In a recent gathering hosted by Egon Zehnder, 20 board directors from Atlanta's largest public companies engaged in a compelling discussion on the future of boards and the imperative for effective, forward-thinking governance.
Navigating Tomorrow: Boards Embrace Foresight to Steer Through Change
The focal point of our recent discussion between Egon Zehnder and various public company board members was the need to shift from oversight to foresight. The complex, fast-changing world we live in demands that boards become more attuned to qualitative issues than ever before. As one participant expressed, "The more the board can sensitize itself to what's coming around the corner, the better."
As boards begin to lean into foresight, a major question arises: How much can boards anticipate extreme reactions in the external environment? Participants suggested considering the “what, why, and how” of scenarios and being prepared to respond even if they aren’t asked to. The challenge lies in determining when to comment internally versus externally and how to navigate communication nuances in the face of uncertainty. While the majority of this communication would be done by management, the board needs to be available as a sounding board and a strategic partner with the C-suite.
Board Dynamics Matter
Board members delved into the dynamics of effective board functioning and how their dynamics are essential for a board to create a robust and safe, though not soft, atmosphere. A critical topic that emerged was the lack of meaningful feedback within boards. The discussion touched upon the importance of feedback in managing dynamics, especially when dealing with committee chairs or board chairs who are resistant to input. The need for a skillful chair who encourages candor and draws out meaningful conversation was highlighted, along with the suggestion that the ability to give and receive feedback should be a consideration in the selection of new board members. “It’s a skill to give feedback,” a participant noted. Board members also agreed upon the importance of creating an environment of trust to validate and accept diverse thoughts and opinions.
Within board dynamics, composition was also explored given how much the landscape of challenges for boards is evolving with topics such as AI, cybersecurity, climate and sustainability. A cautionary note was sounded against attempting to solve management problems with new non-executive appointments. The importance of deliberate education for boards on climate and sustainability issues was highlighted, urging boards to avoid the temptation of hiring specialists for every emerging challenge. “Never hire a director when a consultant would do,” was one sentiment shared.
Governance evolution was noted, with term limits for committee chairs and the aspiration for newer board members to revisit their operating days and see issues through the eyes of the executives. “You can’t provide foresight unless you know what people are agonizing over,” said one participant. The board of the future must not only excel at oversight but also enhance its foresight capabilities. As boards grapple with complex, qualitative issues, the key lies in creating a dynamic and inclusive environment that fosters open communication, anticipates challenges and steers the organization toward a sustainable and ethical future. “You need to have a learning board, not one that walks in and thinks they know everything,” an attendee said.
The Board as a Moral Compass: Balancing Returns and Values
There is a growing consensus that CEOs and their boards can work in tandem not only to deliver results but also to share invaluable guidance and oversight in ethical business decision-making. To do this effectively, board directors explored the idea of delegating more decisions to committees. It would empower committee chairs with more authority, freeing up the full board to prioritize more strategic priorities. This would be a move away from boards’ current tendencies to spend excessive time on retrospective analysis and the "hard stuff," neglecting crucial aspects such as organizational culture and bench strength.
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As our discussion uncovered, a forward-looking board is one that not only excels at oversight but also enhances its foresight capabilities. It is a learning board, equipped to navigate complex challenges, anticipate the future, and steer organizations toward sustainability and ethical success. The key takeaway resonates: To truly provide foresight, boards must embrace continuous learning and remain open to diverse perspectives, fostering an environment where trust, accountability, and ethical considerations converge for a resilient and prosperous future.
