A Stale Model for Corporate Governance

Traditionally there were two general qualifications to serve on a corporate Board of Directors: (1) long-term business executive experience (2) especially in a Board capacity. This made sense, given the Board’s primary governance role providing corporate oversight on a company’s management team. Given these qualifications, most corporate Boards were typically comprised of retired or semi-retired CEOs and CFOs. Further, a byproduct of this societal bias was also that most Directors were fairly homogeneous, namely, older white males. Again, given the Board’s primary corporate governance role, there didn’t seem to be anything inherently wrong with this setup, at least not from a functional perspective (even if from a social one).

However, the technology revolution of the past 25+ years has disrupted every corner of society, and corporate boardrooms have not been immune.

The role of the corporate Board has evolved dramatically in the 21st century, expanding beyond “mere” corporate governance to include such diverse responsibilities as strategic planning, digitalization, globalization, crisis management, workforce development, and many others. These new areas have pushed traditional CEO/CFO Board members well beyond their expertise, which in turn has resulted in some poor decision-making by many company Boards. Perhaps even more important, modern companies operate in a much more dynamic, diverse, and global business environment, which requires high-level corporate decisions to be informed by an equally dynamic, diverse, and global set of perspectives. Of course, this is near impossible to accomplish with a homogeneous Board.

A New Recipe for Success

Around the globe, corporate Boards of Directors have been struggling to keep pace with the changing world in which their companies operate. However, they ARE changing.

Specifically, companies are increasingly taking a more strategic view of their Board composition by recruiting Directors who expand the group’s technical expertise and social diversity, such as:

  • Gender. Adding more women, which fosters and benefits from the growing numbers of female senior executives.

  • Race / Ethnicity. Especially in the US, including African-American, Hispanic, and Asian Directors, which more closely mirrors the American workforce and customer base.

  • Age. Modern corporate topics like technology, automation, workforce development, communications, etc., tend to be generational, which requires a much younger perspective at the Board level.

  • Geography.In today’s global economy, all Boards need a global perspective.

  • Entrepreneurship / Innovation. Whether it is licensing a company’s intellectual property, spinning out new ventures, acquiring smaller businesses, or other strategic growth initiatives, Boards benefit from an entrepreneurial perspective.

  • Communications / Social Media. Modern companies–and especially their Boards while managing a crisis–communicate in myriad ways with multiple audiences and stakeholders, requiring an experienced perspective during critical decision-making.

  • Technology. Regardless of market, industry, or product, every modern company can be considered a technology company, so every company’s Board should also include a Director with a technical background.

AS BUSINESS LEADERS, we owe our companies’ stakeholders the duty to continually explore ways to maintain efficiency, effectiveness, and integrity while building long-term social and financial value. This means occasionally doing something drastic, like jumping outside the box of conventional thinking to ensure our Boardrooms thrive with essential creative diversity.

Key Takeaways:

  1. As you do with the rest of your team, think critically about how to align Board composition with company strategy and values

  2. Corporate governance can be taught; skills and experience cannot

  3. Don’t be afraid to diversify your Board with talented engaged professionals