Posts Tagged ‘innovation’

The Face of the 2020 Board

October 14th, 2013 | By

On the heels of the NACD Directorship 2020 panel, Virginia Gambale, director, JetBlue and managing partner, Azimuth Partners LLC; Helene D. Gayle, president and CEO, CARE USA; director, The Coca-Cola Co. and Colgate-Palmolive Co.; Michael D. Rochelle, founder and president, MDR Strategies LLC, director, Military Officers Association of America, trustee, U.S. Army War College Foundation; and Clara Shih, CEO, Hearsay Social and director, Starbucks, discussed the perspectives, expertise, and skill sets that will be critical for boardrooms of the future.

Gambale noted that some of the issues that will confront boards in 2020 are obvious today. Globalization, technology and innovation, the drive for transparency coupled with short-termism, and a focus on shareholder returns will require a certain expertise at the board level. To meet these challenges, Gambale suggested one valuable mindset is contextual awareness—the ability to lead and make decisions in the context of what is going on in the environment around you with the information you have.

“Another way of thinking about contextual awareness is as the intersection of situational awareness and the ability to use intuition to take advantage of opportunities,” said Rochelle. “It’s a 360-degree awareness.”

“Part of situational awareness is to ensure that in a globalized world you have the ability to speak each other’s language and talk across the divide,” explained Gayle. “We can be brokers for merging creating wealth with creating social value.”

Reinventing the Future

While some technologies, such as social media and mobile, enhance existing business models, some companies are developing technologies that will completely alter the future. Shih pointed to the examples of 3-D printing and self-driving cars, noting that embracing embrace rapid innovation can redefine the customer experience.

Directors and management will need to prepare to keep pace with evolving technology. “The bylaws in corporate governance were meant to maintain stability. We need to be aware that in that environment we need to try harder to carve out time to brainstorm about how businesses can be transformed by these technologies.”

Onboarding Future Directors

“Ensuring a board is prepared to embrace emerging technologies starts with an effective onboarding process. Boards must do a better job of thinking about diversity as more than numbers,” Gayle explained. “How do we make sure what that person has to offer is brought to light? In onboarding, we need a focus on dialogue—having a discussion about what that member brings to the table.”

In addition, considering younger directors may also prove fruitful, she continued: “We have deliberately looked for younger candidates on my board—they understand some of these worlds better.”

NACD Directorship 2020™

October 14th, 2013 | By

According to Confucius, one should “study the past if you want to define the future.”  With that in mind, President and CEO Ken Daly led the session to officially kick off NACD’s future-defining initiative with panelists that have a storied history in the world of governance. The panel comprised Raymond Gilmartin, former president and CEO of Merck & Co., lead director at General Mills, and the newest member of NACD’s board of directors, and Myron Steele, Chief Justice, Delaware Supreme Court.

Based on the observation that capitalism is undergoing a profound shift as a result of shareholder activism, technology, and regulatory activity, work to define and shape NACD Directorship 2020 has been underway for several months. Starting this spring, NACD held three events to discuss and hone the direction of research topics in New York City, Chicago, and Los Angeles. Three areas came to the forefront: information flow, performance metrics, and disruptive technologies. For recaps of these sessions, visit nacdonline.org/directorship2020.

Changes in the Boardroom 

According to Steele, the most significant changes in the boardroom have been the shift in dynamic of ownership from retail to institutional investors, and the dominance of independence in the boardroom. In the past, the majority of investors were retail, now 60 to 70 percent of stock ownership is in the hands of institutional investors.

As a result of Enron and WorldCom, Sarbanes-Oxley required the board to become more independent than ever before. And yet, as Chief Justice Steele observed, without an empirical study to support this requirement, the legislation missed the mark. Of the 17 directors on Enron’s board, 15 were independent and it “still resulted in a massive failure of corporate governance.”

In his remarks, Chief Justice Steele stressed his belief that regardless of who comprises the shareholders, authority, balanced with accountability, rests with directors. “It is still fundamentally the responsibility of directors to manage the corporation with oversight, loyalty, and care. Also the underlying dynamic has changed, the authority and accountability of directors has not.”

TSR and Short-Termism

Continuing off a theme that began last night with keynote speaker Raj Sisodia, Gilmartin addressed the increasing focus placed on generating short-term quarterly results. Maximizing shareholder value above all else has reinforced practices that can be detrimental to society. Although some practices, such as laying employees off, are sometimes required, they are currently being used with a frequency that destroys long-term value and the future survival of an institution.

But directors have an opportunity to change this. NACD Directorship 2020, according to Gilmartin, “allows an opportunity to challenge the conventional wisdom that has developed over the last few years.”

Innovation and Risk Taking

Both Chief Justice Steele and Gilmartin emphasized the need for innovation and risk-taking in boardroom culture. In addition to using incentive systems that focus on the creation of long-term value, Gilmartin suggested using the company’s ability to innovate as a performance metric.

Chief Justice Steele addressed the increasingly litigious nature of directorship, which as Ken Daly noted has become, “not if you’ll be sued, but when you’ll be sued.” According to Chief Justice Steele, the business judgment rule is alive and thriving. Directors should feel free to take the necessary bold steps to create economic value. “Society is dependent upon a board being empowered to take risks on behalf of shareholders—that is what builds the economy.”

NACD Chair’s Address: Forecasting, Innovation, and Change

October 13th, 2013 | By

Wow.” NACD Chair Dr. Reatha Clark King had a tough act to follow—a trio of rock violinists—but her welcoming remarks to the 2013 NACD Board Leadership Conference left attendees inspired and ready to engage in the next two days of sessions. Focusing largely on this year’s conference theme—Future-Proofing the Boardroom—Dr. King drew off her experience as a scientist, a profession based on “forecasting, innovation, change, and being first,” to urge directors to embrace both the opportunities and challenges of the future.

Noting the record attendance at this year’s conference, Dr. King observed “an impressive collaboration of strong-forward looking leaders.” Foreshadowing Monday’s official kickoff of NACD Directorship 2020™, however, she noted that we do not know what the future will bring–other than significant change. And since she believes that each of the attendees has “some” of the answers, in order for the country to move forward, King urged attendees to share their experiences and wisdom over the next few days. In doing so, directors can build a knowledge base of new ideas, trends, opportunities, and solutions that will aide in their efforts to not just meet, but actually embrace future challenges.

The most serious threat the boardroom faces, according to Dr. King, is a lack of imagination. It is necessary for directors to believe what they do creates value for shareholders and stakeholders. Further, every boardroom should draw from a diverse set of sources for information and ideas. As such, she encouraged attendees to not just listen, but participate and work together during this important conference. “Let us prime our boards now so we can meet the challenges of the future.”