10 questions dominating boardroom agendas for 2016
These are the top questions directors are asking in their boardrooms so that they can be better prepared for what’s to come, according to The WomenCorporateDirectors Foundation (WCD). The questions, and responses from WCD members, were formulated as a follow-on from WCD’s Americas Institute, which was held this past fall. Directors came from across the globe to Coca-Cola Co.’s headquarters in Atlanta to discuss top board concerns and how directors are preparing themselves for the challenges of 2016 and beyond.
1. Is the board truly thinking globally? “Many of our companies have global footprints and distribute global products, and yet, I dare say, are not what I would call a global company with a global DNA,” says Elaine La Roche, director of Marsh & McLennan Companies Inc., China Construction Bank, and Harsco Corp., and senior advisor to China International Capital Corp. “The population of the world is going from 7.3 billion today to add almost another billion by 2025. Yes, the demographic growth is going to be coming from China, but also from India, from Indonesia, and from Africa. How many of you have had a conversation about those countries in your boardroom recently?”
2. How can companies leverage ‘glocalization’? “You can’t reach many local markets around the world if you don’t produce innovation locally,” says Adriana Machado, formerly the Latin America government affairs and policy vice president at General Electric Co. “Companies can then employ ‘reverse innovation’ and find opportunities to create a product in a less developed country, and then take it globally afterward.” GE is one of the leaders bringing products tailored to emerging markets — such as portable medical devices — and selling them in wealthy countries.
3. Who’s accountable for the company’s cyber security? “Organizations are still lacking in cyber security preparation,” says Olga Botero, founder and managing director of C&S Customers and Strategy, senior advisor at Boston Consulting Group, and director of Evertec Inc. “True cyber security is based on accountability for each person in an organization.” Boards are responsible for creating the conditions upon which a culture of preparedness and accountability can be built.
4. Where is the data risk in the organization? “I think the biggest thing to remember is that data risk isn’t just about IT or those involved in the security area,” says Kathy Misunas, director of Tech Data Corp. “This is about every employee thinking about security — it’s not just about those handling customer data, Social Security numbers, and credit card numbers. Consider employees in areas such as M&A and investor relations since there may be sensitive data and risk imbedded in these parts of the organization. I believe that many companies are looking at security through a narrower lens than is required.”
5. What is included in the company’s innovation ‘ecosystem’? “The board should be looking at a company and asking itself: Are initiatives praised? Are they celebrated? Are failures embraced?” says Giannella Alvarez, chief executive officer of Harmless Harvest and director of Domtar Corp. “Is the innovation ecosystem comprised of internal and external stakeholders? Do we involve our employees in innovation? Do we involve our suppliers? Do we involve academia? Do we involve start-ups?” Innovation is an open system, more and more so, and boards can help open these doors.
6. What new business model should the company be thinking about? “Innovating isn’t always about new technology; it’s often about business model innovation,” says Teresa Amabile, professor and director of research, Harvard Business School, and director of Seaman Corp. “Think about Uber: Uber didn’t invent cars. Uber didn’t invent the idea of a stranger giving a ride to someone else — that’s been around as long as there have been liveries and taxis. But Uber invented a new business model for doing that. FedEx didn’t invent package delivery, but it invented this crazy new business model for doing that.” Boards need to be aware that the culture is what will make the company open to new business models. “Peter Drucker is said to have quipped, ‘Culture eats strategy for breakfast,’ ” adds Amabile. “You can have the best strategy around, but if you don’t have the appropriate culture within your company to execute it, it will fail.”
7. How does a board balance innovation and risk? “Boards must look short-term, medium-term, and long-term: what is our role in thinking about innovation?” says Anne Darche, owner of Pertinence and director of Groupe St-Hubert and Groupe Germain Hôtels. “Boards have to look at a balanced innovation portfolio from a risk perspective. You do need incremental innovations that are lower risk, lower return, but then you also need the more disruptive innovations: those with longer return and higher risks but will be the ones to bring you to the future. These are the innovations that guarantee that you will be here 15 years, 20 years from now.”
8. Where should the board spend its time? “One of the problems is that we’re spending too much of our time on the past and not enough on the future,” says Donna McManmon, regional sales director at Diligent Corp., which creates collaborative software for boardrooms. “We spend a whole lot of time on quarterly reports, audit reviews, and budget compliance, and not enough on strategy, risks, trends, disruption, R&D, and innovations. As it’s said, a good board brings oversight and insight, but a great board also brings foresight.”
9. How will we manage shareholders? Shareholders are forcing boards to up their communications game, both ways. “Sound pay practices were one of the issues that started this stronger voice from shareholders, but it was really just a Trojan horse,” says Maria Elena (Mel) Lagomasino, chief executive officer and managing partner, WE Family Offices, and director of Walt Disney Co., Coca-Cola Co., and Avon Products Inc. “There is now a whole process where shareholders want more and more communication about everything, and boards are becoming much better listeners. Boards will need antennae to be able to really listen to what’s going on with shareholders.”
10. How can a board bring the right voices to the table? “People who all think alike might not ask questions of each other and may not probe,” says Helene D. Gayle, M.D., M.P.H., CEO of McKinsey Social Initiative and a director of Coca-Cola Co. and Colgate-Palmolive Co. “I think the fact that we’re all taking our responsibility more seriously, and that we’re scrutinized more, opens up the opportunity to also have a greater number of different voices at the table. Not only women’s voices, but diversity across all backgrounds and demographic factors.”
“The best directors can navigate all these disruptive forces, and at the same time help their own companies disrupt boardroom thinking enough to ensure their companies have a future,”
concludes Nancy Calderon, KPMG Global lead partner and director of WCD (www.womencorporatedirectors.com). She adds that the WCD Foundation’s mission is to increase courage, candor, inclusion, and cohesion in the boardroom.