Being asked to join a corporate board used to be a soft option a few decades ago for many executives. Occasional meetings, convivial atmosphere punctuated by dinners, perhaps followed by cigars and a rather good brandy. Those days are long gone.
Now, corporate boards face pressure and scrutiny everywhere they turn. Stakeholders, investors, employees and customers, and even suppliers all want to know what boards are doing for the present and future that affects them.
According to the 2021 Edelman Trust Barometer Spring Update, 62% of people trust businesses, with employees seen as the most important stakeholder towards long-term success. The public now expects CEOs to prioritize societal issues, with emphasis on more significant efforts in four key areas:
● Gender and ethnic pay equality (51%)
● Ensure their company is trusted (42%)
● Reduce their carbon footprint (40%)
● Ensure their company is paying their fair share of corporate taxes (40%)
The activists are at the gate, too, asking uncomfortable questions in public. It’s not just Greta Thunberg, who in the aftermath of the COP26 summit in Glasgow warned: “We don’t just need goals for just 2030 or 2050. We, above all, need them for 2020 and every following month and year to come.”And let’s not forget social media or the perils of cancel culture. Many individuals and companies worldwide have been caught in those fires, and few have come out unscathed. The squeeze is so tight and affects so many people directly; it reminds me of the lyrics of one of my favorite songs by Queen & David Bowie. Although it’s 40 years old – very similar to myself, of course – the intro still holds true today.“Pressure pushing down on me; Pressing down on you, no man ask for; Under pressure that burns a building down; Splits a family in two;Puts people on streets” The pressure is on, but there is a way out. Here are my top three solutions.
1. Build trust by thinking like an activist. Boards need to listen beyond their boardrooms. It’s a gift if people are openly willing to say, “I don’t agree with what you do.” If you as a board can actively listen to those eager to use their time to give you advice, although in a different format than consultants would, you have been given a gift of invaluable insight.
Agree to disagree. Explain why you do ABC. But don’t just put your heads in the sand and ignore these people. As Andrew Edgecliffe-Johnson, US Business Editor of the Financial Times, wrote in June 2021: “Today’s business leaders are being confronted by a new generation of agitators whose aims they consider unrealistic, whose methods they consider unreasonable but whose message will probably be worth heeding in the long run. … from street styles to fashion on Wall Street, new ideas tend to start on the fringes.”Put yourself in their shoes. Think how, if you were an activist, how would you “kill” your company? Get your antennae working; examine the soft spots; where are your competitors outperforming you; what cyber security weaknesses do you have. Make sure you have a transition plan. And know your carbon footprint.
2. Implement better scenario planning – now. Your board needs to ask what your company will look like in a world where the temperature has risen 1.5℃? 2.4℃. Or even worse, 2.7℃ in 2100? For sure, your supply chain will be disrupted severely, but it won’t stop there, especially for your employees. Taking recent events in British Columbia, Canada, or London, UK as an example, basements will be flooded; homes ruined; fuel rationing implemented; food supplies will run out; loved ones lost. Boards must urgently imagine what the world could look like next year and the years after that. They must plan for it, mitigate their risks and help their employees along the way. If you live somewhere that will be wetter, and your company sells clothes, stock up on jackets and rubber boots six months earlier than usual. There will be stores with none, trust me. If your board does not ask many “what if?” questions now, people might be asking “where did that company go?” in the future.
3. Get trustworthy data. First, your board must figure out who your key stakeholders are and what material issues they care about so that you can give them better information. There is reporting rigor coming for ESG for all boards, so you need to get ready. Asset-Managers, proxy advisors, The US Securities and Exchange Commission (SEC), Task Force on Climate-Related Financial Disclosures (TCFD), and the new International Sustainability Standards Board (ISSB) will all be taking a keen interest in your board and your company. When you go to the bank, they want to have your data. Investors will want to have your data. Customers will want to have your data. And they want to be able to say we can trust this data.
Your board must figure out the how and why of measurement. Then, instill a rigorous system internally to find the data and report that data alongside your financial data. You can get internal or external auditors to examine that information when you have that in place. And by doing that, the market will repay you with trust.