The word innovation typically conjures up images of new technologies like networked sensors and quantum computers. That was certainly my focus when I wrote my February blog on the age of innovation. We had just closed NACD’s cutting-edge program at the Consumer Electronics Show, and the buzzing excitement felt on the showroom floor was on my mind.
But as directors, we know that although tech is important for our businesses, it’s merely a means to an end: sustainable growth that benefits all stakeholders. Technology plays a major role there, of course, but the real drivers of company value are people and, more specifically, culture.
Recent remarks by Facebook CEO Mark Zuckerberg before the Senate’s Commerce and Judiciary committees, as reported by the Washington Post, made this point clear. During the hearing, Zuckerberg told senators that Facebook is going through a “broader philosophical shift.” This is precisely why my recent focus at NACD has been cultural innovation.
When I became CEO of NACD in January 2017, I knew from my previous 16 years here that we had a strong culture. I had seen our staff grow from 12 to nearly 100 during those years, most typically through internal promotion and the hard work of engaged teams. But what was our cultural secret? Could we articulate it, and thus preserve it and pass it on? I got a head start on the topic by serving on the NACD Blue Ribbon Commission on Culture as a Corporate Asset, which released its report in late 2017. But there was more to come.
One reason I was chosen as NACD’s president and CEO was that the board knew that I would champion corporate culture as a core asset of the organization. Quoted in Lori Sharn’s CEO Update story, our chair, Dr. Karen Horn, stated, “The top people have all been together a long time and really share these values. Because we’re growing so fast, we’ve brought in a lot of new people to the organization. We need to be sure the new people feel the same kind of engagement and buy in to the current culture, and buy in to the development of the ongoing culture.”
Encouraged by the board, one of my first acts as CEO was to establish a Directors Council, made up of the 13 director-level managers. The Council meets every other week to promote collaboration across departments, with the goal of continuing to foster a healthy, thriving culture. The Council suggested that we develop a Values Statement, so we appointed a Values Squad made up of Council members to interview staffers, and by summer a first draft was ready. The six values, which were formally announced in a soft launch to staff in January, follow:
We are one NACD.
We succeed through member impact.
We communicate openly.
We are continuous learners.
We are innovators.
The current phase of this initiative is to weave these six values into the fabric of our organization, and the board has been engaged throughout.
As our own internal effort at NACD demonstrates, directors can make a tremendous difference in culture. In her March 26 blog, Andrea Bonime-Blanc suggests that directors ask management if there is an “explicit culture program in place,” and if it is “intertwined and integrated” with the company’s mission, vision, values, and strategy—all clearly board-level issues.
Along these lines, a recent blog covering a March 28 panel discussion at a Leading Minds of Governance event was aptly titled “Experts to Directors: Innovation, Culture Change Starts With You.” As the blogger (our own Katie Swafford) said, “There is a buzz in the air about renovating corporate culture in the name of innovation.”
I, for one, have heard—and amplified—that buzz. Have you?
The entire board relies on the hard work of the audit committee to meet its overall objectives. But audit committees today are faced with the heavy burden of regulatory mandates and growing investor expectations. Workloads are increasing, and they have to oversee more complex areas. Many audit committees are asking whether they have the right approach to meet the demands.
One way to ensure the effectiveness of the audit committee is to have a strong chair. Good leadership and effectiveness go hand in hand, and a strong chair can get the most out of the committee members. By choosing a strong leader for this essential role, your entire board will be able to have greater confidence that the audit committee is on top of the issues.
So what makes a strong audit committee chair? Audit committee chairs need to have experience, healthy skepticism, integrity, and strong communication skills. And to be a truly effective, he or she has to take the time to really work on the committee agenda and make sure meetings run well. They also need to be able to effectively coordinate with other board committees, such as the risk and compensation committees.
Here are six other attributes that I have observed in great audit committee chairs:
Highly experienced: Strong audit committee chairs need to have a good understanding of the business, its risks, and controls. They also know what topics to elevate to the full board, and when to do so.
Professionally skeptical: They’re willing to provide an independent point of view and are intellectually curious. They will look for additional information when they aren’t happy with the answers they get frommanagementand
Possesses integrity and confidence: They promote a strong “tone at the top” for the company and for the committee. They also need to ensure that all elements of the charter are being addressed.
Organized and proactive: They’re able to prioritize the most important items on the agenda. They’re good discussion facilitators and know when to cut off low-value discussions.
Strong communication and interpersonal skills: They provide clear updates of issues to the full board. They’re not afraid to ask difficult questions and have uncomfortable conversations with members of management, service providers, and even other committee members.
Willing to devote the time and energy: Chairing the audit committee requires a big time commitment—agendas are denser, filings are more voluminous, and compliance is more time-consuming. So the chair has to be ready, willing, and able to dedicate the time to the job. Strong chairs take the time to develop the agenda and effectively execute meetings. They also make themselves available to management and other board members. The time commitment of the audit committee chair goes well beyond just the meeting time dedicated to that committee, not to mention meetings of the full board.
Strong audit committee chairs understand that an effective audit committee means more than simply meeting stock exchange composition requirements. They recognize the importance of having a diverse committee made up of members with the right experience, expertise, and both hard and soft skills. They keep the committee refreshed and use the assessment process to ensure that all committee members are functioning effectively.
Having a strong audit committee chair at the helm can help ensure that the audit committee not only keeps up but excels.