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  • Writer's pictureMarion Macleod

AQ - your board understanding can add real value

A summary of Michael Peregrine's article for Forbes highlights the Challenges for corporate board members in 2021 and beyond - and that these changes are rising quickly. The adaptability quotient (AQ) for boards will need to be high and take into account the following ten key areas.

As Michael highlights the view from the boardroom needs to be elevated at a slightly higher altitude but still within sight of the tarmac.

Addressing Continued Volatility.

In the aftermath of the Pandemic and with continuing political, social, economic and regulatory volatility, directors will be challenged to confront the tactical and strategic implications of these in their businesses. This will require directors to be more aware of management and have closer interactions with them.

Recalibrating the Board/Management Dynamic.

Role clarity between board and management and their leadership duties will need to be explicit. This includes key decision-making, and confirmation around any blurring of roles with a re-emphasis on the board's monitoring role.

Reimagining the Company.

Satya Nadella has called on the boards of companies to “re-imagine” the organizational mission. Innovations born of necessity during the crisis response will re-emerge, to be incorporated into the ongoing efficiencies, whilst, at the same time remaining on the lookout for what may have been lost.

Accelerating the Commitment to Diversity.

Accelerated community expectations will require boards to respond to diversity with more alacrity to meet social and public policy expectations. This is more of an imperative given that women and diverse groups have born an outsized workplace-related burden during the Covid-19 economy.

Emphasis on Board Refreshment.

Increased diversity goals, will require boards t0 pursue more actively the refreshment of directors. This, will require revisiting director tenure, including, introducing term limits, performance evaluations, and retirement requirements to accommodate this refreshing of the board. More appropriate skill requirements may need to be set.

Re-Evaluating Risk Profiles.

The board will need to reconsider their approach to risk evaluation especially from the enterprise perspective. Risk committees will need to reconfirm “mission critical” risks, and assure the board that the organisation is crisis ready, addressing the “unknown unknowns” as well as the “known unknowns.”

Greater Emphasis on Human Capital.

Greater governance oversight of human capital for three key reasons.

1) the board’s fiduciary obligation to ensure the relevance of the workforce as a significant corporate asset

2) the management of issues such as return-to-work, employee health and safety, employee engagement, diversity and inclusion

3) the external value attributed to effective human capital management practices.

The Corporate Social Voice.

The community's increased corporate social responsibility expectations will require boards to monitor the company’s commitment to “CSR” principles. This is especially important in strategic decisions and business practices, and the public position of the company in key political, economic, public health and social issues.

Corporate Accountability Returns.

Recent Royal commissions have focused the board's attention on culture, ethics and corporate compliance. In the light of media coverage of the 20th anniversary of Enron many

Director codes of ethics will be refined and given higher organizational prominence.

More Disciplined Board Processes.

Directors may be facing existential crises over the concerns with director effectiveness and individual liability exposure. This will generate a focus on significant changes to board engagement and decision-making practices, including board processes. This will increase the accountability of individual directors in the output of boards.

Application of rules and policies around conflicts of interest and independence will get more rigorous attention.

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