The business world is changing, and the corporate boardroom is changing with it. With companies accountable to a wider array of stakeholders, new regulatory and societal pressures are pushing boards to broaden their responsibilities.
Fortune’s Modern Board 25 list celebrates boards that do exemplary work meeting today's challenges. Drawing on research from Diligent, the list highlights organizations that are blazing a new path for governance professionals and setting an example for others.
So, how does a company earn their spot on the Modern Board 25? To put the list in perspective, we’ve put together an overview of how the boardroom is changing and how forward-thinking companies are using this transformative period to their advantage.
The evolving board
Historically, boards have been treated as a simple mechanism for hiring and firing CEOs. Now, boards find themselves needing to address a broad range of issues — from risk oversight to cyber resilience to diversity and ESG — as they take on a more central role in risk management and the development of long-term strategy.
As a result, the metrics guiding board decision-making have expanded.
Previously, the board leaned heavily on financial metrics — because they were easy to quantify, and because there was a well-developed paradigm for analyzing them in terms of the company’s general strength. But the changing business landscape means that today’s board can’t rely solely on these metrics. Rather, they must take into consideration non-financial metrics such as ESG, cybersecurity and stakeholder engagement.
These factors are harder to quantify, but ignoring them can leave the board (and the company they oversee) unprepared for a new generation of risks and opportunities.
The next step forward
According to research by Diligent, to address these new challenges, boards are employing two key strategies: diversifying board composition and upskilling the current board.
Diversity is an indispensable component of modern boards. Cultivating multiple perspectives in the boardroom prevents high-level strategy from overlooking or underestimating the risks that will define the next decades of business.
A diverse board also fosters a dynamic environment that draws on different business backgrounds to navigate complexity with a wide array of knowledge and skills. This gives the board the ultimate competitive advantage of adaptability.
This change is already underway. From 2019 to 2021, the share of newly-appointed directors who came from a “traditional” CEO/CFO/COO background declined from 59.4% to 56.0%. Over that same period, the share of newly-appointed directors who came from “non-traditional” professional backgrounds rose from 13.0% to 18.9%.
Crucially, as the research shows, diversity can’t be treated simply as a box to be checked. It must be approached as a strategic path toward organizational resilience. Diverse viewpoints and skillsets empower the board to tackle complex issues with holistic expertise.
Upskilling accomplishes similar goals by strengthening and broadening the board’s oversight capabilities.
Shareholders have a growing list of concerns they associate with the company’s success, and as a result, pressure is rising for directors to bolster their knowledge around key issues like cybersecurity and ESG. Director certifications, such as Diligent’s Cyber Risk & Strategy and ESG Leadership certifications, provide leaders with the knowledge they need to have meaningful conversations about these key issues.
The Modern Board 25
Board members are aware of their evolving roles: 75% of corporate directors say their responsibilities will continue to expand in the next 3-5 years. Forward-thinking directors know that they must be literate enough in key issues to have meaningful conversations –– both with each other and with specialists in the company.
Navigating new challenges means developing new leadership best practices and providing new guardrails. The boards on Fortune's Modern Board 25 list demonstrate success in adapting to shifting expectations and responsibilities, and offer crucial insight into what makes a modern board successful.