“Boards are grappling with understanding shifts not only in the digital arena, but also in the very human dimension of what they do,” says Susan Stautberg, co-founder and global co-chair of Women Corporate Directors (WCD). “Who their customers are, how to attract the talent they want, and who the competitors are for both – these are the kinds of issues that surfaced around this year’s proxy season and in the conversations among directors outside formal board meetings.”
“We’ve seen that, for boards, it doesn’t necessarily have to be a complex technology issue that challenges directors the most,” says Stautberg. “Boards are having to shift their thinking around people and engagement, but the good news is that discussions around these can spark real change.” WCD, the global membership organization of women directors, has opened 63 chapters around the world, with 10 more set to launch in the next year.
8 Ways Corporate Boards Are Changing How They Think
WCD lists eight areas in particular that have emerged as hot points of discussion during the group’s 2014 Institutes and events, setting the agenda for the upcoming Asia Institute September 3-4 in Singapore, as well as the Americas Institute November 11-12 in Miami:
1. Rethinking the “consumer pyramid”: The billion people at the bottom of the world’s consumer pyramid are demanding a completely new strategy for engagement. “Historically, large companies have viewed this group as the recipients of their public policy work, to whom companies donated goods and services,” says Sandra Peterson, group worldwide chairman and executive committee member of Johnson & Johnson, as well as a director at Dun & Bradstreet and a WCD member. But technology changes are making this population more accessible to more knowledge that companies can offer. “You can now reach this market through mobile technology, such as providing healthcare education to villages that were at one point cut off. The people there are becoming consumers earlier, and are the middle class consumers of the future.” This opens opportunities for companies both competitively and in their social responsibility efforts.
2. Rethinking your business model: “One of the best things a company can ask itself is ‘What if we could not make any money at all on our core business?'” poses futurist Edie Weiner, a WCD member and chairman, Weiner, Edrich, Brown, Inc. As business models are being disrupted more rapidly than ever, leadership should be forcing itself to think about the ways a company could sustain itself if it lost its key revenue source. “This question starts directing you into possibilities that would interest Wall Street and others, who want to know how you might leverage other assets and potential revenue streams.”
3. Rethinking who your competitors are: Companies must look outside their industries to identify where disruptors may come in. Zelma Acosta Rubio, a WCD member who serves as general counsel, board secretary, and director of corporate affairs/CSR for Banco Internacional del Peru – Interbank and director at La Fiduciaria and Intertitulos, comments on the financial industry: “In the banking sector, for example, radical technology innovators like Google, PayPal, and UBank, are setting new technology standards. And consider non-financial industry players such as Apple: currently, with more than 800 million iTunes accounts, Apple is well positioned to introduce mobile payment services because the majority of those accounts have credit cards linked to them. Facebook is trying to get licenses in Ireland so that you can actually send money to your Facebook friends from the app itself. If you are sitting at a bank, you’re thinking: where do we need to focus and what new skills do we need to acquire to remain competitive in this new landscape?”
4. Rethinking the supply chain: In the U.S., both environmental and competitive pressures are driving companies to return some of their manufacturing back to the States. “These days one has to be able to manufacture goods and be responsive to the changes in the market,” says Alice Gast, a director at Chevron and incoming president of Imperial College in London. “Changing over a plant in China is extremely long and cumbersome and difficult, whereas with our new technology combined with low energy prices, one can have an efficient plant domestically that can change out the product and make something different with the agility that is needed to remain competitive.” Not “outsourcing” production to heavily-polluting plants also creates opportunities to “build plants that are more efficient and ‘smarter’ and conserve energy,” allowing companies to take into account what the true impact of their energy consumption is.
5. Rethinking the importance of board education: Directors need to be on top of shifting trends, such as consumer behavior, as much as company executives do, says Dr. Namane Magau, executive director of South Africa’s B&D Solutions and a director at AON South Africa and other boards. “If management stays in touch with the needs of the consumers but the board does not, there can be dissonance between the board and the management. Directors need to be informed on an ongoing basis of the environment in which the business is operating, including the shift in trends and needs by the consumers, so that you have that shared understanding and ongoing responsiveness that can make the company resilient.”
6. Rethinking how to attract talent: Within the next 20 years, 100 million educated workers are expected to move into cities globally. “As companies are thinking about whom they are going to recruit into their workforce, it’s important for them, and for governments, to look at what the life-work facilities are for families,” says KPMG’sNancy Calderon, also a WCD member. The “livability” of cities becomes a real concern for potential employees, who are not just coming into the city alone and sending money back home, but are instead bringing their families. “Features such as child care and health care near your place of work can make a real difference in workers’ lives, and particularly women’s lives.”
7. Rethinking what diversity brings to the bottom line: Issues such as gender diversity are becoming more critical in many regions, driven by economic necessity. For example, as Japan struggles to recover against massive headwinds – longtime economic slump, declining population, and the tsunami crisis of 2011 – the government is pushing companies to rethink long-held beliefs and traditions. Goldman Sachs’ Kathy Matsui, a WCD member whose ideas have captured the attention of Prime Minister Abe, observes, “We finally have an administration in Japan with a growth strategy, and a key component of this strategy is dependent upon women. The light bulb has gone off: we need to start to require a minimum number of outside directors on boards, which is certainly not the norm in Japan. The economic and market reality is such that the government is running out of options.”
8. Rethinking compensation: When it comes to compensation, everyone is an “expert” – all executives get paid, and therefore think they know how best to pay others. But this attitude can undermine serious board discussion about compensation, says Melissa Means, a manager director at compensation specialist firm Pearl Meyer & Partners, which partnered with WCD in the 2014 Thought Leadership Council. For a board to practice its fiduciary duty, “directors must leave that at the door and be able to immerse themselves in the situation of that company. They need to thoroughly research what’s going on in the industry and market and with pay practices in general. Directors also need to be discerning enough to be able to say ‘this is what’s right for us to do here and what’s going to drive the behaviors we want.'”