Topics: Corporate Governance,Leadership,Risk Management
Topics: Corporate Governance,Leadership,Risk Management
November 13, 2019
November 13, 2019
In the report of the 2019 NACD Blue Ribbon Commission, Fit for the Future: An Urgent Imperative for Board Leadership, NACD and this year’s commissioners offer recommendations for a critical and updated approach to board leadership and operations, involving greater speed of decision making, proactive behaviors, adaptability, and innovation. Necessitated by a landslide of challenges such as the pressure for companies to articulate and justify their broader purpose, increased investor scrutiny, fast-changing geopolitical strife, and the growing complexities of technology and business model disruption, boards must evolve rapidly in order to create long-term value amid seismic shifts, sometimes occurring concurrently, and sometimes interacting and amplifying each other.
In this environment, which puts a premium on orchestrating dramatic transformations and the successful execution of new ideas, there is an even greater onus on boards—and board leadership—to exercise good judgment.
The general counsel, as an advisor to the board and as a partner to board leadership in the role of corporate secretary, plays an important part in identifying future-state opportunities and supporting board leadership’s efforts to identify needs and embrace change. While the general counsel will be a pivotal player in supporting actions identified throughout the report, key areas of focus for the general counsel are highlighted below.
Facilitate board assessment. The general counsel can both recommend and facilitate assessment of the current operations of the board and the performance of existing directors. Likewise, the general counsel can help determine and document the needs for future directors, with an eye toward diversity and the skills needed to future-proof the board. Board assessments would be usefully complemented from time to time by a 360-degree management assessment of the board, enabling some helpful truths to be conveyed, in a measured fashion, about how the board’s overall contribution could be strengthened.
Rethink agenda setting in partnership with board leadership. Board leaders—and by extension generals counsel—must optimize scarce meeting time, rethink agenda setting, and consider the use of virtual tools to connect more continuously as a board. Important objectives include creating “white space” time in the board agenda for open conversation and to delve into identified issues of importance, and fostering dialogue and minimizing time spent on formal presentations.
The general counsel should make creative recommendations for new ways of collaborating. For example, the general counsel could recommend that board leadership consider encouraging cross-fertilization and interaction between committee chairs, combined with periodic joint meetings of committees with overlapping or interlinked mandates, such as the audit, risk, and technology committees.
Regularly update documents to keep forward momentum and provide clarity. Working with the chair of the nominating and governance committee, the general counsel can assist in performing a rigorous governance review that covers the board’s governance guidelines, operations, structure, and charter(s) every year. The board’s annual goals should also be clearly captured, and minutes may need a fresh approach to effectively document thinking on strategic issues.
Streamline reporting to the board. Review the protocol for the flow of information to the board to ensure appropriate transparency on company performance and risk, while also evaluating the volume, efficacy, and digestibility of information provided to the board.
Draft board leadership and director role requirements. The general counsel can surface the need to define, and periodically refine, the characteristics and role requirements expected of the company’s next board leader in order to prepare candidates to lead the board into the future. For example, the board should consider emphasizing the importance of fortitude and adaptability when updating the leader’s role definition. Also, the general counsel can draft individual director job descriptions that reflect the new requirements of the board’s current and future strategic needs, valid stakeholder expectations, and an inclusive board culture.
Revise and refresh director onboarding. Robust director onboarding is becoming increasingly important, and repeating onboarding for directors who have held a seat for some time can also be valuable. In fact, a board on which one commissioner serves has created a “re-boarding” program for directors, which kicks in 18 months into their board service to help them better understand the business and to enhance their board and committee contribution.
Partner with board leadership on a learning agenda. The general counsel should assist in developing and maintaining a targeted, continuous learning agenda for the board, which may include time on board or committee agendas for learning about industry-specific topics or emerging trends, as well as external time spent on additional learning that may benefit the company on governance matters, regulatory developments, shareholder/stakeholder issues, and/or team dynamics and decision making. A continuous-education strategy for the board should also include sessions where the board collectively reflects on governance failures that happened elsewhere, perhaps at companies in their industry.
Consider management’s learning as well. Continuous learning also applies to management, and the board should encourage selected executives to take board positions at companies that are not competitors. For the general counsel, seek opportunities beyond the legal sphere to increase your value as a business partner to the board.
Balance risk with a need for increased visibility. In the board of the future, the board leader needs to challenge prevailing assumptions about the limits of transparency and disclosure, engaging directors and management in dialogue about how to appropriately offer visibility into the workings of the board. As a leader in managing organizational risks, the general counsel should have a voice in how to increase visibility without also increasing risk to an unacceptable degree.
The proxy statement and the compensation discussion and analysis can be utilized to tell a more comprehensive story about how the board operates.
It is likewise important to prepare designated members of the board to engage directly with investors on selected governance matters.
Use clear documents to impact accountability. Strengthening the board’s accountability for individual director and collective performance is an urgent mandate for every board leader. This requires that board members have a detailed job description and a clear understanding of what is expected of them. As noted above, the general counsel should have a hand in developing director role descriptions that reflect the enhanced requirements of the company’s board.
It is the board leader’s job, as ever, to build and maintain a high-performing board. Board leaders must catalyze and orchestrate a transformation in how the board is composed and structured, how it operates and interacts with the business, and how it holds itself accountable. The general counsel’s involvement, diligence, and creativity will be critical in supporting board leadership on this journey. In addition to strategies and recommendations, the 2019 report offers toolkits to assist the board and, by extension, the general counsel, in accelerating change to achieve the board’s optimal future state.