Uncertainty and the board: Strategies for turbulent times

More about the podcast

• Boards must revisit strategies from past disruptions—adjusting inventory levels, reengineering supply chains, and modernizing operations—to remain agile.
• Proactive succession planning and having "bench strength" for boards is vital to maintain governance continuity during change.
• Companies must improve transparency and clarity in shareholder interactions, especially proxy statements, to reduce the information gap.

Here is an edited transcript of the conversation:

Intro: Welcome to the Corporate Director Podcast, where we discuss the experiences and ideas behind what's working in corporate board governance in our digital tech field world. Here you'll discover new insights from corporate leaders and governance researchers with compelling stories about corporate governance, strategy, board culture, risk management, digital transformation, and more.

Dottie Schindlinger: Hi everybody and welcome back to the Corporate Director Podcast, the voice of Modern Governance. My name is Dottie Schindlinger, executive Director of The Diligent Institute, and I'm joined once again by my amazing co-host and queen of all PowerPoint presentations. Mehgan Day strategy leader here at Diligent.

Megan, how are you doing today?

Meghan Day: Oh, good Dottie. Because this is a bit of a reprieve for my PowerPoint presentation building, but, uh, I'm just catching up on all of today's VUCA as I like to call it.

Dottie Schindlinger: Oh, the volatility, uncertainty, complexity, and ambiguity. What is today's VUCA?

Meghan Day: Well, I think it's finally catching up with board members because there are some juicy new survey findings from our friends over at Spencer Stewart that I want to talk to you about.

Dottie Schindlinger: You sent me an article about this. Yeah, go ahead and tell us the headlines because it was fascinating.

Meghan Day: Spencer Stewart has released a new survey series called Measure of Leadership, which focuses on how both CEOs and board members are globally navigating a complex and rapidly evolving business environment.

Hello VUCA. They uncovered something in this latest survey that is a little bit startling. Just one third of CEOs say that they are highly confident in their board's ability to help them navigate the challenges facing their organizations today, just one third. And on the flip side though it sounds like board members though, are feeling pretty confident in their ability to deliver and support the CEOs.

So there is a gap happening that I feel like we haven't seen since our favorite PwC surveys where everyone every year says they wanna vote off, you know, everybody on their board.

Dottie Schindlinger: It's really fascinating, Megan. There is always a little bit of a disconnect between the way that the board sees the world and the way that senior management sees the world.

But this one is particularly interesting because what that's saying is that the CEOs are not feeling fully supported and they're not feeling like they're getting maybe quite what they need from their boards, whereas the boards feel that they're giving plenty of support. The CEO and they're doing everything they need to do to support that CEO.

I mean, of course, I'm paraphrasing here, but it is interesting to see that level of disconnect at the same moment when we know that we have a huge exodus of public company CEOs from their roles. So, Hmm.

Meghan Day: Yeah. It's interesting. So, 22% of CEOs agree this idea that they're getting the right support.

43% of board members agree that disconnect between the two is not great, but it's also not great that less than half of board members feel like that the board is doing a good job. And I don't know how much of that is just the, the ness of it all. There are also some gaps in subject matter expertise that the CEOs are thinking, you know, they strongly agree that they're providing subject matter support.

You know, when you look at it from, you know, different types of support, strategic thought leadership expertise, deeper knowledge of the company and the things that they're specifically facing within their industry. Directors strongly agree that this kind of support matters but perceive they're already delivering it.

Some 63% of board members said that this type of specific subject matter expertise, is relevant to the challenges that they're navigating, but only 43% of CEOs actually say that's being delivered. So again, another 20% difference between the two groups.

Dottie Schindlinger: I think it's really fascinating, Megan, and I'm glad you shared this report with us.

We'll make sure to put a link on the podcast page, but I would say, you know, it is always really interesting to see that disconnect. I would also say we've been spending a lot of time recently thinking about it. The quality of directors and sort of what makes for a great board director, you know, what are the things that you're really looking for?

And part of the reason we've been thinking a lot about this is because we've been working with the Wall Street Journal over the last few months to supply them with data so that they could produce a report that just came out called the “Top 250 Board Directors.” And they basically created a methodology, with an independent lab called Bendable Labs.

They came up with a methodology assigning a point value to different attributes of directors. So, you know, so for example, what's their tenure on the board and are they in that kind of golden zone of having been there for at least five years, but maybe not more than 10 years? And, you know, does that, board member have previous CEO experience?

Are they on a board? Are they in the S&P and in the Fortune250. Are they on a particular committee or chairing a committee? Are they the chair or an independent director? Are they a diverse board member? They kind of came up with a bunch of different point values that they could assign to the directors and then ranked them one through 250.

And that report just went out as a special journal report on, May 18th and May 19th. So, you know, we were kind of excited to see the report come out and it is, really interesting to think about because one of the things that, I actually mentioned when we were talking to the Wall Street Journal about this is there are so many things about the quality of directors and the quality of CEOs and the quality of that relationship between the two that is never disclosed.

It's the, the stuff that happens, on the phone or the stuff that happens in the boardroom during an executive session or the conversation that happens, over the glass of wine after the board meeting, and quite often those are some of the most important things happening, right? Those are some of the most important conversations that really move the agenda forward or change the perspective or, you know, push the agenda in a way that it wasn't going to go during the confines of the recorded meeting and in the minutes.

And unfortunately for those of us who have to research governance, we can't measure those things. So, they're very, very important. But we don't know about them, right? We can't, we can't see them in the visible data. That said, the data that is visible isn't unimportant. It is important. It’s always very important to keep that perspective of, it's not the only important information.

And I think sometimes when we see reports like that come out from Spencer Stewart or we see this ranking of the top 250 directors, there's still so much to the story that we want to know. And in the case of the Spencer Stewart report, you know, how much would you love to jump on the phone with those directors and say, how are you measuring your own quality when it comes to supporting your CEO? What are you basing that on? What’s the criteria for that? What's the variable for that? Is it a feeling? Is it because when you're in a room with that person, it feels good and you have good conversations and you leave feeling upbeat about things?

Or is it some, you know, some set of KPIs that you've set? To measure the quality of the relationship, and I wonder to what extent that's ever discussed at the board level. Are we in fact creating KPIs for ourselves about the quality of our support of the CEO or the quality of our interaction?

Is that something the board chair does, or the lead director does? If the CEO is the board chair do, do you set up some sort of metrics about the quality of the conversations you're having when you have your weekly touch base or your every other week touch base? You know, it would be worth it.

Finding that answer out, and if you are a board member listening to this podcast, maybe that's something for you to talk about at your next meeting. Do we actually have any way to measure the quality of the relationship we have with our CEO?Maybe we all think it's great, but based on what data? Sorry, I'm a researcher.

I know I'm very nerdy, but I think sometimes it's helpful to pause and ask like, how are we measuring? What does great actually look like? What does that even mean?

Meghan Day: I really love that Dottie and my head initially was not quite at the same level of yours, was like first step, let's make sure we're having a conversation about if the CEO is getting, you know, what they need out of these conversations and I, that to me is an extension of, I think a lot of the work that should already be happening in the governance committee and the types of annual assessments that you need to be doing. But I, really like how you framed it, Dottie, and I think too, the governance chairs and governance committee members listening, I do think that makes it tangible and something that you can think about building into hopefully a process you already have.

Dottie Schindlinger: Well, speaking of great board members and great CEOs, Meghan, we had the opportunity to sit down with Brian Kushner, who's a senior managing director at FTI Consulting, and we talked to him about, you know, some of these issues, what is really happening in boardrooms, what's happening with CEOs, what's happening with companies today, and to your point how are they surviving VUCA land? So why don't we give that interview a listen and we'll come back and talk about it right afterwards.

Meghan Day: Joining us on the Corporate Director podcast today is Brian Kushner. Brian is a senior managing director at FTI Consulting, where he is the co-leader of the aerospace and defense technology and activism practices. He's also the current leader of the board practice and former leader and creator of FTIs private equity practice.

Brian also sits on the boards, OFO Gibson Brands and Cumulus Media. Brian, welcome to the show.

Brian Kushner: Thank you, Meghan. Pleasure to be here.

Meghan Day: Well, before we dive in, I'd love for you to share a little bit with our audience, a bit more about your professional background and the work you currently do at FTI consulting.

Brian Kushner: Sure. So my professional background is, I have a, PhD in applied physics and a minor in electrical engineering. So perfect for board work. You know, absolutely right, aligned. I spent the first 10 years of my career as an aerospace and defense contractor. And during that process I got into doing turnarounds of problem projects.

And then over time became the turnaround guy and continued to do that. And then got recruited to do a turnaround down in Austin, Texas, where we were living in Washington, DC and then moved to Austin, Texas in1993 and, had lived there, continuously up until actually last week. In the interim, I have been the CEO of over a dozen companies, Chief Restructuring Officer, which is like the CEO, but generally taking a company through a bankruptcy in of another seven companies. And I've been a director of companies since the nineties, public and private companies, and currently sit on three boards, as you mentioned.

Meghan Day: Fantastic. Well, I can't wait for this conversation. And to start off, want to talk a little bit about a recent collaboration that we did with your team on the What Directors Think report, which was also in partnership with Corporate Board Member. One thing is clear from that, since we have fielded the survey earlier this year, a lot of things have been changing in the US and around the world.

So, let's look at the political realm for a moment. You know, how should boards and executives be thinking about the present uncertainty.

Brian Kushner: Well, thank you. Interesting question. And you're right. You know, one of the main differences since the survey was held was obviously the election, the aftermath, the inauguration, and then the confluence of events that's happened since that point in time.

You know, as, as everybody likes to believe, whatever we're going through at this point, this time is different, but in many cases the recent uncertainty is actually a grouping of several experience that many of the directors and hopefully many of the, the members of the executive suite have had separately, but maybe not together.

Some examples include the recession. Uncertainty of future and contagion risk during covid lockdown and the immediate aftermath, the great retirement, remote and hybrid office environment. Dealing with those issues during the supply chain and inflation crises round one of the Trump tariffs, even going back to 2007, 2008 and, you know, through 2010.

You know, the big recession that we had there. The challenge is to be able to deal with all these issues simultaneously, which is something that many executive teams and even many directors have not experienced. Um, and that's a, that's a, big challenge. You know, during the financial crisis back in 2008 through 2010, we had many of these same issues happening at the same time, except that they were all related to.

Workforce, lack of demand, how do you manage, your company and how does the board allocate capital, for maximum effect in essentially environments where demand had dried up? In this point in time, it requires the board and, and executive teams to work collaboratively with management, really at the same levels that they found themselves working and interacting during early Covid exploring scenarios, making the capital allocation decisions and when necessary. Thinking about the things that are going to be the short term and the long term benefit of the company.

Meghan Day: That makes a ton of sense. And I, think in regard to the hot topics right now around trade and tariffs more specifically, you know, is there anything that makes the current disruptions especially difficult for today's boards?

You know, any strategies that you suggest for companies to adopt to remain competitive and resilient right now?

Brian Kushner: Obviously the tariff issues are, are challenge. And as I said in the answer, previously, companies and boards have seen many of these elements before. And those that are still around had a successful playbook.

During the inflation and supply chain crisis, for example, inventory and working capital levels were adjusted. In order to provide greater flexibility, teams re-engineered products to capitalize on second sources or more reliable sources, or maybe in this case, um, sources without that aren't as expensive and they modernize their processes to mitigate excess steps.

Maximize quality impacts during the manufacturing processes and business activities. A big challenge, and this is one that's kind of changing daily, is the overlay of compliance. And what some have termed, weaponized regulatory, we don't really know what's going to happen each day and each day can provide a new surprise.

So, you really have to focus on not necessarily just adjusting for the short term. But also, how does your long-term strategy get integrated into that? And that's where the challenge and benefit of experience from the board can really help a management team guide through this crisis.

Meghan Day: That's great advice and one that I had not spent a lot of time thinking about that.

Hopefully you do have a group of people around you if you're an executive who have seen some of this before and can really lend their expertise to, to guide the ship during uncertainty.

Brian Kushner:That's important for many boards and really in terms of optimizing the feedback on and collaboration that the board can provide to the management team.

This is an area where their experience and having been through several successive. Problems is beneficial. Now, I know that, you know, I believe 2024 was the highest year of CEO turnover, and that exceeded the prior record, which I believe was 2023 and several forecasts that 2024 might given everything that's going on might be even a larger unit when you add in changeovers of COOs and CMOs and CFOs, etc. You know, there's just a lot of executive turnovers. So, at the same time, boards are going to have to manage the stabilization of the environment of the company, along with recruiting new executives and getting them instantiated into their positions. So that's going to be an additional complexity that right now many boards are thinking that.

That may not necessarily be an additional challenge that they're facing. And then an additional overlay to that, as we see very often, board refreshment. And soit's always good to have a few directors’ kind of lined up so that you know that in times of board refreshment, you have some specific people that you can bring in that'll help optimize and focus on whatever challenges the organization is dealing with.

Meghan Day: Great point. I want to shift gears slightly and, and talk a little bit about another area in your background around board members and, activist investors and are, are What Directors Think survey saw some concern about actor, activist investors. Decreasing from previous periods, only about 11% of directors surveyed consider shareholder engagement and activism to be a top priority for their organization.

You know, some early findings from this year's proxy season are showing that successful activism is looking like it's going to be on the rise. So, I would love your take on maybe some common misperceptions that boards have about activist investors and why is a decreased concern about them, maybe especially dangerous both now and in general.

Brian Kushner: Great question and frankly, when I saw that level in the What Directors Think survey, I was surprised by that response. I will say that boards that are less concerned about shareholder engagement and activism do so at their peril. While activists can be opportunistic very often, they're frequently researching a company years in advance of investing.

Having evaluated the company, its shareholders’ benchmarks, consulted with experts, competitors, and very often former employees. And given how many large institutional investors overlap on public companies, there's a high likelihood that activist investors know any individual companies, institutional shareholders as well.

If not better than the company. So, this is a real area of concern and, and obviously given fluctuating valuations, volatility in the market, there could be opportunities for activists to increase and as well as take advantage of opportunistic situations. Part of this can be dealt with by enhanced shareholder communications and engagement, and I believe this is an area where many companies can improve shareholder and governance, communications, you know, generally are best when they clearly address the questions and concerns of an investor.

And companies often forget that. Investors are dealing with an inordinate volume of proxy communications that they must digest, make decisions about voting, and the fact that there's always an information asymmetry between companies and their investors, which can often persist in their governance communications.

The best proxy statements, the best, you know, communications and investing engagement with shareholders. In addition to the kind of the required disclosures, focus on questions from shareholder interactions and can include. Information to bridge that gap and really take on information that's valuable to the investor from their perspective and help bring down that information asymmetry or gap.

Meghan Day: Well, let's zoom out a little bit. How do you see the role of corporate boards evolving in the face of all this uncertainty we've talked about today? You know, are there specific governance practices or structures you believe should be prioritized to help boards be successful here?

Brian Kushner: Great question again.

Governance tends and governance trends tend to go in waves, many of which can last up to a decade or more well before being replaced by the new hot thing. As I'm sure you can imagine, many of these trends start in the S&P 500 migrate to the Russell 3000 and private companies over time. For many companies, you know, the board governance is support itself and three statutory committees and those three statutory committees, you know, audit, comp and nom gov are getting new responsibilities with audit, often absorbing risk comp, absorbing human capital, and I'm absorbing environmental, social and education.

What's happened is this has led to longer and more frequent committee meetings in addition to longer and more frequent board meetings. And then when you have those specific committees, you wonder, okay, where do I put in governance of AI, supply chain, cyber technology, ERM, compliance, and anything else that bubbles up as a concern to the board.

One way of dealing with that is, many firms have added a fourth committee, to the mix and have, and some have added a fifth committee. Some of these take the form of an executive committee focused on operations. Others are like a finance committee, which has forward-looking, uh, activities associated with risk and the financial structure of the company and relieve some of the burden on the audit committee or the Science and Technology Committee for those who are either, you know, digitally native or technology oriented, which can be important governance mechanism for those companies as well as even for non-digitally native companies. And finally, a risk committee, which often absorbs compliance to highlight risks and also further reduces burden on audit.

As well as, helps address some of the items that come up in the middle of board meetings. Upside of the additional committees is that there is more segmentation on focus in committee work and the ability to divide up activities and play to individual director strengths is really good for allocations, for larger boards.

And my personal belief is it helps, really focus and enhance the governance of the company. The downside is that additional committees involve a lot of work and many high performing boards benefit from. Having all the members go to all committee meetings, which is an additional time burden, and I recognize that, you know, even at the risk of increasing this burden on directors, I often recommend that all directors attend all committee sessions in order to increase the breadth and depth of understanding and improve overall governance.

Meghan Day: Great, great food for thought there, Brian. Before we wrap up here, any final thoughts or advice to share with our director audience on some lessons that they can apply right now?

Brian Kushner: Well, I, guess the, most basic one is that in many cases we've seen all the pieces of the current uncertainty profile previously, and directors boards and, and C-suites might benefit from just segmenting them, understanding what's necessary in order to maintain their financial viability and figured out how to apply the lessons learned.

In the last 10 years, what they learned in Trump won, what they're learning from the exceptions to the tariffs, what they're learning from the compliance risks, what they're learning from there, you know, international activities. And figured out how to maximize shareholder value for the long term, not just always be subject to the short-term decisions.

Meghan Day: Great advice. Well, let's ask you a couple of questions that we ask all of our guests. The first is, what do you think will be the biggest difference between boardrooms today and 10 years from now?

Brian Kushner: Great question. I assume you mean other than having more committees and more committee meetings,

Meghan Day: You can take it any direction you'd like.

Brian Kushner: Okay. You know, I think that one big example is going to be active deployment of AI in the boardroom. Not much of a futurist and generally today AI shows up in a boardroom, either, you know, assisting in presentations and demonstrations or as personal assistance in chatbots, but we're not yet seeing the collective benefit or group interaction with AI or that AI has learned from participating in prior board meetings and committee meetings and can provide dynamic assistance, assessments, other than, taking better notes so that when I'm able to do the summary of an audit committee or a technology committee and, and a board meeting, I have some benefit from that. but I think that that's going to be a real differentiator and also help streamline some of the burden that I just identified previously.

And I think it'll be a collective benefit and, and maybe even, a repository for future enhancements for board and committee meetings.

Meghan Day: What was the last thing you read, watched, or listened to that made you think about governance in a new light?

Brian Kushner: Well, that's an easy one. The thing that was surprising to me were some of the results as we just spoke about, of this year's What Directors Think survey, we're so many critical concerns of the last five to seven years in activism, supply chains, human capital, inflation, environmental and social.

We've all considered lower risks for 2025, and obviously I, don't think that's shaping up to be the case.

Meghan Day: Very fair. Well, Brian, last question for you. What is your current passion project?

Brian Kushner: Well, as I'm mentioned at the outset, you know, we've moved to a new city as of last week to be closer to our daughters, and so really learning my way around Dallas, taking advantage of time to travel and, visit fellow board members. That’sprobably project A. Project B is, I'm a, I'm a cancer survivor and a few years ago after my surgery, I lost independent control of my right ring finger. But it's begun to come back a little bit and as a guitarist, I'm trying to relearn many of the songs and, both, from classical Spanish, jazz, etc. that I had known before and be able to adapt them to my new playing style. So that's also a lot of fun.

Meghan Day: Well, we wish you a lot of luck on that endeavor.

Well, Brian, thank you so much for joining us on the show today. We really appreciate it.

Brian Kushner: Megan totally my pleasure. I really enjoyed it and look forward to the next opportunity to be together with you and the members of the Diligent team.

Meghan Day: Great.

Brian Kushner: Thank you

Dottie Schindlinger: Megan, thank you so much for that interview. It was really great that you had a chance to speak with him.

Meghan Day: He's got a wealth of experience, and I think that experience reminded me of something, and hopefully our listeners too, that you know, this idea that not one-to-one, that we've all been through this before.

Certainly, there are nuances to this VUCA world right now that are different than other points in history, but hopefully you do have that wealth of knowledge and experience around your boardroom table, that you're able to come together and think about this, not only in terms of what has happened in the past, but collectively brainstorm it and think through what could happen in the future.

You know, the idea of board members being able to see around corners is one that we always joke about. They wish they have but that power can really be unlocked when you get 10, 12 people in a room together to really think strategically,

Dottie Schindlinger: 10, 12 people in a room together who don't all look and think the same and are using AI.

I mean, truly, right? I think it's pretty soon going to be table stakes that you need to have AI assistance. To really help you truly see around the corner. Because they, I really do believe we are on the cusp of a new era where directors are going to be supercharged in this way, where they actually can see around the corner because they have the sum total of human knowledge helping them to understand what might be happening next, how to react to it, and what the outcomes are going to be if they do X, Y, or Z in certain conditions. And it can make those kinds of determinations in real time for you and really help you better support your CEO and make better strategic decisions.

Dottie Schindlinger: What do you think, Meghan?

Meghan Day: Who's held liable though if the AI is wrong, still the board member.

Dottie Schindlinger: It's a fair question. I think. Unfortunately, it's probably still the board member, right? Doesn't the shareholder want a human to sue? Yeah, that's true. Well, Meghan, that wraps up particularly silly episode of the Corporate Director podcast, the Voice of Modern Governance.

I'm Dottie Schindlinger, and I've been joined by Meghan Day. I'd like to say a few special thank yous, first and foremost to our fellow governance geek, Brian Kushner from FTI Consulting. Podcast producers Kira Cicarelli, Steve Clayton and Laura Klein, our sponsors, PwC, KPMG, Wilson Sonsini and Meridian Compensation Partners, and most especially to Diligent for putting up with this show.

If you like our show, please give us a rating on your podcast, player of choice. You know the drill. Five stars only please, and you can also listen to our episodes and see more from Diligent Institute by going to diligent.com/resources. Thank you so much for listening.

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