Listen to Episode 41 on Apple Podcasts

Guests: Doug Chia, President, Soundboard Governance LLC Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation In this episode:
  1. To add'or not to add'a new committee? Today's stakeholder focus begs the question, but be cautious of 'committee proliferation' and management duplication, Chia warns.
  2. ESG (and E-ESG) are now board essentials. 'It's about how you re-engineer your business,' says Chia'and this includes employees, equity, and addressing systemic racism.
  3. Moving from crisis mode to long-term strategy. Especially now, the board plays an important role in helping management think about the future.

Summary

'This has been quite a year, 2020, and I feel like outside-the-box conversations on governance are needed, ' says co-host Dottie Schindlinger. Doug Chia joins her and co-host Meghan Day for such a conversation, which covered committees, crisis management, capitalism, ESG, and more. 'I honestly feel there is no topic we can stump Doug with'he is such a well-rounded governance geek,' says Schindlinger. Chia is'''president of Soundboard Governance LLC, fellow at the Rutgers Center for Corporate Law and Governance, and senior fellow for The Conference Board ESG Center. He has served as executive director of the ESG Center, assistant general counsel and corporate secretary for Johnson & Johnson, and assistant general counsel, corporate for Tyco International.

To add'or not to add'a new committee?

'As we move to a different model of governance, should the board structure and their agendas change accordingly? It would seem actually kind of crazy if It didn't.' - Doug Chia, President, Soundboard Governance LLC
As vehicles for targeted, deep-dive conversations, committees play a critical role in efficient, effective board operations. The audit, compensation, and nom/gov committees emerged in the wake of the Enron and WorldCom scandals. Should today's boards similarly revisit their committee structures in response to evolving conditions, like the business world's shift from shareholders to stakeholders? 'What committee looks at the customers? What committee looks at the employees beyond those 10 at the top?' Chia asks. According to Chia, some issues may merit a committee'like technology, public policy, science, and risk, which has long been a staple for financial institutions. Yet boards should be careful not to stray too far into the purview of management and should avoid overdoing it with 'committee proliferation.' Chia presents Airbnb's dedicated stakeholder committee as an example. 'I think that's a great idea, but it shouldn't lead to each stakeholder being covered by a certain committee,' he says.

ESG (and E-ESG) are now board essentials

Should boards address environmental, social, and governance (ESG) goals with a special committee, or is this an overarching systemic topic? Definitely the latter, according to Chia. 'The concept of sustainability is not about tree hugging and using hybrid cars. It's about how you re-engineer your business around the concept,' he says. 'For Larry Fink at BlackRock to say '''okay, we're embracing SASB and TCD reporting standards''that's a big deal.'
'You can't just ignore [ESG] or have some kind of short-term fix or make some kind of a lofty statement and then call it a day.' - Doug Chia, President, Soundboard Governance LLC
For example, the board can play a powerful role in addressing systemic racism, which Chia discussed in a recent episode of Inside America's Boardrooms, and in improving equity overall. For the latter, Chia cites a recent paper on inclusive capitalism by Leo Strine'"the most influential jurist in terms of corporate law for this generation, and he has a lot to say.' Day agrees. 'The essay sets up the importance of employees moving forward in the responsibility of corporations'that in fact [ESG] should be E-ESG.' Schindlinger and Day heard Strine speak at the recent Salzburg Global Corporate Governance Forum, a virtual event this year co-sponsored by the Diligent Institute. Here he shared another essay about ways compensation committees can tackle inequity. 'Definitely worth a long read,' says Schindlinger.

Moving from crisis mode to long-term strategy

'How do you move from a posture of crisis management, just ensuring that you can weather the storm, to thinking differently about how your business may be operating?' - Doug Chia, President, Soundboard Governance LLC
As COVID-19 accelerates the trend of putting more on the boards' plate, with higher expectations, 'the strategic advisory piece often gets overlooked,' Chia observes. With so much to deal with just on a daily basis right now, 'the board needs to support management with the short-term struggles while helping them keep an eye on what the future looks like,' he says. 'The changes might have to be drastic and that might affect what you're going through now,' Chia adds. This might be the time to consider moving out of certain markets or product types, like IBM did with typewriters and laptops. 'These were big moves that showed they were very forward thinking.'

Listen to Episode 41 on Apple Podcasts

Also in this episode . . .

Chia talks about the Soundboard Governance Challenge'a quiz for all governance geeks'and the need for director resources. 'You have 12 people, half of them retired, with no support staff trying to do a job that's much harder, with much more time demands than before,' Chia says. 'If they're going to do this job the way everybody wants them to, they really need some support.' Resources in this episode

Navigating Change, Elevating ESG

11/11/2020
Dottie Schindlinger

Navigating Change, Elevating ESG

Listen

Insights From Two Intrepid and Forward-Thinking Diligent Leaders

Listen to Episode 50 on Apple Podcasts

Guests: Brian Stafford, Diligent CEO, and Lisa Edwards, Diligent President and COO

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

  1. A Pivotal Moment in Modern Governance: Stafford and Edwards discuss the monumental changes of the last year and how modern governance is evolving as a result.
  2. The Role of Leadership: Stafford and Edwards take a closer look at how modern leadership will remain paramount to success.
  3. The Future of Innovation: Stafford and Edwards dive into the future of the SaaS business model and the intersection of governance and software.

Summary:

In our 50th episode special, hear from Diligent CEO Brian Stafford and COO and President Lisa Edwards for an in-depth discussion of modern governance: what it means to them, why it’s so important, how it’s changing, and what to expect for the future of governance.

A Pivotal Moment in Modern Governance

2020 taught the corporate world that the time for a truce embrace of modern governance is long overdue. Edwards details the reasons behind this approach from the board level: “More and more data is available to boards, and the role of the board itself has changed. We need to think holistically about a company: how it operates, its role in the wider community, its sustainability efforts, and its general impact on the world.”

Stafford further expands on this point: “Modern governance is more important now than it’s ever been. The past year has shown us an incredible acceleration of trends that had been occurring over the last ten years.” As a result, modern leadership has changed too. Stafford goes on: “Expectations of management and the board have changed. The board needs to ask more questions, and make sure they aren’t missing important developments.”

Modern governance has evolved as well as expanded to cover a much wider array of issues. Stafford details the future of climate change action, for example: “Regulation, policy and institutional investors are never the first to act, but it’s a material trending force. The next trend is coming will be  around climate. Whether you act because you feel morally inclined or because you are being forced to, this push is going to happen.”

“Modern governance is about how business leaders get access to the data and insights they need to do their jobs well and drive the future of their companies.”

–Lisa Edwards, Diligent President and COO

The Role of Leadership

This holistic approach to modern governance will help tackle the issues companies and corporate leaders will have to address in 2021 and beyond. As Stafford puts it, “We saw the protests in the wake of George Floyd’s death bring discussions of diversity, equity, and inclusion back to the top of the boardroom. We saw the World Economic Forum and the Business Roundtable making bold statements around stakeholder capitalism. Meanwhile, political leadership has been less clear; less decisive. So, corporate leaders felt that they had to step in and provide that leadership.”

Thinking about culture, Edwards also notes the challenges that come with the virtual environment: “In many cases, boards are onboarding a new member no one has spent time with in-person. How do we bridge those gaps? How do you think about culture? Culture is part of governance; it’s the glue that holds everything together. You need to make sure in this virtual environment that your board is continuing to govern the company in the right way.”

It’s up to modern leaders to make sure the emphasis being placed on new and important issues does not subside. Stafford details this idea: “In the last few years, we’ve seen increased focus on gender diversity, and now we have seen a spark of energy on racial and other components of diversity. Will this subside, will this be a flashpoint?”

Stafford believes we are in the midst of an evolution surrounding the role of the director and thinks that they will play a more active role in many of these issues and trends moving forward. He explains: “The more active role that boards have stepped into this year will likely continue. I think that even after the pandemic is contained, we will see more frequent, perhaps shorter, board check-ins and meetings.”

“Governance is changing to become more inclusive and expansive than ever before. It’s a pivotal and unique time to sit on a board.”

–Lisa Edwards, Diligent President and COO

The Future of Innovation

The virtual climate of the last year is sure to leave long-lasting effects on governance. Edwards discusses aspects of virtual leadership: “Board members are clear that, until we see material progress on vaccines and getting back to work, things are going to stay virtual. We need to be thinking about cybersecurity and the way information is getting to the board.”

Next, Edwards focused in on the future of the SaaS business model and the potential for a platform approach: “The cloud is here to stay, and it will be the standard for the next decade. I am confident that we will see continued innovation around it, and that this is the way people will consume software and services.”

She further discusses the benefits of such innovation: “The real benefit is being able to take disparate data and put them together to derive insights on a single platform. When you have services that can serve as different applications, it makes things easier on the development side as well. Digital transformation is in part about corporate leaders, and how they get access to the data and insights they need to do their jobs well and inform and drive the future of their companies.”

“The intersection of governance and software is so vital to the concept of modern governance, and not a lot of companies focus on this.”

–Brian Stafford, Diligent CEO

Also in this episode…

Our Diligent leaders discuss personal perspectives on the pandemic. Both discuss the challenges and lessons learned from sending their children to virtual learning environments. Stafford, meanwhile, has honed his gourmet pizza-making abilities since lockdowns began.

Resources from this episode: