NEW YORK, Jan. 11, 2017 /PRNewswire-USNewswire/ -- "So much of what has been taken for granted in today's world is turning upside down - putting boardrooms at a critical turning point in thinking about strategy," says Susan Stautberg, CEO and Chairman of the WomenCorporateDirectors (WCD) Foundation. "From changes in the EU to uncertainties about trade relationships, companies face a number of hurdles that will put extreme stress on boards and management teams."
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During a recent WCD Americas Institute in Miami, bringing together top women business leaders from around the world, directors shared their key concerns for the coming year, and how their companies must pivot to prepare themselves.
10 Boardroom Pivots for 2017
1. Leveraging local talent for global compliance challenges. With more
globalization comes the positive of new markets, but also the negative of
more regulations to navigate. "Compliance cultures are different in every
country, and we see the rules changing even as we are in the midst of
opening new markets," says Elane Stock, a director at Yum! Brands,
Equifax, and Metro Atlanta Chamber of Commerce. "So having strong talent
in the region who understand where the regulations are and where they're
moving is really important. You can't just do this from your corporate
headquarters. You've got to have local resources, whether they are
internal or external, that can point the way through this complexity."
2. Disrupting without destructing. As bold as some companies are in moving
into new markets and new businesses, many, if not most, take a much more
conservative approach to change. "Ninety percent of new ideas at
companies never see the light of day," says Irene Arias, Global Director
of the Financial Institutions Group at the International Finance
Corporation (IFC), a member of the World Bank Group focused on private
sector development in developing countries. "Inertia - whether because of
fear or a lack of information - holds companies back. Successful boards
have directors challenging each other in a productive way, and then can
challenge their management teams to pivot. But it is important to
integrate the old and the new - knowing where to reinvest and knowing
where to reinvent."
3. Dismantling the "unilateral" business model. Many large corporations in
heavily regulated industries - from financial services to health care -
have been particularly resistant to changing their decades-old business
models. "They used to wait for disruption to occur externally, but have
begun to seek new ways to operate," says Molly J. Coye, a longtime
veteran of the health care industry and a director at Aetna (where 40% of
the board is female), Prosetta Biosciences, and Access Health
International. Under growing cost pressures and changing expectations
around health care, insurers such as Aetna have moved far from their
traditional roots as underwriters. "We moved to a deep relationship with
physicians and hospitals, and are creating joint ventures with health
systems. These collaborations, as well as leveraging data to better
understand patients and customers, have helped us reinvent the patient
experience and our company."
4. Stepping into oversight. Striking a balance between empowering upper
management and conducting necessary oversight is an ongoing challenge for
boards. "As much as we as directors are not trying to micromanage the
management team, we are increasingly tasked with oversight of controls,"
says C. Kim Goodwin, director, PineBridge Investments and Banco Popular
de Puerto Rico. "We have to know what processes are in place for things
such as third-party vendors, which is a hot topic in due diligence
globally. It takes only one vendor or supplier to destroy not just the
company's ability to do business in a particular location, but also the
company's reputation globally. As a board, we have to be on top of issues
like this so that we can mitigate risk if and when something happens. If
the board knows nothing about it, we can't raise the necessary
questions."
5. Getting involved earlier in strategy. "A key change in the past 1-2 years
is both the quality and quantity of board meeting time and conversation
around strategy," says Gabrielle Sulzberger, General Partner, Fontis
Partners, and a director at Whole Foods, Brixmor Realty Group, and Teva
Pharmaceutical. "Directors have really had to bring our game in a way
that's just fundamentally very different." In thinking about corporate
strategy, she says, "we try to move the culture of the board meeting
itself so that there is an opportunity to have more kind of
out-of-the-box thinking from management. Generally, they bring their
ideas and their presentations as pretty well buttoned-up. What we're
trying to do at the board level is facilitate more innovative
conversation. We want to allow there to be a little more safety around
experimenting and throwing out some of what their somewhat 'crazier'
proposals are." Earlier involvement from the board allows new ideas to be
considered before strategies are "baked."
6. Thinking cross-functionally across board committees. While boards can
populate committees based on directors' specific backgrounds and
expertise, there are key decisions that are the responsibility of the
full board. Succession planning is under greater scrutiny from investors,
and demands this level of oversight, even if process is driven by the
nominating committee. "A good practice is for the whole board to get to
know as many of the senior executives that might be on the succession
plan as they can," says Carol Stephenson, a director at General Motors
Company, Intact Financial Services Inc., Maple Leaf Foods Inc., and
Ballard Power Systems Inc. "This is not just by listening to
presentations, but by watching their judgment in certain situations such
as getting to know them over dinner. The onus is on the board members to
get to know the various successors so that they can have an informed
opinion when the time comes."
7. Bridging information gaps. The generational divide in technology has led
some boards to open up the criteria for boards to bring on younger, more
tech-savvy directors. "Boards have to be adaptable and be able to see
their blind spots," says Josette Sheeran, President and CEO of the Asia
Society, a director at the Capital Group, and former Vice Chairman of the
World Economic Forum. "Boards, like all human beings, resist what they
don't understand. So we have to get a baseline of understanding among all
board members by bringing in experts, going to where the customers are,
visiting the factory floor. All of these things help open up an easier
discussion about where the company is and where it needs to be."
8. Connecting board members with institutional investors. As KPMG Board
Leadership Center's Susan Angele explains, "Governance itself is
undergoing a huge disruption from what had been seen in the past as a
'board-centric' model of governance to now more of a shared model between
investors and the board." Amy Schioldager, a Senior Managing Director and
Global Head of Beta Strategies at BlackRock, says that more directors are
willing to meet with investors than before: "I think directors want to
hear what the institutional investor is thinking - that the investor has
a perspective the board may not hear from management, for instance." She
says that 10 years ago, it was rare to see a board member at an investor
meeting, while today management brings a board member to one quarter to
one third of the meetings.
9. Bringing along the CEO in the new era of shareholder pressure. The
growing incidence of board members meeting with investors is just one of
the potential sources of conflict when dealing with the CEO. "A lot of
them have traditionally controlled that relationship with shareholders
and so don't necessarily understand the value of including board
members," says Kapila Anand, lead director of the WCD Foundation and
director, Extended Stay America, Inc. "But this boardroom/shareholder
engagement is increasingly a reality, and boards need to work with the
CEO and IR team to be included when relevant."
10. Communicating what's important. If companies are making changes to
significant aspects of their business, it's often not enough to simply
file the right regulatory paperwork. "There does need to be more
disclosure," says Anne Sheehan, Director of Corporate Governance at
CalSTRS. "The proxy is a compliance document, certainly, but it's also a
communications tool that companies can use to communicate things like
their philosophy on diversity or their philosophy on compensation.
Schioldager at BlackRock echoes this: "The biggest opportunity that is
wasted when engaging with shareholders is in the proxy disclosures.
People do exactly what the lawyers tell them to do and are able to check
a bunch of boxes. But this is an opportunity for you to tell your own
story. What is the story? What's the company doing? What's their
strategy? How do they think? What does the board do?"
"Being able to tell the story of the company and the story behind the strategy and its evolution is one of the most important roles of both management and directors," says Stautberg. "Boards are increasingly in the public eye, and increasingly in front of investors, and being able to explain the strategic decisions companies are making in the midst of so much change is critical."
For more information about WCD, please contact Suzanne Oaks Brownstein or Trang Mar of Temin and Company at 212-588-8788 or news@teminandco.com.
About WomenCorporateDirectors Education and Development Foundation, Inc.
The WomenCorporateDirectors Education and Development Foundation, Inc. (WCD Foundation) is the only global membership organization and community of women corporate directors. A 501(c)(3) not-for-profit organization, the WCD Foundation has 75 chapters around the world, including recent launches in South Korea, Puerto Rico, and Uruguay. The aggregate market capitalization of public companies on whose boards WCD Foundation members serve is over $8 trillion. In addition, WCD Foundation members serve on numerous boards of large private and family-run companies globally. For more information visit www.womencorporatedirectors.com or follow us on Twitter @WomenCorpDirs, #WCDboards.
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SOURCE WomenCorporateDirectors Education and Development Foundation, Inc.
