TOP OF MIND: What directors are thinking
By Eve Tahmincioglu

KAPILA ANAND, DIRECTOR: WomenCorporateDirectors, Extended Stay America, ESH Hospitality and Omega Healthcare Investors, Inc.

Board diversity has been on the minds of many nominating and governance (N&G) committees, but the last year has brought a new level of urgency to the topic. Investor and other stakeholder interest, proxy advisory firm commentary and the spotlight on cultural issues (from #MeToo to gender pay parity) have certainly contributed to this heightened focus. But, concurrently, directors are finding that the complexity we are facing today requires the kind of problem solving enabled by a diversity of thought around the boardroom table. N&G committees play such a key role in aligning board composition with business strategy: identifying board directors with relevant backgrounds, experiences, industry knowledge and more.

So, as urgency around the topic has increased, WomenCorporateDirectors (WCD), with KPMG, recently launched a roundtable designed to explore the slow pace of change in boardroom diversity, exploring both the barriers limiting progress as well as possible solutions to this challenge.

Many of us, as N&G chairs, can relate to the fact that it is not easy to easily access directors who both have the skills aligned with board matrix gaps while also bringing diversity of thought. Advocates for gender and ethnic diversity have just started to work together in their aligned missions, and accessing historically non-traditional board candidates even with the help of a search professional can stretch out the process. While other board committees (e.g. audit or compensation) have access to forums that generate leading practices, N&G committees have few such diversity focused peer-to-peer exchange forums that capture and distribute the resulting lessons learned. The WCD N&G roundtable is focused on filling this gap by convening relevant peer exchanges that inform refreshment/assessment practices and also compiling centralized tools for N&G committees, including diverse director databases. The time is right, and if N&G chairs come together, we can make a difference in boardrooms — starting in the U.S., but ultimately around the world.

Kapila Anand served in a variety of leadership roles at KPMG LLP including as an SEC audit partner, KPMG board member, Partner in charge of Public Policy Initiatives, and the National segment leader for Travel, Leisure and Hospitality serving large global clients. 

ROBERT HERZ, DIRECTOR: Fannie Mae, Morgan Stanley, Paxos, Workiva

There’s an old axiom in the world of corporate reporting that says, “What you measure and report matters.” The very important corollary to this is, “So measure and report what matters.” That’s what many investors are now increasingly asking of companies when it comes to ESG [environmental, social & governance issues] and other sustainability matters. As broad macroeconomic trends — such as population growth, globalization and technological innovation — reshape business models and even entire industries, management and boards of directors are being asked to look more critically at the associated risks and opportunities, particularly over the long term, and steer their companies to measure what matters. Research has indicated that strategically focused sustainability efforts are a key driver of business value, leading to higher risk-adjusted stock performance, sales growth, and margins.

Accordingly, shareholders are demanding more — and, more importantly, better — information on corporate performance with respect to business-critical sustainability issues.

I joined the board of the Sustainability Accounting Standards Board (SASB) Foundation because I’ve long believed that corporate reporting — both internally and externally — can be richer and more useful with the addition of key non-financial performance metrics. That’s what the SASB is working to standardize, having spent six years developing an evidence-based, market-informed set of sustainability indicators for each of 79 unique industries.

After extensive consultation with hundreds of companies, industry associations and investors, the SASB standard-setting board will codify its standards this summer. Of course, the SASB standards may also usefully inform board reporting, facilitating more focused and productive engagement with management on important value drivers. Because non-financial metrics often serve as leading indicators of future financial performance, they can provide a sort of “early warning system” for boards and key committees.

As directors, we may face growing pressure from investors to strategically address important ESG factors, but we should also consider doing so for our own reasons, such as strategic oversight, effective risk management, and identifying and evaluating emerging opportunities in a changing world.

Bob Herz is the former chairman of the Financial Accounting Standards Board (FASB), an original member of the International Accounting Standards Board (IASB), and a current member of the SASB Foundation Board of Directors

 


Issue: 
2018 Annual Report

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