Five Guiding Points for Directors in the Digital Age of Corporate Governance

June 29th, 2012 | By

In an effort to stay relevant in today’s rapidly evolving digital landscape, directors of leading public and private companies from across the country recently attended the National Association of Corporate Directors’ Spring Forum in New York City.

This year’s topic, “Directors in the Digital Age,” included an agenda full of applicable topics, along with experienced directors and corporate governance experts there to help dedicated director attendees remain ahead of the curve.

One of the most interesting sessions during this year’s forum was the keynote conducted by Ed Ludwig, BD’s (Becton, Dickinson and Company) soon-to-retire chairman of the board. With more than 30 years of service at BD, Ed has personally experienced what it takes to lead in the boardroom and has personally advanced exemplary board leadership.

As Ed noted during his keynote, and as other attendees at the forum addressed, “the digital age—in which business transactions and information often move at the speed of light—has served to dramatically accelerate and amplify our successes and failures at leadership.” More than ever before, the digital age is impacting the boardroom in ways that directors must be prepared to address.

Although it is crucial to engage through digital mediums, there are fundamental guidelines corporate directors should follow in order to achieve sustainable long-term shareholder value creation, as well as to avoid shareholder value destruction. Here are a few of Ed’s tips:

1.      Choose the right CEO

Companies and circumstances call for different types of leadership and skills. There are, however, acknowledged universal skills that all CEOs should possess and values they should live by. This includes an unwavering ambition to serve the organization and society, combined with personal humility and acknowledgment on the part of leaders that at least some of their successes can be attributed to good, old-fashioned luck. In addition, leaders should be able to forge a strategic identity for the firm, build a shared commitment on the part of the organization and create a community of diversity.

2.      CEO Succession: Know What’s Needed Next

It’s never too soon to begin thinking about CEO succession, even with a newly appointed CEO. Every board of directors should ensure that its CEO succession plan includes a pool of potential next leaders with diverse experiences that will enable them to jump into action, if called upon, as the chief executive.

3.      Ensure There is an Effective Executive Leadership Team and System of Engagement for the CEO

It is equally important for an effective CEO to have the right leadership team working with him or her. These individuals must be genuinely exceptional in their own fields of expertise and also possess the ambitious leadership traits described for the CEO. Leaders of any organization must surround themselves with outstanding individuals that they trust completely to “speak truth to power.”

4.      Test Company Strategy to Make Sure It is Focused on Long-Term Shared Value Creation and Not Just Short-Term Operational Results 

Most agree that among the most important roles for directors is to ensure that the firm is pursuing the right strategy. Single dimensional, short-term shareholder value creation is no longer sufficient for companies. Global companies in the digital age must aspire to a higher purpose. Board members should ensure that the companies they oversee have realistic strategies aimed at long-term value creation.

 5.      Collaborate in Peer Forums, Commit to Continuous Learning and Remain in the Know 

Participating in peer exchange forums and professional educational programs are among the most important ways that directors can share and refresh their expertise and voices to focus on long-term shared value creation. In today’s new paradigm of capitalism, corporate director leadership will eventually reward both shareholders and other stakeholders in society. Peer exchanges and director education programs such as the NACD Spring Forum are among the best ways to share leading practices and to teach and learn from fellow participants.

While directors do not want checklists, mandates and unnecessary regulations to oversee their enterprises and drive effective board governance, the digital age demands that directors and their boards be nimble, innovative, ethical and value-producing entities on behalf of global stakeholders. So stay in the know and engage in director-led peer education. It is the best way to ensure our future growth and prosperity.

Ed’s perspectives are important for all directors to keep in mind, from those who are newly appointed to their first board positions to those who have been seasoned with years of experience. The accelerated pace of a global marketplace fueled by an increasingly reactive media environment requires a higher level of responsibility. As part of NACD’s mission to build better boards and further exemplary leadership, we will remain on the forefront of helping directors identify, interpret and gain insights and intelligence about current and emerging issues worthy of boardroom dialogue.

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