How can we create forward-looking boards?
Boards are wrestling with an unprecedented array of challenges on multiple fronts. Activist investors demand drastic, immediate results to boost profit margins. Regulators are more inclined to impose costly new requirements and expose Directors to embarrassing publicity for any compliance failures. New competitors and rapidly evolving technology upend market dynamics and undermine established business models. All the while, an expanding chorus of social and traditional media outlets call out Directors for failing to meet expectations.
The recent revision of the guide for Boards has put the spotlight on culture and behaviours. Directors are challenged creating a climate characterised by interpersonal trust and mutual respect in which all are comfortable being themselves, speaking up, asking challenging questions, admitting errors, discussing problems and offering innovative solutions.
In some environments, people perceive the career and interpersonal threat as sufficiently low that they dare to be themselves. Boards, however, are not such an environment. The stakes for Directors are high. Directors are visible and have much to lose - their standing in society, their positioning in their industry, their perception of themselves. When there is so much at stake, the tendency is to act in ways that protect and preserve the status quo.