Board

Key issues facing boards of directors in 2025

Strategic Leadership and Oversight
Boards must prioritize strategic leadership and oversight, ensuring alignment with the company’s goals and objectives.

Diversity, Equity, and Inclusion
Boards should focus on diversity, equity, and inclusion, recognizing the benefits of diverse perspectives and experiences.

ESG and Sustainability
Boards must address environmental, social, and governance (ESG) issues, prioritizing sustainability and responsible business practices.

Technology and Innovation
Boards should stay informed about technological advancements, such as generative AI, and their impact on the company’s business model and operations.

Global Uncertainty and Risk Management
Boards must navigate global uncertainty, managing risks associated with geopolitical tensions, economic volatility, and regulatory changes.

Talent Management and Succession Planning
Boards should focus on talent management and succession planning, ensuring the company has a strong leadership pipeline.

Stakeholder Engagement and Communication
Boards must prioritize stakeholder engagement and communication, maintaining transparency and trust with investors, customers, and employees.

Board Composition and Refreshment
Boards should regularly assess their composition and refreshment, ensuring they have the right skills, expertise, and perspectives to drive the company’s success.

Culture and Values
Boards must promote a strong culture and values, supporting ethical decision-making, accountability, and a positive work environment.

Diversity and Inclusion: Ensure the board reflects a diverse range of skills, experiences, backgrounds, and perspectives to drive informed decision-making and innovation.
Strategic Alignment: Recruit directors whose expertise aligns with the company’s strategic goals and objectives, enabling effective oversight and guidance.
Independence and Objectivity: Prioritize independent directors who can bring objective perspectives, unbiased by conflicts of interest or personal agendas.
Relevant Expertise and Experience: Identify directors with relevant industry, functional, or technical expertise to provide valuable insights and informed decision-making.
Leadership and Governance Skills: Recruit directors with proven leadership and governance skills, including the ability to engage in constructive debate, build consensus, and hold management accountable.

Additionally, consider factors like:

– Director tenure and term limits

– Board size and composition

– Director compensation and incentives

– Ongoing training and development

– Succession planning and board renewal

By addressing these issues, organizations can recruit high-quality board directors who drive long-term success and sustainability.

Abstract- This article talks about need of Directors Training as well as it summarizes what the law requires in different jurisdictions, and at the end it distinguishes for each country whether these requirements are mandatory or voluntary. In a world of instant communication and ever changing business models, the traditional task of the Professionals in business is evolving. The mounting drift focus on:
• Increased governance requirements
• More regulations
• More emphasis on documentation
• More intervention from governments

Together with guiding corporate strategy, the board is chiefly responsible for monitoring managerial performance and achieving an adequate return for shareholders, while preventing conflicts of interest and balancing competing demands on the corporation. Now more than ever, directors need to understand their fiduciary, legal, and ethical oversight responsibilities hence the bar has been hoisted. Board of directors must focus more on economic performance, not conformance. Public confidence in corporations has reached an all-time low and the role of directors has become even more challenging and demanding.

Besides, Governance-related policy changes introduced in recent years have increased the focus on the experience and qualifications of corporate directors. Accompanying these changes is an increased expectation that companies and boards take affirmative steps to ensure directors are prepared to address emerging opportunities and challenges. The board of directors has had often the business shrewdness, but lack a deep grasp of corporate governance or the leadership skills required to reform policies, practices, and behaviours that can undermine a company’s performance.

Today’s boards of directors are facing an unprecedented level of scrutiny and pressure from regulators, investors, media, institutional investors, and other stakeholders. Besides, Directors’ training and development is fundamental element in enhancing board effectiveness and can help board members be better prepared to tackle misgiving. An effective board education program offers ongoing educational opportunities that help board members continuously cultivate skills that heighten the overall effectiveness and performance of the board.

Boards today can be a competitive advantage for companies. They can provide an outside view, overcome blind spots in strategy, raise awareness of external risks, connect with governments, society and other stakeholders, give credibility and build trust in ways that executive teams cannot. But most board education programs today add little value and instead either focus on the regulatory environment or copy existing managerial education for senior executives. But boards need more than this to become effective. For example, the board’s strategic role is different from the strategic role of executives. It ranges from supervision to co-creation of supporting the executives

The Board of directors not only monitor the company’s innovation performance, they actively contribute to it. Board diversity is key in this regard as board members from other industries are faster to foresee sudden industry shifts or disruptive moves. Employee representatives can also be an excellent source of innovative thinking. Board education is failing to address many other important questions, such as which structures enable boards to add real value, as opposed to mere regulatory compliance. And, most importantly, what makes an individual a good board member.

Besides, Board development and training is important because today’s chief executive officers (CEOs) are overstretched and confronted with an incredible rise in complexity of society, governments, alternative business models, global changes, new risks and opportunities and shifts in economic conditions. Even the best executives cannot be expected to respond consistently to all these challenges.

As organizations strive to compete in the global economy, differentiation on the basis of the skills, knowledge, and motivation of their workforce takes on increasing importance. According to a recent industry report by the American Society for Training and Development alone spend more than $126 billion annually on training and development. Undoubtedly, Education is important, but people learn from their practical experiences much better as compared to bookish knowledge. Now a days training and development has been the most important factor in the business world because it increases the efficiency and the effectiveness of both directors and the organization.

OCED in 2004 avowed that in order to improve board practices and the performance of its members, an increasing number of jurisdictions are now encouraging companies to engage in board training and voluntary self-evaluation that meets the needs of the individual company. (Principle VI.E.3)

a)Orientation of Director on Board
The move from being a manager to a directorship or from director to chairman is more than a change in responsibilities; it is a major change in behaviour and identity. Most of directors will have been becoming more experts in a narrower field, or focusing only on the interests of a single department. Suddenly, a need to have equal responsibility for all departments scanning the external environment for opportunities and developments and joining a new, elite, group at the top. Their need and requirement is different from the seasoned and full time director working with other board of similar or different product line.

Numerous companies are faced with the need to make a step change in the way they operate, perhaps when the business has grown from small, informal beginnings to a point where a more structured organization is appropriate. Effective company directors understand that directing the organization is much more than managing it.

They aim to maximize their contribution to the work of the board and ensure that they achieve high performance in all aspects of their role as company director. The difficulty is for the newly-appointed company directors manage their transition to the board effectively, by explaining both the theory and the practice of corporate governance and by building on
their existing competencies.

b) Why is it Important to Welcome and Train new Board Members?
A proper welcome and training will help new members:

• Take on their roles in the organization both quickly
and comfortably;
• Feel more connected to one another;
• Feel more connected to the organization;
• Better understand their role on the Board;
• Operate from the same “script” that is, to
understand the vision, mission, and their roles in the
organization;
• Feel more motivated to do a better job.

i. Ideal Training Objectives
The training objectives of the new director(s)
must be:
• A knowledge of the law relating to company
directors’ liabilities;
• A better appreciation of how to apply the principles
of corporate governance to building an effective
organization;

An insight into how to balance the different aspects of the company director role – governance, entrepreneurship and management;

• A clear understanding of the leadership and organizational issues involved in stakeholder management and performance delivery;

• A sharper focus on their own competencies and how they can be further enhanced in order to maximize the effectiveness of their dealings with the rest of the board as well as with the organization as a whole.

Source: globaljournals.org

African Boards of Directors should possess the following TECHNICAL SKILLS for best performance:

Financial Literacy: Understanding financial statements, budgeting, and financial reporting.
Strategic Planning: Developing and implementing strategic plans, setting goals and objectives.
Risk Management: Identifying, assessing, and mitigating risks, ensuring compliance with regulations.
Governance and Compliance: Understanding governance structures, ensuring compliance with laws and regulations.
Digital Literacy: Understanding digital technologies, leveraging technology for business growth.
Data Analysis and Interpretation: Interpreting data, making informed decisions, driving business growth.
Cybersecurity: Understanding cybersecurity risks, implementing measures to protect against cyber threats.
Environmental and Social Impact: Understanding environmental and social impact, ensuring sustainable practices.
Human Resources Management: Understanding HR best practices, ensuring effective talent management.
Industry Knowledge: Staying up-to-date with industry trends, developments, and best practices.
Communication and Interpersonal Skills: Effective communication, building strong relationships with stakeholders.
Leadership and Collaboration: Demonstrating leadership, building collaborative teams, driving business growth.
Innovation and Entrepreneurship: Encouraging innovation, driving entrepreneurship, and business growth.
Global Perspective: Understanding global markets, trends, and best practices.
Continuous Learning: Committing to ongoing learning, professional development, and staying current with industry trends.

By possessing these technical skills, African Boards of Directors can drive business growth, ensure effective governance, and create long-term value for stakeholders.

McKinsey conducted a global survey of more than 1,000 directors and found that “boards with better dynamics and processes, as well as those that execute core activities more effectively, report stronger financial performance at the companies they serve.” This shows how important an effective board is to a business and why you should invest in your board of directors’ development.

The more your board develops, the better equipped it is to face the challenges of a fast-moving business landscape. The way directors tackle the challenges and emerging compliance issues is key to gaining that competitive edge over your peers.

Furthermore, Karen Brice, director of governance and board advisory at Grant Thornton remarks “executive and non-executive directors alike tell us that, if their board isn’t adapting fast enough to provide the kind of leadership that is needed to protect and grow the organisation, they could face an increasing sense of isolation from management teams.”

WHAT IS BOARD DEVELOPMENT?

Board development is the process of helping your directors gain access to resources that enable them to improve their individual and collective performance and effectiveness. This could be:

Sharing best practices
Undertaking specific training for continual improvement
Filling skills gaps
Increasing board diversity
Regular evaluations to assess progress
Having a defined role to focus on
Providing access to relevant papers and reports

The benefits of regular director training

There are a number of benefits of undertaking regular director training, for everyone from CEOs to new board members. These include:

Helping forge bonds

Corporate boards do not have the time to forge close bonds if the only time they interact is during meetings. Bringing them together out of the business environment allows them to network in a less formal space where they can be more relaxed and get to know each other better.

This connection can only help in future meetings, making miscommunication less likely, as directors understand each other more deeply. It aids collaboration and facilitates more productive discussion because the members who disagree are less likely to do so with hostility and will be more inclined to find an amicable solution.

Futureproofing the organisation

The business world is growing and changing all the time, with new capabilities, possibilities and risks entering our consciousness. Regular training helps you avoid treading water and keeps you competitive by ensuring you are on top of new technology and current best practices. Besides, it helps you navigate potential corporate minefields in the short, medium and long term.

Training arms your directors with the tools they need to take advantage of the governance landscape and making it a regular activity means that they are always aware of recent developments and predictions.

Encouraging better decision making

Training gives board members better clarity when it comes to early recognition of problems and difficulties for the business. This allows discussions to take place early, in a less pressured manner, giving the board breathing space to fully debate and develop a solution that works.

Without this ability, the board might not recognise a critical threat until it becomes an urgent issue, meaning that there is a tight deadline on decision-making and less time for reasoned, insightful discussion.

7 steps to better director development

1. Evaluate the current composition

The composition of the board is vital in director development, as it dictates the array of competencies and experiences, as well as attitudes, that make up the board. Understanding your current board composition allows you to decide what training would benefit the individuals and, therefore, the collective. This will form the basis of your recruitment strategy.

Here are some elements that you should consider:

—————

2. Revise board structure

Based on the discussions you have about composition, you can expand to look at the structure of the board as a whole. How can it be improved to facilitate a better flow of information and decision-making?

Is the structure working well right now? If so, consider if this will be the case in the future and consider what changes are needed to keep it fresh and effective.

3. Write down role descriptions

Almost every job that someone applies for has an extensive role description, detailing exactly what the company will expect of the successful candidate. It makes sense that the board of directors works in the same manner. When new directors are recruited to the board, they are there for a reason and not just to make up the numbers around the boardroom table.

Each director should understand what is expected of them so that they can focus on how best they can contribute to the success of the organisation’s strategy. Writing down detailed role descriptions for directors is essential for development as it guides them down specific paths and allows them to think more strategically.

4. Conduct a skills audit

Once you have role descriptions, you can audit the skills possessed by your current board and analyse how they can be developed in order to fulfil those role responsibilities.

If a director is expected to understand the market in-depth, but they have only basic knowledge of the industry, this is a skill that you need to develop through training or recruitment.

Personal development training is one way to address this skills gap. In addition, you could organise team training sessions or boot camps.

5. Set a clear vision

In order to further hone your audit, you need to understand where you want to go. This dictates the skills you need to achieve your aims. Having a clear vision of the board contributes in the same way that writing specific role descriptions does.

It provides goals for directors to work to and a way of measuring progress. If you can benchmark where you are and understand where you want to go, it is easier to see what needs to change to help you achieve your strategic goals.

6. Carry out annual reviews

Board evaluations are essential to ensuring directors are successfully working towards the collective vision. By understanding what you have or haven’t achieved in the preceding 12 months, you can shape the direction of work for the next year in a manner that will increase effectiveness.

An annual board review looks into the work of the board individually and as a collective, uncovering skills gaps, collating feedback, clarifying objectives and much more. Using Boardclic’s Board Evaluation tool, you can utilise this benchmark data to understand what success actually looks like in your sector and to give you a competitive edge over your peers.

7. Organise refresher training every year

Induction is one thing but regular training should also be a part of your director development programme. It is also important to refresh directors’ existing competencies every year. This helps to foster a culture of continuous improvement, which encourages board members to keep striving to greater heights.

The best performing boards do not rest on their laurels but spend time reflecting on their skill sets, improving and expanding them.

FAQ

How can you encourage directors to attend training?

Encourage individual board members to attend a training programme by giving them control over the training they undertake. Rather than booking training sessions and then fitting your directors into the slots, hold a discussion with the board where you encourage members to suggest types of training that they would like to attend, within the areas in which you would like to see development.

Ensuring the style of training fits the schedule of the individual director also helps. Some board members just do not have the time to spare to attend a three-day boot camp workshop. They would probably benefit more from bite-sized sessions instead.

Do you need a board development committee?

You do not have to have a board development committee, but it does make the process of identifying training opportunities, organising activity and tracking success much easier.

When it functions properly, it contributes to a diverse and well-rounded board that is best equipped to tackle the challenges and embrace the opportunities thrown at it. These committee meetings can help provide executive teams with specific guidance on how to best equip themselves to fulfil the responsibilities of the board.

How to measure board development success?

The success of your executive board development is borne out in the effectiveness of the board overall. You can measure this using Boardclic’s board evaluation platform. It can track your progress in each specific area against both your own benchmark and that of the industry in which you operate.

Conclusion

There is no option to stand still in the corporate world, and that certainly applies to board of directors development. Growing skill sets and expertise as well as consistently seeking out best practices and emerging risk factors are both essential to being able to compete, increase resilience and steer an organisation along the right path.

An important element of board development is your annual board evaluation. It can help you discover skills gaps, pinpoint critical challenges and create an open and transparent, collaborative environment.

Source: boardclic.com

A healthy board culture is increasingly recognized as an important element of board performance. But unlike other areas of board governance — composition, risk, succession and strategic planning or financial reporting, for example — board culture is less clearly defined and understood.

When asked about their culture, boards tend to speak in generalities, describing it in terms such as “collegial” and “engaged.” While true, those descriptions apply to many boards and don’t go deep enough in distinguishing one board from another — or provide the insight boards need to understand the role the culture is playing in overall board performance.

Two related forces have made the topic of board culture more urgent for many boards: growing stakeholder scrutiny on board performance and increasing board diversity.

In the past several years, shareholder activism has been gaining momentum. Investors around the world have become more active and vocal, seeking deeper engagement with the companies they invest in, using their influence to drive improvements in governance and holding boards to account on a wide range of issues, from strategy and performance to composition and CEO pay.

With less implicit understanding among directors about how the board should behave, it’s more important than ever to define and manage a board culture.

In some regions, the increase in board diversity is an outgrowth of investor pressure on performance. With research showing that companies with more diverse boards perform better, many investors are pushing boards to increase their diversity, especially gender diversity. Boards themselves recognize the value of injecting a broader set of perspectives into boardroom conversations, and are adding directors from other countries or different industries or increasing the gender, ethnic or age diversity of their composition.

Boards are adding new perspectives to enhance board deliberations and improve outcomes, but greater diversity also increases the opportunities for misunderstanding and conflict among directors with different points of view and backgrounds. In the past, boards tended to be more homogeneous and, as a result, there typically was more implicit agreement about how directors should interact and behave. Directors’ shared assumptions and similar experiences made decision making more efficient.

Today, with less implicit understanding among directors about how the board should behave, it’s more important than ever to define and manage a board culture to facilitate constructive interactions between board members. For boards striving to be more dynamic, performance-oriented and shareholder focused, getting culture right is key.

Board cultures tend to be more heavily weighted in one of four main culture styles: Inquisitive, Decisive, Collaborative or Disciplined.

What is board culture?

A board’s culture is defined by the unwritten rules that influence directors’ interactions and decisions. These include the mindsets, hidden assumptions, group norms, beliefs, values and artifacts (such as the board agenda) that influence the style of director discussions, the quality of engagement and trust among directors, and how the board makes decisions. Board culture also is influenced by the style of the board chair and/or the CEO. Boards can vary by region; in some national or regional cultures, for example, a more direct style is well-accepted, but in others, a more “diplomatic” approach is expected in the boardroom. Absent a dramatic change to composition — from a merger or addition of activist-backed directors, for example — board culture tends to evolve slowly because boards meet and interact intermittently.

We have developed a model for diagnosing and understanding board culture, drawing on extensive research showing that there are two dimensions of culture: attitudes towards people (individual versus collective) and change (flexible versus stable). These same dimensions can be used to evaluate organizational and team cultures as well. In fact, a comprehensive study¹ of organizational culture and outcomes found that companies can define and create an optimal culture that leads to better business outcomes when they have a framework for evaluating culture and the tools to manage it. We have found that many of the same principles apply equally well in the boardroom.

In practice, we observe a wide range of working styles and dynamics in the boardroom, yet in our experience, board cultures tend to be more heavily weighted in one of four main culture styles:

Inquisitive: These boards value the exchange of ideas and the exploration of alternatives.
Decisive: These boards are focused on measurable results, driving a focused agenda and outcome-oriented decisions.
Collaborative: These boards value consensus and having a greater purpose.
Disciplined: These boards emphasize consistency and managing risks and prioritize planning and adherence to protocols.

None of these styles is objectively better or worse than any other. The culture of a board should align with the business strategy and broader business environment and the requirements for working effectively with management. For example, companies in very dynamic industries, when strategy must be reviewed and reinvented frequently, may benefit from a board culture that is more inquisitive and flexible, where directors question assumptions and value the exchange of ideas. When managing risk is a top priority, boards may need to be more disciplined about monitoring results and performance, and following established protocols to ensure the accuracy of disclosures.

How to change board culture: four questions to consider

Because board culture is an important driver of board performance, a natural time to assess board culture and how it supports strategy is during the board’s annual self-assessment. Using an agreed-upon framework and vocabulary like the one Spencer Stuart has developed, boards can diagnose their current board culture and agree on a target culture. A board may want to evolve its culture if it is underperforming, when there is a new CEO or its own composition is changing, or when the business strategy is changing. For example, in a crisis or turnaround situation, a board may want to be more decisive and results-driven. At a strategic inflection point — when the organization needs to figure out new markets, new products, where to invest in acquisitions or innovation — a board may need to be more inquisitive and flexible.

Once the board has identified a target culture, directors can ask the following questions to help shift the board culture.

Do we have the right people in the boardroom?

Boards consider a variety of factors when recruiting a new director. When they want to evolve board culture, boards can consider an additional lens: how a director would help shift dynamics in the boardroom toward the desired culture. For example, a board that wants to become more decisive and results-driven may want the next director to have a no-nonsense, by-the-numbers style, perhaps a CFO profile. A board wanting to become more adaptive and inquisitive may look to add an entrepreneur or an innovator.

Are we structuring our discussions and assignments to focus on the right issues and activities?

Boards can reinforce their priorities by structuring committee and board assignments and meeting agendas in a way that supports the culture they want to create. A board seeking greater collaboration and openness to the ideas of all members may want to close discussions by “going around the table” and soliciting comments from each director.

Do board and committee leaders model the desired board culture?

The board chair has a profound role in shifting the board culture. The chair (or lead independent director) can move topics requiring the most board focus and energy earlier in the agenda, leaving the less strategic items to later in the meeting. If the board needs to become more inquisitive, the chair may decide to reduce the time devoted to operational reviews to leave time for the exploration of strategic alternatives. On a board that has decided to become more disciplined, the chair can direct a change in the board materials and build more structure around discussion topics.

The board chair or lead independent director and the committee chairs also can influence culture by how they model the desired culture. When a shift is needed, board leaders can guide discussions differently, encouraging or cutting off discussion as appropriate. They also may evolve pre-meeting activities, for example, creating a mechanism for directors to ask questions in advance of a board meeting.

A board may want to evolve its culture if it is underperforming, when there is a new CEO or its own composition is changing, or when the business strategy is changing.

Do we as individual directors consider how we are contributing to the culture?

As directors become more comfortable with the language of culture and more self-aware of how they are promoting or working against the target culture, they can provide feedback to one another on behaviors that may need to change. Just calling attention to directors’ habits and assumptions can help the board adapt its behaviors. Depending on what’s needed, the board also could provide a coach, group training or individual training on topics such as decision making, trust building or communication styles. Boards can use their annual self-assessment to evaluate their progress in moving toward the preferred culture.

On an individual basis, directors can reflect on their own behaviors and whether they are helping to shift the culture. On a board that’s overly collegial or collaborative, for example, directors can consider whether they need to weigh in on every topic. Or if the board wants to become more inquisitive, directors can decide to speak up more.

Starting to understand your board culture

When it’s able to diagnose culture, a board can evaluate the role culture plays in board performance and consider whether there are elements of the culture that need to change. Having a common language about the culture and identifying directors’ preferred styles helps board members understand and adjust to the preferences of one another and make better decisions about the potential culture fit of new director candidates. To provide a sense of various board cultures based on our model, we have plotted several examples of board culture below.

Author: George Anderson

Companies’ strategies and operations are facing unprecedented change. Some companies, such as many technology companies and streaming service providers, have thrived in the past few months of upheaval, while companies in tourism and traditional retail are among those facing existential crises. Yet, no matter their financial position, almost every company has undergone a radical shift to virtual operations. Even companies that had nascent or stalled digital transformations have become significantly more tech enabled; this means everything from supporting remote working to finding entirely new market opportunities. Food and beverage brands are now selling directly to consumers, for example, and sectors from home improvement to medicine are innovating as fast as they can to meet both customer and employee expectations for convenience, speed, and safety in the form of low- or no-contact experiences and operations.

As leaders consider how to build on the digital gains they’ve made (however haphazardly) and assess how digital-first operations and the post-pandemic economic reality will affect their strategies, boards have a significant role to play in ensuring their organizations build a digital strategy that will support innovation and performance for the long term. Achieving this goal will require boards and executive teams to take a step back and truly reimagine the business and how it operates. Boards must also keep a close eye on the strategic risk from digital disruption. (For more on how companies can build on crisis-driven digital gains, see “Becoming a digital-first organization: Making the most of crisis-driven digital transformation.”)

To do all this, boards need to understand digital. Many, however, are still lagging in their digital expertise. There a few specific steps they can take to ensure they have the right level of knowledge, supportive governance processes and culture, and a digital orientation. Those that take the following steps will be best able to support the management team in resetting for a digital-first world.

1. Build digital expertise

Just as no board would consider recruiting a director who couldn’t read a balance sheet, boards should now consider basic digital literacy a qualifier to serve as a director. Without that foundation, directors can hardly be prepared to understand how digital drives—and should drive—the company’s overall purpose and operations or how it enhances the ability to understand and serve customers. Further, without a grasp of the basic digital lexicon and an appreciation of the vast array of issues and considerations digital embraces, directors lack the ability to translate what the management team is telling them or to engage on any meaningful level. This leaves them unprepared to meet challenges, ask the right questions, or provide relevant input.

Since most boards are currently lagging in digital expertise, most will need to make it a priority as they make the trade-offs among various considerations inherent in any board recruitment. (This is also true of other areas where boards face increasing expectations, such as sustainability and corporate reputation management.)

Finding such directors won’t necessarily be easy and may well require boards to modify their director-recruiting criteria to ensure they are looking in the right places. That typically means taking on traditional prerequisites such as CEO and prior board experience, since directors with digital skills often skew much younger than the typical director—probably in their 30s, compared with the mid-50s that is the average age of new directors around the world—and are unlikely to have C-suite experience.

However, adding one person with digital expertise is just a start. Boards with only one source of expertise on any topic run the risk of delegating everything relevant to that person, and that person runs the risk of being a lone voice unable to influence the broader agenda. In addition to seeking new directors, board leaders should focus on supporting current directors in acquiring sufficient digital knowledge, which most should be able to do. They can also make digital orientation part of onboarding for new directors who lack it. Further, boards should include on their digital knowledge agenda focused and structured immersion trips to other companies that are digital leaders; one leading company makes one board meeting in four a visit to another company it wants to learn from. Meetings with management teams are also an important part of director continuing education.

Gaining real digital value on the board will also take having one or more directors with deep digital expertise who can serve as stretch thinkers—people who can challenge their fellow directors and the management team on what is possible. These people need to be chosen carefully, however, because digital knowledge alone won’t make them effective in such a role. They also need a clear understanding of the board’s role and responsibilities and to be able to work with other directors to take a holistic view of all the board has to tackle.

Any digital expert on the board should also be able to work patiently and steadily as an influencer with both the board and management. With the board, this individual can nudge fellow directors toward the future, helping them imagine and reimagine what alternative futures for the company could look like and how to get there. With management, this director should be able to work behind the scenes—with the cooperation of the CEO—listening, learning, and making recommendations management will ideally adopt as their own. This kind of influencing works best, in our experience, when a director can plant the seeds of ideas, building awareness and ownership while intuitively understanding what the organization can absorb at any given time and not pushing too hard.

2. Establish a digital orientation

To be effective, boards need to be aligned on their overall purpose, asking and answering fundamental questions: Why does this company and board exist? Who are our key stakeholders? How can we best serve their interests? Similarly, to be effective digital leaders, boards must make sure the company has a clear digital ambition and purpose and that directors are aligned on it as well, understanding how digital transformation will affect every element of the organization and help it better deliver on its purpose. (For more on aligning your board on overall purpose, see Future-Proofing Your Board.)

The goal should be for discussion of digital innovation to be an integral, crucial element of driving impact in the core business rather than a stand-alone topic on the board’s annual agenda. Boards should ensure that digital considerations are woven into both strategy and its implementation, and that the digital strategy sets immediate and longer-term priorities that go well beyond one-off initiatives or the more recent, jury-rigged changes driven by the pandemic.

For that to happen, the board will have had to embrace digital—meeting online, hiring new board members virtually, and making the most of the communication tools and norms (such as more frequent and more informal discussions) that have become standard in recent months.

And, as with any area in which a board wants to assess its own performance, it should set some metrics and regularly track progress against them. Metrics could include the share of directors with specific digital expertise, the amount of time spent discussing the digital strategy, the frequency of meetings with digital and innovation executive leaders, or market share gains from digital innovation, among many others.

3. Innovate governance to ensure the board can get up to speed

Directors with digital expertise are in ever-increasing demand. Previously, companies may have had the luxury of waiting a year or two to add a new director when a regular board vacancy opened up. But now, the acceleration of digital change created by the pandemic means that waiting will almost certainly put companies behind competitors. Boards that can’t recruit digital experts in the near term can compensate by establishing an advisory board or even temporarily increasing the board’s size if they can’t wait for directors to drop off.

4. Support a digital culture

Boards determined to lead the way on digital transformation need to foster a culture that rewards innovation and change and doesn’t penalize failure. That starts with supporting the longer-term thinking required to place bets on huge investments that may not pay off for years. For digital, much like sustainability and diversity, it is the board’s job to see that proper actions are taken in the long-term interest of the company. The board should have a plan for communicating the change story to shareholders—and know how to stand its ground when necessary—explaining why, for example, a long-term investment may be a better bet than seeking immediate dividends. At the same time, boards must support management in not losing sight of immediate strategic and tactical needs, ensuring that digital transformation is part of ongoing operations, not separate from or opposed to them.

A digitally savvy board can also set the overall tone for culture change and model expectations going forward. Something as seemingly small as asking informed questions and explanations from management presenting at board meetings—in essence demonstrating that directors don’t have all the answers—speaks volumes when trying to nurture an innovative culture.

There are also digital considerations in boards’ oversight responsibilities—for example, determining whether there is sufficient talent, at every level, to make what may be a seismic shift. Most organizations have a head start from their generally successful transformations through the pandemic and can build on those. In addition, to make sure the positive changes stick, boards will want to monitor executive compensation to determine whether proper incentives are in place to motivate executives to take appropriate risk as they seek to discover new and better ways of doing things, enabling them to keep up with or, better yet, anticipate change.

Source: heidrick.com

The pace of digital change is accelerating at an incredible rate. Chances are, you’ve heard or read this statement countless times over the past couple of decades. But, it’s just as true today as it was at the beginning of the digital era. Arguably even more so now that the so-called “burning platform” of digital transformation has quickly become a “burnt platform.”

Digital change isn’t a looming threat or shift that’s on the horizon. It’s here. It’s happening right now. And it’s up to you to adapt to it, drive it and turn it to your advantage. Whether you’re talking about changing customer demands, agile new competitors entering the market or employees demanding greater flexibility in where and how they work, the immense cost of failing to adapt means standing still isn’t an option.

But, despite how long digital change and transformation have held their place near the top of most organizations’ strategic agendas, just 16 percent of executives say their company’s digital transformations are succeeding. Plus, 72 percent of strategists say their company’s digital efforts are failing to meet revenue expectations.

To better understand why that might be and identify the underlying causes of unsuccessful digital change projects, Thoughtworks recently conducted a major Technology Proficiency study.

Among the findings, we learned that growing businesses are far more likely to make technology decisions at the board level compared to organizations seeing low or zero growth. But we also discovered a significant skills gap at the board level of many businesses.

The digital board skills gap

Many of the enterprises we surveyed display a gap between the technology areas where directors are the most proficient and the technology areas that are a business priority. The board has digital skills, just not necessarily the right ones to enable growth.

It’s a finding highlighted by other researchers too. For example, a global study by the MIT Center for Information Systems Research found that, among larger companies, just 7 percent have a top management team where more than half of members are digitally proficient. Plus, those companies outperformed the rest on growth and valuation by more than 48 percent.

The need for a digital-ready board is clear. But what does it take to increase digital readiness at the board level, and what does a digitally-proficient board look like?

The anatomy of a digital-ready board

There are many ways to define digital-readiness. But, at the board level, it means being informed, proficient and empowered enough to advise the C-suite in continuously making strategically solid technology decisions. It involves understanding where specific technologies could support a particular strategy or help the organization react to changing conditions or achieve strategic goals.

Crucially, it doesn’t mean that every member of the board has to be a well-versed expert in every emerging or strategically important digital trend. That’s still something the organization gets from its CIO, digital experts and advisors. However, every board member needs to understand how these technology trends can empower their organization while helping them achieve their strategic goals.

The key to digital success at the board level is developing not only understanding digital trends, but also bringing diversity of perspective to the discussion. The board is a team just like any other in the business, where no single person needs to be an expert at everything and diversity of experience, background and perspective can be a huge benefit. This diversity of talent and perspective can help boards gain a better balance between their fiduciary responsibilities and the need to shape the long-term strategies of their companies.

The importance of agility in the board

Being knowledgeable about the latest digital trends is essential for boards, but it’s also vital that the board adapts its governance and pace of decision-making to the current business climate — one characterized by frequent disruption and capital allocation shifting rapidly toward technology. While the board’s traditional role won’t change — to support and challenge management with a focus on strategy, risk and performance — they must simultaneously adopt a more entrepreneurial approach to help the C-suite stay ahead of this level of disruption and innovation.

In many of our clients, we see a new generation of boards emerging. These boards proactively embrace the opportunity to be the disruptor versus simply managing the risk of being disrupted. These emerging boards make sure that board composition is digital-ready and frequently review their ways of working while adapting their board agendas, processes and tools to enable leaner governance and faster decision-making. In addition, these boards make frequent collaboration and interaction with the C-suite a priority, always staying within the guardrails of the original remit of the board as non-executive directors.

5 steps for increasing the digital readiness and agility of your board

At Thoughtworks, we’ve helped boards with different levels of digital readiness and agility to plan, navigate and execute digital transformation strategies and initiatives. While every board’s journey is unique, we’ve identified five macro-steps that can help any board achieve a higher level of digital proficiency and agility:

Step 1 – Improve the awareness of the board around digital trends.

Proactively conduct sessions to help the board keep up with relevant digital trends and identify which ones are applicable across the business. For example, we often facilitate sessions with board members and executives where we share the most recent technology trends and contextualize them to help the team understand how those trends could become a driver in value creation. In some cases, we take them to visit some of our digital native clients and partners so they can interact with key stakeholders in businesses where digital technologies are at the core of their business model. The hands-on experience enables them to envision the different aspects needed to transform their organizations, besides technology.

Step 2 – Identify how digital trends could enable untapped customer and business value.

Support board and C-suite members to crystalize their digital aspirations, expected business outcomes and contextualized implications while identifying the challenges and opportunities for adopting relevant digital trends. This is an excellent opportunity to have executives and non-executive directors exploring and discussing new technology trends and their ability to enable new customer experiences, services and revenue streams. It also opens the door to visualize critical capability gaps in the organization like technology, culture, talent, operating models and governance structures that might need transformation to sustainably drive digital innovation.

Step 3 – Build a high level, strategic roadmap to take advantage of digital trends.

Engage board members in reinforcing the broader, long-term benefits of adopting these digital trends while developing a shared understanding of the capability investments needed across talent, culture, technology, governance and operating models. By following the principles of value-driven transformation, every board member should understand the value of adopting digital trends to their business as we can align with management on the metrics of success.

Step 4 – Discuss the role of the board in providing governance to the adoption of digital technologies and digital business models.

Driving digital transformation across operations and business ecosystems challenges the effectiveness of traditional board governance, regular committees and formal l engagement with management and staff. Therefore, board and C-suite members must discuss how to leverage lean and agile governance practices and tools to steer digital transformation in ways that deliver the most value for everyone, examine options such as co-creating governance principles for new digital capabilities like artificial intelligence, machine learning and autonomous machines. Lastly, boards should also explore their role in unlocking continuous human learning capabilities within the organization and its partner ecosystem, to help ensure that the organization can adapt to the changes brought about by digital transformation.

Step 5 – Set a regular cadence for the previous steps.

Use the above to maintain an updated view of emerging technology, its implications for the business and how it could be implemented and properly governed. Digital transformation is ever-evolving — a quarterly cadence will ensure that the board and C-suite know how technology trends enable both short- and long-term business strategies. In addition, it’ll help ensure close, ongoing collaboration between executives and non-executive directors.

Start your journey to digital board readiness today

Digital trends and emerging technologies are strategically important to businesses in all industries — and every board needs to become digital proficient to make informed, timely decisions about those trends. For some, the idea of having to improve or gain digital proficiency can be daunting. But, in practice, it’s far easier than most believe. Experienced business leaders don’t need to become highly-skilled tech experts overnight. Instead, they need to understand critical emerging tech trends and their potential impact on the business.

Boards are experiencing a seismic shift in which they must balance long-term business model changes driven by digital technologies and customer expectations with operational governance, compliance and short-term costs reductions. At the center of this seismic shift, there is an opportunity to rethink how boards work and adopt agile and lean practices — within the guardrails of their remits — to collaborate with the C-suite and stay ahead of disruption by leading digital transformation. Those who embrace this shift will become catalysts for digital transformation, enabling C-suite executives to build resilience into their organizations and adapt to constant digitally-driven changes across marketplaces, customer groups and society at large.

If you’re articulating your own digital transformation journey and want support to help guide your strategic decisions while delivering the best results for your business, contact us today.

By:

Kathy Gettelfinger,

Marcelo De Santis &

Matthew Schauer

Genius Boards, UK and H. Pierson Associates Limited are delighted to formally announce their Boards Development partnership. This combines H. Pierson’s industry-leading management consulting services with Genius Boards over 2 decades of empowering directors to perform better through the provision to them of cutting-edge governance solutions.

The partnership is focused on supporting boards of organizations in Africa and select emerging market institutions.

Speaking on the partnership, H. Pierson’s Executive Vice Chairman & Founder Mrs. Eileen Shaiyen had this to say: “we are delighted with the Genius Boards-H. Pierson partnership, and are certain that t will deliver very superior solutions to our clients’ boards of directors across Africa and other select emerging markets.”

While speaking on the partnership, the CEO of Genius Boards, Sharon Constacion said that both firms were very aligned in the type of work they do – “we are thrilled to partner with one of the continent’s leading firms, H. Pierson, to support their clients’ Boards in accelerating positive change”.

Governance professionals recently gathered at the Corporate Secretary Forum – Winter in New York, hosted by Governance Intelligence, for discussions highlighting the variety of challenges they face in the coming year and offering practical solutions.

An array of experts, both on panels and in the audience, shared their insights on areas such as boards’ agendas for 2024, preparing next year’s proxy statements, risks facing companies in 2024, building a successful team of directors and how boards should be using and overseeing artificial intelligence (AI).

Boards’ 2024 agendas

The forum began with a discussion about the issues that will feature on boards’ agenda in 2024. As usual, there is a lot to consider.

Kimberly Simpson, COO, general counsel and corporate secretary with the National Association of Corporate Directors (NACD), highlighted the potential effects on some boards of the current geopolitical landscape. NACD members had recently received a high-level security briefing at the Pentagon, followed by a discussion with a recently retired four-star general who described the situation as the most dangerous period in his lifetime.

Simpson noted that Russia’s war in Ukraine and Saudi Arabia being located near conflict in the Middle East raises concerns for boards, particularly energy companies, in areas such as supply chains and economic stability. Elsewhere, inflationary pressures appear to have eased slightly yet there remain fears of a potential recession and how that would affect companies, she added.

She also pointed to the continuing focus on cyber-security, which has been enhanced by the recent introduction of new SEC rules. Those rules, which go into effect at the end of the year, require companies to provide information to investors about material cyber-security incidents and the controls they have in place to protect against such attacks. They have been a source of discussion for audit committee chairs and there remains confusion about what best compliance practices will emerge, Simpson told attendees.

Among issues for boards to consider are other new SEC rules, including potential requirements about climate-risk disclosures, while shareholder activism has not gone away and the universal proxy remains relatively new, added to which is AI, she said.

Fellow panelist Brady Long, executive vice president and general counsel at Transocean, said boards should approach AI in the same way they oversee other risk areas. Boards are hopefully bolstering management’s and their own expertise to ensure effective oversight, he said. Most companies probably don’t have too much in-depth AI expertise and there is an opportunity for boards to bring in expertise or acquire it through learning, he commented.

There is discussion in the governance profession about the extent to which boards should recruit subject matter-specific experts on risk issues such as sustainability, cyber-security and AI. Simpson noted that members of nominating and governance committees say that having bespoke experts on the board may be less preferable than having members who are smart and more generalist. She advised boards that wish to include an AI or cyber-security expert to look for a current chief information officer (CIO) as their knowledge becomes outdated very soon after their retirement. She noted the challenges of finding a CIO who also possesses the necessary board-member skills in areas such as strategy and finance.

Long commented that new risk areas will arise every year. ‘If the way to solve the problem is to always add expertise to the board, you’re either going to run out of seats or you’re going to radically change the nature of governance,’ he told the audience.

Technology, cyber and AI top concerns

Asked to rank the significance of risks facing companies, audience members most frequently named by a large margin technology/cyber-security/AI. This was followed, in descending order, by geopolitical risk, environmental and sustainability risk, regulatory risk, shareholder activism risk and supply-chain risk.

With that array of issues in mind, Brian Short, partner with Ballard Spahr, urged governance professionals to have regular engagements with their boards on risk matters as part of their scheduled meetings. From a reporting perspective, he noted companies’ general obligations to disclose risks, to which have been added the new SEC rules on cyber-security.

Fellow panelist Seth Gastwirth, deputy general counsel and assistant corporate secretary at JLL, also urged corporate secretaries to not only obtain risk assessments for their companies but also comment on them and be flexible with them because they can quickly become out of date.

As an example, he noted that few if any companies would have had pandemics in the top 10 list of risks under their enterprise risk-management programs before the outbreak of Covid-19. Governance professionals need to be conscious that new risks will emerge during the year and should focus on their companies’ systems of controls so that people are ready to respond to new risks as needed, he advised.

Staying on track with diversity

Panelists at a later session discussed the importance of diversity in building an effective board, not just in terms of thinking and skills but also in terms of gender and race/ethnicity. In the wake of the US Supreme Court decision to essentially bar affirmative action in university admissions programs, conservative legal groups have been taking action against corporate diversity programs. A group has also challenged – thus far unsuccessfully – Nasdaq’s board diversity rule.

Leahruth Jemilo, vice president and head of ESG advisory at Corbin Advisors, said she was not concerned that such moves would upend companies’ efforts. She anticipated that the pushback would be short-lived and unsuccessful because younger generations of Americans support increased diversity. Young people want to see diversity on boards and in management, and companies that want to attract the best talent will have to focus on those areas, she told attendees.

Fellow panelist Tina Carew, associate general counsel with Invesco and general counsel and corporate secretary with Invesco Mortgage Capital, also said the pushback has not been a concern for her firm as it focuses on diversity in board recruitment.

A corporate secretary in the audience commented that her board has stopped using search firms for director recruitment because they have ‘limited thinking’ in terms of selecting diverse candidates. Instead, the board has been attending NACD and other events and using its own networks to ask specifically for creative thinkers and women of color as potential director candidates. This has led to a diverse slate of candidates, she said.

Carew said her board is also considering no longer using search firms for director recruitment.

Safety and use-case first on AI

Governance teams and boards are giving a great deal of thought to the opportunities and risks AI presents. Part of the discussion is about how to get started with the technology. Jonathan Yellin, general counsel, executive vice president and chief compliance officer with Charles River Associates, noted that for his firm there had been concern about being left behind as a business by not using AI, but that he was concerned about getting ‘over their skis’. ‘We had to understand what the goal was,’ he explained.

An AI policy is about mitigating risks the technology poses, Yellin said. As part of that, his team asked company department heads about how they wanted to use AI. They now meet regularly to discuss the ways in which it is being used and the developing regulatory framework. He described his biggest fear as confidentiality, but said he was also concerned about ethical issues such as bias in hiring. He acknowledged, however, that people are using the technology, which means he needs to engage with them.

Fellow panelist Marion Lewis, CEO of Govenda, stressed that any use of AI should be tied to a use-case. It poses a risk-versus-reward question and certain uses are inherently riskier than others, she said. For example, using AI in a medical context poses much greater risks than using it as a tool for customer services, so different standards should be applied to different use-cases.

Lewis commented that some of the key questions that need to be asked as part of developing a risk-management system include: where does the data reside? Who owns the data? What’s the track record of the vendor? Asked about uses for AI in corporate governance, she noted that a feature of a tool her firm offers is the ability to take transcripts of board meetings and create drafts of minutes that are added to the workflow. This enables what has previously been a weeks-long task to be completed in hours, she said.

Source: overnance-intelligence.com

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