Category: Board Composition

Unlocking Innovation Through Diversity

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The first panel at the 2016 Global Board Leaders’ Summit’s Diversity Symposium provided directors with real-life examples and related metrics from four executives who have successfully linked diversity with competitive advantage.

Unlocking Innovation Through Diversity

Leslie Mays, partner at Mercer, moderated the panel that included Rohini Anand, senior vice president and chief diversity officer, Sodexo; Phillip Goff, president and cofounder, Center for Policing Equity; Herschel R. Herndon, founder and president, HRH Global Connections; and Sonya F. Sepahban, director, Genomenon and Cooper Standard.

The panel suggested four essential steps to build a more diverse workforce and create value through innovation.

Start With the Board

Anand noted that because the Sodexo board does not take its commitment to diversity lightly, performance metrics for the CEO are directly tied to diversity initiatives. Sodexo, a facilities management company, sets ambitious recruitment goals across every department, with the aim of achieving a C-suite consisting of at least 40 percent women by 2020. The CEO’s commitment to Sodexo’s diversity goals has in turn driven deeper engagement in diversity and inclusion at all levels of the company. The result? Anand said that the division of Sodexo that she leads has realized $1 billion in new business that can be directly tied to the company’s diversity and inclusion efforts.

Set the Metrics for Innovation

Herndon defines innovation as “anything new that creates value.” The value of a more inclusive workforce will be revealed if specific business practices are established:

  • Tie recruiting metrics to the statistical makeup of the market the company serves—or seeks to serve.
  • Monitor if and how diverse talent is being cultivated through the leadership pipeline.
  • Establish new-business lines targeted to previously underserved populations and then track their success.
  • When planning strategy, challenge your board to keep diversity top of mind.

Work to Remove Biases

Goff noticed that workers at a company he consulted to performed with greater efficiency when paired with a coworker of the same race. These workers had little training in how to work with someone who was not from their own background, and when paired with a colleague of a different race, faced tensions that slowed their work.

To realize the full economic value of diversity and empower teams to do their best work together, companies should provide training in how to overcome unconscious biases and in how to be mindful of tensions caused by misunderstandings when evaluating workers’ performance. “Bias can be baked in,” Goff said. “If we define all the things we care about and measure based on them, we will see greater success.”

Inclusion Must Be Pervasive

Sepahban, who currently works closely with start-up companies and venture funders, said that while only 12 percent of venture capital is awarded to companies with diverse leadership, companies with at least one woman founder performed 63 percent better than those without a woman leader based on exit valuations.

To change the tide towards inclusion at start-ups and larger companies alike, Sepahban urged her fellow directors to make inclusion pervasive. “This isn’t someone else’s job,” she said. “Even with all the great work done by diversity leadership, it’s still everyone’s job. Leadership should educate all to ask themselves what they are doing to help.”

Does Investor Relations Expertise Belong On the Board?

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Ferris_Bob

Robert D. Ferris

Times sure have changed. Whether a company’s equity is owned by a few venture capitalists or a league of activist investors, investors today want to have their say about where the company is headed and who is leading it.

Perhaps the time has come for companies, both public and private, to consider better use of an underused and under-appreciated asset that many of them already have and others should acquire: the role of the investor relations (IR) professional. Integral to the board’s oversight of corporate asset allocation (i.e., dividend policy, investment in research and development, external growth through M&A and other measures to return value) is a current understanding of how the securities and capital markets work, characteristics and propensities of investor types, investor attitudes and concerns, and relative values of the enterprise.

Request Reports From Your IR Professional

It is commonplace today for the corporate IR professional to present quarterly market analysis reports to the C-suite and in particular the CEO and CFO, regarding relative market performance, changes in ownership, and current investor perceptions and concerns. In my opinion, such reports should find their way to the board of directors as well, both in formal, written form, and as in-person presentations, inviting questions and discussion—all in an effort to keep the board up to date regarding pertinent market activity and best prepared for contingencies.

In the current market environment, the IR professional requires special and multi-disciplined skill sets that can help a board. As spokesperson for the company and often the proxy for the CEO and CFO with investors, the IR professional must be thoroughly familiar and conversant with the business plan, financial structure and strategy, and the performance of the company. He or she must be aware of and sensitive to disclosure Regulation FD, securities laws, and other regulatory imperatives.

Intentionally Include IR Experience and Perspective on the Board

In addition, nominating committees should consider seeking an outside director who has IR experience in addition to other useful boardroom skills. Just as public companies are required to have a financial expert on the audit committee, perhaps boards should be urged to have a skilled investor relations professional among their ranks. While the same might be said of other core disciplines (cybersecurity, finance, human resources, law, marketing, technology, and so forth), the domain of IR knowledge seems worthy of particular consideration at this time of market turmoil and uncertainty. Having IR expertise on the board certainly would make the board smarter and better prepared to deal with myriad corporate and financial decisions within its purview.

The corporate IR professional could be an invaluable asset to the board, as he or she must be cognizant of the pulse of the investment community on specific issues, while bringing this critical perspective to bear on the board’s discussion and decision-making process. The corporate investor relations discipline has evolved significantly over the years out of necessity. No longer simply a stockholder relations functionary, the IR professional is the primary, and sometimes the only daily, interface with owners (as well as prospective owners and market influentials) of the enterprise. The IR professional thus has a keen sense of investor interests and concerns, their perceptions of relative value, and of their voting propensities.

Suggesting the addition of an IR skill set on the board is not to be taken lightly. Recognize that there are numerous skilled and experienced IR professionals available, all of whom, in addition to the aforementioned experiences, know how investors think and know all the hard questions and concerns regarding material corporate events, financial performance, prospects and policies—all in a constantly changing economy.


Robert D. Ferris is an investor relations and crisis counselor and commentator, with more than four decades of experience with both domestic and foreign issuers. A former chairman of National Investor Relations Institute’s Senior Roundtable, his ideas on C-suite communications strategies in challenging corporate situations have been widely published.

‘Secret Sauce’ for the Nominating and Governance Committee Chair

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Overseeing a company’s corporate governance process and structure, the nominating and governance (nom/gov) committee is essential to a company’s long-term success. In this BoardVision interview—moderated by NACD Director of Partner Relations and Publisher Christopher Y. Clark—Bonnie Gwin, vice chair and co-managing partner of the global CEO and Board Practice at Heidrick & Struggles, and Thomas Bakewell, CEO and board counsel at Thomas Bakewell Consulting, discuss the qualities of an effective nom/gov committee chair:

  • Sets the right mix between board culture and composition
  • Facilitates cross-committee communications
  • Performs effective board evaluations
  • Spots diverse talents in director candidates

Bonnie Gwin, vice chair and co-managing partner of the global CEO and Board Practice at Heidrick & Struggles (left) and Thomas Bakewell, CEO and board counsel at Thomas Bakewell Consulting.

Here are some highlights from the discussion.

Christopher Y. Clark: Depending on what your definition of best is, why should the best director on the full board be the chair of the nom/gov committee?

Bonnie Gwin: In my opinion, it is an incredibly critical role. You’re talking about a director who is helping guide the board in not just developing a great composition for the board that is strategic and focused…, but also a director who understands the culture of the company and the board that they’re trying to build. You really need an outstanding director who understands that mix between composition and culture and can work closely with the board to get it right.

Thomas Bakewell: Bonnie is spot on in terms of composition and having the right team around the table. The other magic that you need in a terrific nom/gov chair is somebody who can draw people out, spot talent, make sure everybody gets heard, [and] really…build the team. Coming from a baseball town where we have a pretty good manager [who] wins a lot of World Series, we know the value of having a great person who can draw everybody out and get the team to work together. It’s really [about teamwork] … and using a lot of the tools that are available today. One of the trends in tools is…much more thorough and in-depth evaluations. [These are] … not just check-the-box or check-the-list [exercises] but in-depth individual board evaluations to know what’s really going on in the boardroom and among directors.

Clark: NACD [held] a combined meeting of the NACD Audit Committee Chair Advisory Council and NACD Risk Oversight Advisory Council. … It was invaluable for both sets of committee members. How do you feel about [meetings between committees] … whether it’s audit and risk [or] compensation and nom/gov? Do you think those interrelationships of committees should be enhanced or promoted?

Gwin: Generally speaking, transparent communication across all the committees of the board is essential. It’s essential for a high-functioning board. And in particular where you have, for example, [the] nominating [and] compensation [committees], there’s a lot of interplay between them and the issues they’re addressing. I think it’s important to ensure that there [are not only] good transparent lines of communication between those two committees, but frankly across the whole board.

Bakewell: The magic ingredient is how people work together, and part of that key element is how they communicate. The old approach to boards was everybody showed up the day before the board meeting [and] went to the committees. A lot of times people went to every committee [meeting]. What’s the point [now]? You don’t have the time. You don’t have the energy. You don’t have the resources today. So how do you have a board where everybody trusts each other and they communicate? If you’re not on the audit committee and important issues come up…, can you simply pick up the phone and reach out to the audit committee chair, or is there another process that’s very helpful for you to get the information you need?

Clark: Please give us one last piece of wisdom.

Gwin: The piece of wisdom I would share is the importance of long-term succession planning. We’ve talked about that several times, but I really think, looking at board composition [and] board dynamics… over the next four or five years…is very important.

Bakewell: I would say my secret sauce is [that when looking at director candidates] it’s not so much [looking at] … particular talents, [because] everybody can look at a resume and see what somebody has. They’re going to see if they’re a CEO, [or] they’re skilled in marketing. The real magic is [asking], “What is their true personality? Are they a ‘driver’ personality? Are they a curmudgeon?” Sometimes boards need curmudgeons. Is somebody a strategic thinker, or is their skill set not [being] a strategic thinker but taking strategy and converting it into action? What have they done in their past experience that really makes them qualified for this role?

Clark: Well I think we’ve got all the synapses popping. I wanted to thank the both of you for joining me today.

Additional Resources:

Report of the NACD Blue Ribbon Commission on the Governance Committee: Driving Board Performance

NACD Resource Center: The Nominating and Governance Committee

Report of the NACD Blue Ribbon Commission on Board Evaluation: Improving Director Effectiveness

William Young is the editorial and research assistant for the National Association of Corporate Directors.