakeholders are at an all-time high. Staff are demanding better workplaces. Customers are less loyal. Regulators are putting in place more laws. The environment has a bigger voice. Technology is disrupting everything, and faster and faster. Oh, then drop a global pandemic in the mix, and it’s a wonder that a modern board director doesn’t retire and run for the hills…or their bunker.
So, back to our central question.
Are we just asking too much of board directors?
If we agree boards are too slow and modern governance is getting more complex, then yes. It's too much.
How do we address this? It’s not ONE thing, it’s THREE.
People, structures and systems.
We want our director community to be at the cutting edge of leadership and societal issues. In that case, we need incremental improvements and setting up for the future board. Where we are leaders of these issues. Not laggards. The future board is a fundamental rethink of how we govern.
Here’s the start of my list of how we will make significant shifts and supercharge boards and directors for the future:
Directors and boards need to shift their mindsets and adjust their incentive structures
We need a whole of enterprise governance thinking, with leaders at every level
Changes to the structure of how boards operate are critical to future success
Continuous education for all directors must be a prerequisite
Boards must embrace technology to better their practices
Data insights are critical to assess and underpin a board’s effectiveness and performance
Finally, more pathways for diverse voices and experiences, to support boardrooms
What’s on your list? What will you chip away at to bring your board into the future?
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