‘Volatile’ and ‘uncertainty’ are two words that have become deeply embedded within the business vernacular in recent years. Together they speak to an economic outlook blighted by inflation, stubborn that it is, and a strained labour market in which businesses appear to be erring on the side of caution in the face of skill shortages and high employee turnover.
Their combined ripple effect has undoubtedly led to difficult decisions on the employment front, but beyond this, modern–day business leaders face a confluence of challenges that encompass diversity, cybersecurity, regulatory, and Environmental, Social and Governance (ESG) too. Challenges which often fall at the feet of a company board.
Fundamentally, boards exist to oversee corporate governance and to ensure legal compliance. Its decision–making powers cover strategy, risk management, policy, monitoring, audit and stakeholder communications. Informed, independent and constructive decision–making members make a real impact on the overall success of a company. It also provides clear leadership and challenges the CEO and senior executive team performance.
With that said, a board must be more than the sum of its parts. The proverbial seat at the table is simply not enough. To be fully efficient in this demanding world of modern business, a board requires members who are committed, curious and collaborative. Members and trustees who have done their homework. In its recent survey of board members across the globe, the Financial Times found that close to three quarters of directors (72%) agree that, in this changing climate, members require a ‘much deeper knowledge of company operations and competitors’ than ever before.
Trends in geopolitics and emerging technologies are front of mind, too, with the threat of cyber–attacks and the rapid pace of technological change name–checked as the two leading risks facing organisations today. The agenda has changed. Broadly speaking, board members now undertake a wider remit upon joining. Driven largely by this era of uncertainty, yes, but also the expectation for greater accountability in the wake of high–profile corporate scandals.
Another telling stat from Financial Times’ report shows that while the traditional indicator of a board’s success – company profit – still ranks highest among directors, metrics such as ‘company values and culture’ and ‘quality of leadership team’ have emerged as crucial measures of evaluating the performance of a board and its members, with each cited by nearly half (44%) of all respondents.
The evolution of the board has been placed on the fast–track, and it’s up to members to keep pace. Members best placed to ask where the company should be in three, five or 10 years’ time. To hold management to account on an agenda that will no doubt feature matters relating to ESG more frequently in the years to come.
Perhaps this will lead to a wider shift in the makeup of boards, too, as businesses place an increased focus on future–proofing workforces through diversity and inclusion, not to mention the sustainability agenda and transitioning to low or zero carbon models. This in itself could open the door to younger board members for whom humanity’s handling of the climate emergency stands as an indication of their future. There is, however, some way to go; research from Spencer Stuart in 2020 suggests that the average age of a nonexecutive director in the FTSE 150 is 60 years young.
Nevertheless, younger minds bring with them fresh ideas and insight that can also help plug the gaps in a board’s understanding on emerging digital technology, for example. Diversity of age brings diversity in perspective. Adding to the knowledge pool and expertise that can ultimately enable boards to continue providing strategic counsel and meet the rising expectations of their shareholders, their consumers, and the wider public.
Life as a board member should not be viewed as a mandatory checkbox or a soft route out of retirement. Taking a seat at the table is an opportunity to address some of the most important issues of our time. To advise and counsel, helping to instil a sense of measured calm as we collectively face the uncertain and volatile waters come what may.
From my experience of sitting on boards, the commitment is far outweighed by the sense of civic duty and making a real difference. I would caution to think carefully before joining a board – do your homework – it is an enormous responsibility. As we have seen with the fallout from the RTÉ board!
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