Without a doubt, directorship has changed. In the last 10 years, the effects of legislation and regulatory activity such as Sarbanes-Oxley and Dodd-Frank have significantly expanded the role of the director. Taking into account the current trends of increased shareholder activism, heightened media scrutiny, emerging technologies, and disruptive innovations, it is expected that this role will continue to morph. As these shifts in the economy increase in amplitude and frequency, it is necessary for those in the boardroom to understand and prepare for the future structure of directorship—today.
With this in mind, NACD has launched NACD Directorship 2020 to help directors define and prepare for the emerging challenges and opportunities expected to impact boardrooms in five to seven years. More than an initiative, NACD Directorship 2020 extends from educational programs and roundtable exchanges to published research. Using topics informed by an advisory council composed of boardroom luminaries, academics, and governance experts, feedback from educational programs will shape ensuing research on leading practices for the future. In the coming months, several symposiums will be held across the nation, and the conversation will be continued at our annual Board Leadership Conference in October.
This week, NACD held the first of such symposiums at the Harvard Club in New York City. More than 100 directors attended the afternoon session to discuss two areas: the future state of the risk agenda, and how to select performance metrics that will engender sustainable organizational profit. The symposium was led by NACD President and CEO Ken Daly; Akamai Technologies Lead Director and Audit Committee Chairman Martin Coyne; and former Bell and Howell CEO, current NACD Director, and Northwestern University Professor Bill White. During the highly interactive sessions, questions were posed to attendees who were then able to discuss and provide thoughts among their peers. Takeaways from the event include:
Composition and resourcing is essential to navigating the current and future risks to the boardroom. With the right resources and information and the right people around the table, the boardroom can effectively engage in the critical issues.
Inherent in their role as part-time overseers, directors will always run the risk of information asymmetry: management has the full suite of information about the company’s operations that is then selected and parsed out to the board. The challenge for the board is to communicate its expectations on the type and amount of information it needs for effective oversight.
It is essential that directors trust, but verify. In the boardroom, the culture should be fostered so the executive staff feels they are able to report on the high-risk items and things that keep them up at night. To verify the information presented, directors should go beyond the C-suite, even outside the company. This can include meeting with the heads of business units, or gleaning outside sources of data.
In risk oversight, the board can informally meet with senior management and the internal audit team to develop a list of the top organizational risks. After these risks are identified, the board can have an executive session with an outside expert to gain more knowledge of the areas.
Industry experts on the board may not anticipate the disruptive technologies that have the potential to pose either a huge risk or opportunity to the company. While extremely valuable at the table, industry experts may not always be able to see beyond their acumen. Boards can recruit experts from other industries—who bring the perspective and knowledge of different risks and market forces—to serve as directors.
Total shareholder return (TSR) and financial and operational metrics reflect hindsight. These data can be bolstered with a healthy balance of “early warning” metrics derived from the company’s strategy, such as customer and employee satisfaction, dollar investment per employee, or retention.
Metrics are the operationalization of strategy. If the strategy’s underlying assumptions are flawed, however, the metrics have less significance. Is the board looking at metrics that question the strategy itself? This could include a measurement of the organization’s adaptability changes in the marketplace.
Reputational and stakeholder risk is an area that should receive boardroom attention. Directors should encourage metrics that foster stakeholder engagement as a strategy for risk mitigation.
The long-term health of most companies is determined by its success in being innovative. The company should establish early warning metrics that monitor how its innovation systems generate sustainable cash flows.
The next NACD Directorship 2020 events will be held July 16 in Chicago and Sept. 10 in Los Angeles. Between events, NACD’s blog will feature viewpoints and research from our NACD Directorship 2020 partners—Broadridge, KPMG, Marsh & McLennan Companies, and PwC—that will take a deeper look into the emerging issues and trends that will redefine directorship.
Corporate directors today face a growing list of oversight responsibilities—from meeting regulatory requirements to providing strategic insights, leadership, and direction to executive teams.
At the upcoming NACD Directorship 100 Forum, corporate directors have a unique opportunity to not only engage with peers, but also to gain fresh perspectives from experts in the boardroom. Held on Tuesday, Nov. 27, 2012, in New York City, this event packs a punch—providing numerous leading sessions in just one day.
Tenet HealthCare Chairman and retired Global Chairman and CEO of Deloitte, Ed Kangas, said the NACD Directorship 100 Forum is “the best value in boardroom education.” For directors looking to stay ahead of the curve, Kangas recommends making “it a priority to attend. The selection of speakers and topics are top shelf.”
This event couples exclusive director education and networking sessions with recognition of leading corporate directors during a gala dinner.
Forum speakers include: Ann Fudge, director, General Electric; Ellen Kullman, chairman and CEO, E.I. du Pont de Nemours and Company; James Robinson III, director, Coca-Cola; Robert Denham, lead director, Chevron; and David Walker, former U.S. Comptroller General, Governance Accountability Office. Click here to view the full agenda and speakers.
Michael Pocalyko, chairman, TherimuneX Pharmaceuticals and managing director and CEO, Monticello Capital LLC, views the NACD Directorship 100 Forum as a “must-attend event for boardroom leaders who are committed to the directorship profession.” According to Pocalyko, the forum has something for directors of all levels of experience: “From the highly interactive knowledge exchange roundtables, to the timely and relevant panel discussions, even the most experienced directors will walk away with fresh approaches to boardroom leadership.”
Closely following an important presidential election, the forum topic of “Reinvigorating America” is as timely and important as ever. Although seating at this year’s NACD Directorship 100 Forum is limited, there’s still time for you to join us and the “who’s who” of the governance community on Nov. 27, 2012, in New York City.
Register here for an unparalleled opportunity to learn, network, and discuss key issues confronting your board.
Boardroom leadership skills are developed over time, honed through years of experience and refined through ongoing learning. It is a continuous process, as corporate directors must respond to changing, often volatile, business realities, and the NACD fellowship program is a part of that process.
An NACD fellowship is bestowed on those directors who have gone the extra mile (and more) by completing a rigorous foundation course and elective curricula. The result is a select group of directors who have demonstrated their commitment to boardroom excellence and are prepared to implement leading corporate governance practices in the boardroom.
This week, NACD is pleased to announce a new group of 64 Fellows who achieved this significant credential in the second quarter of 2012. NACD offers two fellowship credentials: the NACD Board Leadership Fellowship for experienced directors and the NACD Governance Fellowship for new and aspiring directors.
NACD Board Leadership Program Fellows (partial listing)
Maureen A. Breakiron-Evans, director Cognizant Technology Solutions, Stetson University, Federal Home Loan Bank of Pittsburgh
John L. Dixon, director Wells Real Estate
Paul J. Feldman, director TrendIQ and WECC
Eliza Hermann, director Brightpoint Inc.
John Hotta, director Lake Washington Institute of Technology
Beatriz Infante, director Emulex and Sonus Networks
William T. Keevan, director DeVry Inc.
Jeffrey W. LeRose, director Southern Capital Ventures, Elon University Love School of Business and Research Triangle Software
Michael K. Lorelli, director CP Kelco, Rita’s Italian Ices and WaterJel Technologies
Leslie A. Murphy, director Kelly Services, Vision Service Plan and St. John Health System
Carol K. Nelson, director Premera Blue Cross and Seattle University
Marissa T. Peterson, director Ansell Ltd., Humana Inc., Oclaro and Quantros
John Michael Rauh, director Pioneer Drilling Co.
Darrell R. Tukua, director Allina Health System, Capella Education Co., Gate City Bank, and MMIC Group
NACD Governance Program Fellows (partial listing)
Byron Scott Bagby, US Army (ret.), director Prince Hall Shriners Foundation and Westminster College
Howard Bain, director Nanometrics Inc.
Daniel H. Bauer, director Association for Corporate Growth
James C. Baughman, Jr., director Community Trust Bank, Office Suites PLUS, Dupree Mutual Funds
Selene Benavides, director National Society of Hispanic MBAs
Roberta S. Brown, director The Nature Conservancy
Michael F. Canders, director JPMorgan Chase and Company Military and Veterans Advisory Board
Ivan Ciment, director Tekademic Inc. and SpanTran Inc.
Mark A. Cohn, director Christopher & Banks Corp.
Christopher Warren Cole, director Navy Safe Harbor Foundation and Military Bowl
Brian D. Dittenhafer, director Investors Bancorp
Jeannine English, director AARP
Sara Faivre-Davis, director Farmer Mac
Tony R. Jimenez, CEO MicroTech; director George Mason University Board of Visitors and United States Hispanic Chamber of Commerce
James J. Kaelin, director Wright Patman Congressional Federal Credit Union
John E. Lynn, director Wright Patman Congressional Federal Credit Union
Charles A. Mallon, Jr., director Unitrust Financial Services and Credit Union Mortgage Association
Beryl Raff, director Group 1 Automotive Inc. and Make A Wish