The New Year has arrived! We reflected back on an unprecedented 2020 to uncover the top innovative and progressive trends we saw from boards. From board composition and education, to ESG oversight and emerging stronger from the pandemic, these are the focus areas we think all boards should have on their list of resolutions for 2021.
Don’t let another year pass you by. While it remains extremely important for boards to have a strategic, long-term succession plan, it was also a welcome change to see some boards make the smart decision to call an audible in 2020. Sometimes a particular skill or attribute becomes so important, it needs to be addressed immediately. Directors should consider adding an additional board seat as a way to enhance the composition of the board—in some cases, pending legislative and regulatory pushes as well as increased investor focus may lead boards to act. In other instances, companies find they need to respond to the disruption of the pandemic by adding tech or digital skills to the board. Fast-moving directors will have to adjust the long-term succession plan to accommodate the enhancement, but the immediate value delivered will be worth it.
Learning a new skill is one of the most common New Year’s resolutions. Directors know it’s becoming more and more challenging to have all the skills in the boardroom needed to oversee the company’s strategy, risks, and execution efforts. We’re seeing more and more boards leveraging outside experts to keep the board educated and upskilled to face these challenges.
Two examples are cyber and investors. It is very common for boards to now hear directly from outside cybersecurity experts (as well as the company’s CISO or CIO), to provide a sense of the maturity of a company’s program. And many boards hear from outside bankers at least annually to give them a view of the company through an investor lens. The world is moving quickly, the number of risks are ever-expanding and board member time is valuable. Broaden your perspective and don’t limit your board to hearing about challenges from only company insiders.
Understanding where the company is on a variety of environmental, social, and governance (ESG) issues, and developing a go-forward plan of action hit the board agenda in a significant way in 2020. (Our Annual Corporate Directors Survey showed a noticeable uptick in the directors who said ESG issues were a regular part of the board’s agenda, rising from 34% in 2019 to 45% in 2020). The most effective boards are approaching this in three steps:
Start with a baseline understanding of what the company has been doing related to ESG risks and opportunities.
Understand the company’s gap analysis regarding what the company is currently doing compared to what the stakeholders—investors and others—are now looking for. Consider how the company compares to its peers as well.
Once the board understands the effort the company will be focused on they can start to focus on how the board will oversee this effort. From there, we think there is a role for the full board as well as each of its committees.
Losing the extra weight in your board materials in favor of crisp, consistent dashboard reporting can help board meetings be more productive. As board materials balloon in size and, in many cases, become static presentations, directors need to look at their materials with a critical eye. Ask yourself: “Am I getting 30 pages as a pre-read that could instead be a 1-2 page data dashboard? Am I getting a different report format from the company at each meeting, even though this was meant to be a recurring update?”
Particular areas where dashboards can be helpful is in understanding ethics and compliance reporting, internal audit status, culture assessments, cybersecurity, and diversity, equity, and inclusion insights. In order to monitor these challenging areas, the board needs to have baseline data consistently reported so it can assess periodic updates and track progress towards milestones and goals.
This pandemic will remain with us for some part of 2021. Companies should seize the opportunity to emerge stronger. Boards can lead by challenging their companies to learn from the experience and make changes to their working practices, supply chains, or business models as needed. No company should be planning to settle back into the old normal—this is a time to be opportunistic. Consider enhancing work arrangements to allow for remote working (expanding and diversifying the talent pool in the process), explore how supply chains can be made more resilient, and find ways to accelerate digital transformation to be more efficient and deepen customer relationships.