This newsletter’s Table of Contents is as follows:
- Governance 2022: multidimensional landscape brings board challenges
- Rethinking your Board Chair’s Leadership for 2022
- Cybersecurity and data privacy
- Human capital concerns take center stage
1. Governance 2022: multidimensional landscape brings board challenges
Governance in 2022 will see shifts to accommodate a range of other issues. Here are nine future governance forecasts that are on – or working their way through – governance agendas:
- Non-financial reporting regulation will increase
- Mandatory climate reporting (“ESG”) is coming FAST! Be ready!
- More serious attention is needed to enhance cyber security and address alternative payments technologies (e.g. bitcoin) – See Topic #3 below
- Board oversight of “organizational culture” especially employee engagement is required – See Topic #4 below.
- Mandatory diversity quotas (i.e., more than gender) for all listed companies – the board should reflect the customer and employee base
- Mandatory engagement between boards and large shareholders is needed with agendas publicly disclosed
- Sunset clauses need to be put into force on all dual-class shares (i.e., voting versus non-voting shares)
- Term limits need to be considered for directors
- Measures are required to address executive pay through regulation of pay consultants and the highly contested area of “peer benchmarking”
Source: Board Agenda and Richard Leblanc
2.Rethinking your Board Chair’s Leadership for 2022
With an understanding of the collective mindset of chairs today, Deloitte identified nine areas that chairs are keeping front and center as they seek to transform their boards for the future. These represent not only the substantive matters boards oversee, but also their processes, and how the two intersect and may need to evolve.
i. Board composition
Disruptive issues such as crisis resiliency, technology, cyber, and the future of work are demonstrating the importance of a mix of competencies and experiences as a critical element of board composition. There’s also a positive dynamic at the intersection of demographic diversity and diversity of skills.
ii. Board education
Chairs are experimenting with techniques to encourage a mindset of continuous learning through formal programs and otherwise to stay knowledgeable on the areas affecting their organizations, to enhance directors’ ability to govern effectively, and to help new directors on board.
iii. Board meetings and materials
Chairs are giving careful consideration to the pre-reads and other materials provided to the board and to the conduct of the meetings themselves. They are also focusing on and rethinking details that may have been “givens” in the past but that can make a great difference in the time available to boards and committees of the future.
iv. The board’s role
Chairs are giving considerable thought to how the role of the board could and should evolve. As one chair points out, get comfortable with change.
v. Committees
Chairs are thinking about the roles of these committees, whether other committees are needed, such as a talent committee, and how the role of committee chair can help to improve individual directors’ performance.
vi. Corporate purpose and the role of the corporation
Until recently, the purpose of the corporation and its role in society was not on many boards’ agendas. This is yet another topic to which the chairs have given considerable thought.
vii. Management succession planning
Boards are reassessing what it means to be a successful CEO in today’s environment. Chairs are (finally) treating CEO succession planning as a significant responsibility.
viii. Stakeholder engagement
The interviews conducted in countries outside of the United States suggest that one of the key roles of the chair is that of “company ambassador”, but maybe viewed differently within the United States, where the role of company spokesperson is generally regarded as residing with management rather than the board or its chair.
ix. Strategy
Chairs are recognizing strategy as being dynamic and is discussed at many, possibly all, board meetings throughout the course of the year.
3. Cybersecurity and data privacy
The topic of cybersecurity immediately suggests familiar threats of ransomware and phishing attacks. However, another threat more recently has come into focus: third-party risk. Companies have had vulnerabilities exposed through their electronic connections with vendors and suppliers.
How boards can be proactive Given how cybercrime has accelerated during the pandemic, boards should be well-versed in their organization’s data governance program—the strategy by which it manages the data used for business operations.
Perform a risk assessment so you know what type of data you have. Rank sets of data by risk factors. Clearly, the higher-risk data that may be sensitive in nature—it could be PII (personal identifiable information) or proprietary data—you want to protect that the most.
Boards also can evaluate the strength of the company’s efforts to enhance internal awareness of cyberthreats and train employees in best practices to combat social engineering risks, such as harmful emails.
Sometimes, the weakest link is inside the organization.
Questions boards should be asking
- What are the information technology department’s processes for ensuring software is updated with critical protective capabilities?
- What are the costs and benefits of various risk mitigation strategies, such as purchasing cyber insurance?
- What new technologies are being implemented by the business and its third-party partners, and what risks are associated with those?
4. Human capital concerns take center stage
A confluence of changing workplace policies and talent issues—and what those issues mean for the resulting company culture—require more board time and focus.
And as companies weather the Great Resignation, directors are now seeing highlighted talent management as the No. 1 place they would like to spend more board time in PWC’s Annual Corporate Directors Survey.
And this trend is intensifying!
Ensuring the company has the talent it needs is a basic building block for success. As that goal has become more challenging, boards are getting more involved.
Where and how talent is working has also become a board-level issue, as companies’ policies run the full gamut and continue to shift in response to evolving circumstances.
Employee retention as well as their health and safety, are board issues today.
Boards are already relying on more data for talent and culture monitoring, culled from employee engagement surveys, exit interviews, customer feedback, and other sources.
This need for data will grow, as directors dig further into these areas.
