Ten Trends Business Boards are Addressing

Read Time:8 Minute, 30 Second

By Women Corporate Directors, Special for  USDR

As corporate boards kick off the year in a generally positive global economic climate, directors can think more strategically about growth,” says Susan Stautberg, CEO of WomenCorporateDirectors. “2015 will deliver more opportunities for established industries and fast-growing sectors alike, and boards will need to ensure their companies are continuing to  evolve.”

Looking at the year ahead, WomenCorporateDirectors – the largest global organization of women board members – has identified the ideas and trends that are top-of-mind for directors today. Recent member events – including the WCD Americas Institute this fall – highlighted what’s on boards’ radar screens and how boards are changing  today.

Ten Board Trends for 2015

1.    Cybersecurity a concern for everyone – not just financial firms
Major security breaches such as the Sony hacking have been a wake-up call that all companies are vulnerable to cyberattacks – not just financial firms. “It can happen to any of us,” says Kay Ellen Consolver, a top executive at Exxon Mobil for two decades who now serves on the Supervisory Board of Thyssen Petroleum. “While the executives of a company are running operations, we on the board have to get them to think about the things that haven’t happened  yet.”

2.    Emergence of new board committees
One way that some boards are addressing more urgent concerns such as cybersecurity is by adding new committees to the existing board structure. Professor Liora Katzenstein, co-chair of WCD’s Israel Chapter, explained in remarks at the WCD Americas Institute: “On top of the standard board committees, visionary boards now include new specialized committees such as strategy, risk, environment, technology, innovation, corporate social responsibility, and digital social media.” Eileen Kamerick – a director at Associated Banc-corp, the Legg Mason closed end mutual funds board, and Westell Technologies, Inc. – mentioned on a panel at the Institute that regulatory issues can cause a board to establish standing committees to ensure that these matters get the right level of attention. “Management has the primary responsibility, of course, but it’s the board’s responsibility to make sure that it is done  correctly.”

3.    Growth of advisory boards to supplement board knowledge
In addition to new committees within the formal board structure, companies are employing advisory boards around specialized areas – using these groups as a task force with deep knowledge. Claudia Kotchka, an advisor to the Institute of Design at Stanford University and a director at BlackBerry, created a design advisory board when she led innovation at Procter & Gamble, bringing in people from different companies in other sectors who could bring broad experience solving their own design issues. “When you’re in your own industry, you are just way too close to it,” says Kotchka. “But these people who were independent would come in with no agenda, and help us when we got  stuck.”

4.    “Professionalization” of boards opening doors for women
Shifting board priorities may be opening up boardrooms to more women directors as boards become more “professionalized” around areas such as audit and compensation. While the trend of more women populating audit committees started more than a decade ago with Sarbanes-Oxley, Eileen Kamerick explained, the scrutiny around compensation might also present opportunities for women. “Boards need to populate this committee with directors with true expertise, and women with HR backgrounds could fill these  roles.”

5.    Board tenure increasing, resulting in less opportunity for board renewal
“While the number of new directors added to S&P 500 boards has grown over the past two years, director turnover remains relatively low compared to a decade ago – less than 7%,” says Julie Hembrock Daum, head of the Spencer Stuart North American Board Practice and a member of the firm’s board of directors. “U.S. boards have traditionally steered away from term limits and have relied on retirement ages to encourage turnover. As retirement ages have moved up – most boards now have a retirement age of 72 or older – the result has been an increase in board tenure, an increase in average age and a decrease in board turnover. The result is a lack of opportunity for new directors, including  women.”

6.    Setting pay packages to appease multiple stakeholders
Setting compensation levels continues to challenge boards in the wake of say on pay. “But the silver lining of say on pay is it has forced companies to engage more actively with their shareholders around this issue and explain what they may be doing a bit differently from their peers,” says Jan Koors of Pearl Meyer & Partners. “If we as a company spend all of our time and marketing dollars trying to explain our unique business proposition, then shouldn’t we be able to structure our pay programs differently? We need to be clear what it is about our ‘special sauce’ so that we can explain to employees, shareholders, the media, and to anyone who asks that our business proposition and compensation are in  alignment.”

7.    Keeping an eye on the “CEO marketplace”
“As boards have assumed more accountability for CEO succession, many are working closely with both HR and the CEO to understand the developmental needs of CEO candidates and others on the management team,” says Julie Daum. “While external benchmarking is often used as an important piece of the compensation equation, it should also be seen as an integral part of talent assessment. As the pace of business increases, more and more companies will regularly benchmark their CEO and management team against executives viewed as best in class outside the company to gain an outside perspective on the capabilities needed to compete in a changing business  environment.”

8.    Cultivating global intelligence
Boards are increasingly global in mindset and make-up, but directors are still learning how deep they must go within each market to truly understand the local culture. The WCD Americas Institute, which focused on regional concerns when doing business in the Americas, featured multiple discussions on cultivating global intelligence. Olga Botero, a director of Evertec – a payments and cards processing company based out of Puerto Rico that operates in 17 countries in Latin America – explained in her panel at the Institute, “If you really want to do business in Brazil, you can do business in Brazil. But if you want do business in the rest of the Latin American, maybe Peru or Colombia or Mexico would be a better place to be your hub. We’re different, and we do business differently. It is the same as thinking of the European Union as one country. Knowing markets as a board member is not just receiving the monthly presentation that we get – it is really understanding the environment, the economics, and the customers in each  country.”

9.    Developing a more thoughtful approach to entering markets
Andrea Menezes, the CEO of Standard Bank Group in Brazil, offers this advice to companies entering a new market: “What is important when you’re sitting on a board of the company is to remember that you are just investing in those regions. What the main shareholders – usually the government – want to see is investors providing for and giving a heritage to those countries, either those employees, either this community, either this economy. And when you see an investment that just tried to extract economic value out of that region without providing any extra value added, this is a deal that’s not going to work. And then, you are really going to see implications over your company or business or market  share.”

10.  Infrastructure needed for companies to take advantage of global trade
The process of entering new markets can involve taking advantage of free trade agreements, which was another focus of the WCD Americas Institute. Anne McKinney, the deputy director of the Colombian American Chamber of Commerce, explained that, “companies can’t really take full advantage of trade agreements when they’re dealing with outdated and inadequate infrastructure. This means both hard infrastructure – ports, railroads, and the like – as well as the soft infrastructure – the institutions that help facilitate trade.” Boards are learning that factors such as slow customs procedures and unpredictable goods delivery (due to smuggling, fraud, and security concerns) are extracting a high “hidden” cost, a figure the Organisation for Economic Co-operation and Development (OECD) estimates as high as 15% of the value of the goods  traded.

For more information about WomenCorporateDirectors, please contact Suzanne Oaks Brownstein of Temin and Company at 212-588-8788 or news@teminandco.com.

About WomenCorporateDirectors (WCD)
WomenCorporateDirectors (WCD) is the only global membership organization and community of women corporate directors, comprised of more than 3,500 members serving on over 6,500 boards in 67 chapters around the world, with many more slated in the next two quarters. The aggregate market capitalization of public companies on whose boards WCD members serve is $8 trillion – if WCD were a country, its economy would be the world’s third largest, behind only the U.S. and China. In addition, WCD members serve on numerous boards of large private companies  globally.

WCD membership provides a unique platform for learning from the intellectual capital of accomplished women from around the world, and WCD’s mission is to increase courage, candor, inclusion, and cohesion in the boardroom. KPMG is a Global Lead Sponsor of WCD. Spencer Stuart is a Premier Global Partner, and WCD Strategic Partners include Marriott International, Marsh & McLennan Companies, and Pearl Meyer & Partners; WCD Alliance Partners include International Finance Corporation (IFC), JPMorgan Chase, and Northern  Trust.

WCD has 67 global chapters, located in Arizona, Atlanta, Beijing, Boston, Charlotte, Chicago, Chile, Cleveland, Colombia, Columbus,Dallas/Fort Worth, Delhi, Denmark, Finland, France, Germany, Greater Colorado, Greater New Mexico, Guatemala, Gulf Cooperation Council, Hanoi, Hawaii, Ho Chi Minh City, Hong Kong, Houston, Iceland, Indonesia, Israel, Japan, Kansas City, Kenya, London, Los Angeles/Orange County, Malaysia, Melbourne, Mexico, Milan, Minnesota, Morocco, Mumbai, Netherlands, New York, New Zealand,Nigeria, Northern California, North Florida/South Georgia, Panama, Peru, Philadelphia, Philippines, Quebec, Rio de Janeiro, Rome,San Diego, Sao Paulo, Seattle, Shanghai, Singapore, South Africa, South Florida, Switzerland, Sydney, Tennessee, Toronto, Turkey,Washington, D.C, and Western Canada. Upcoming chapters include Argentina, Brussels, Egypt, Greece, Mongolia, Poland, Puerto Rico, South Korea, Spain, Tampa, and Thailand. For more information,  visit www.womencorporatedirectors.com.

SOURCE  WomenCorporateDirectors

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