Corporate Board Member has published an article I wrote for them entitled, "Three Ways for Boards to Rethink Governance." In it, I present some forward-looking ideas on how boards can rethink and reimagine how they govern in this moment when all norms are being challenged. This is a brief teaser for the full article:
1. The Board’s Role. Rethink what the board is there to do.
When was the last time your board met in executive session for the express purpose of thinking about how the company’s stakeholders look at the board’s role and what that particular company needs from its board? Boards should set aside time to rethink their role in the context of the fundamental changes their companies will be facing going forward. As companies face a new world order, it is more important than ever for the entire board to be on the same page for what it is there to do.
2. The Board’s Committees. Rethink whether the board’s committee structure is stakeholder-driven.
It may be time to rethink whether certain interests of stakeholders other than shareholders should receive deeper-dive treatment in at the committee level. Some boards already have standing committees to cover subjects that relate more directly to its customers (e.g., risk, product safety, innovation) and communities (e.g., public policy). Recently, there have been calls for boards to “reimagine” the scope of their compensation committees to cover the company’s overall workforce and issues of human capital going far beyond executive compensation and benefits. It may be time for boards go even further to rethink whether its governance is truly stakeholder-driven and reimagine how to restructure its agenda and committees to understand and balance the interests of the corporation’s four key stakeholders. (I just wrote a piece for Skytop Strategies specifically exploring this idea.)
3. The Board’s Resources. Rethink whether the board is sufficiently resourced versus sufficiently paid.
Before March 2020, director compensation had been on a steady, upward trend on the notion that directors are being asked to spend more and more time on their board duties. During the COVID-19 pandemic, many boards have temporarily reduced director compensation. If the assumption is that director compensation will go back up to its original levels once business goes “back to normal,” boards need to rethink that. Instead of automatically bringing director pay levels back to what they were, boards should rethink how they allocate those funds and apportion some to procure resources that could help them handle the ever-increasing demands. The job of the director will only become more demanding. Giving directors additional resources will make them more effective than giving them additional pay.
Boards of directors should not let this moment go by without some rethinking of how they govern.