This newsletter’s Table of Contents is as follows:
- Cyber oversight and Board Member “Cyber skills/Experience”
- WARNING!! Climate Strategy Gains Importance as Exxon Loses Two Board Seats
- Three BIG priorities for boards to shape their organization’s strategy
- Board of the Past Won’t Take Your Company into the Future
1. Cyber oversight and Board Member “Cyber skills/Experience”
With breaches continuing to dominate the headlines, cyber-security and cyber risk remain among the top areas of investor, regulator, consumer, and other stakeholder focus, with growing pressure for businesses of all types and sizes to articulate how they are actively managing and mitigating the risks. Boards are expected to be well-informed about their company’s cyber posture and to demonstrate effective oversight. In a March 2021 survey of in-house members of the Society for Corporate Governance about how their companies’ boards oversee cybersecurity and cyber risk, Deloitte found the following:
a. About 70% of large-, mid-cap, and private companies report having one or more board members with cyber experience. About 57% of small-caps said one or more board members have cyber experience.
b. Among public companies, 11% said cyber experience is a top recruitment priority in the next one to two years.
c. Cyber is on the agenda annually for 46% of companies. The remainder of responses was spread across quarterly (13%), biannually (15%), every meeting (5%), never (5%) and other (17%).
d. Management expertise was cited as the most common resource the board uses to stay current on cyber risk, as reported by more than 90% of companies.
e. More than half of the large- and mid-cap companies and private companies and nearly 70% of small-cap companies reported the use of outside/external advisers and relevant briefings and publications provided by management.
f. About 50% of public companies cited cyber expertise on the board compared with 31% of private companies.
g. Among all companies, more than 36% reported board in-person or online education as a resource.
2. WARNING!! Climate Strategy Gains Importance as Exxon Loses Two Board Seats
Engine No. 1, a self-described “purpose-built” investment fund, began its “reenergize Exxon” campaign last year to persuade the company to lay out a serious plan that could lead to sustained future growth if the world moved away from the use of fossil fuels. The hedge fund put forth a slate of four directors it hoped to add to Exxon’s board and won support from several of the oil company’s largest shareholders, including BlackRock, State Street and Vanguard.
Source: Corporate Board Member
3. Three BIG priorities for boards to shape their organization’s strategy
Following a year of widespread disruption, boards are balancing competing priorities as they help their organizations navigate this era of accelerated change. In addition to managing the operational disruption caused by the COVID-19 crisis, they must respond to emerging economic, social, regulatory, and technological trends while reacting to the ever-growing investor and stakeholder demands.
- is vital in this complex and fast-changing environment. Boards should rapidly re-appraise their priorities for 2021 so they can shape their organization’s strategy and adapt it as circumstances evolve. This will noticeably change the governance discourse and lead to new challenges for boards and audit committees in successfully fulfilling their steering and oversight role.
As well as COVID-19, a recent study by EY identified three key priorities in addition to the COVID-19 pandemic that boards should focus on to drive short-term and long-term value for organizations during 2021. They are:
- Boards have both a responsibility and an opportunity to help their organizations transform into sustainably-led businesses that create long-term value.
- With cyber threats greater than ever before, boards should have a set of insightful key performance indicators and receive regular reporting from management.
- A challenge for boards is to provide robust oversight around the organizational culture to ensure that the culture evolves to reflect the broader societal change.
4. Board of the Past Won’t Take Your Company into the Future
Forget the old board model; build a resilient board for opportunities and challenges that lie ahead. We’re in a new world — one that requires a new paradigm of management leadership and board oversight.
Post-pandemic boards will require new — and different — competencies and skill sets in increasingly important areas such as AI and automation, risk management, supply chain optimization, transformation and process redesign, mobile workforces and satisfying stakeholder demands for environmental, social and governance objectives.
And, to do so, they need diversity — in thought, experience and background in addition to diversity in age, gender, race, and ethnicity. Today’s boards need directors who have an agile, open mindset and are committed to continuous learning.
The following are a few questions to ask yourself as you re-examine the composition of your current board:
- How does our board makeup compare with our customer base, products, geographies and communities?
- Do we have the right skill sets, experience and competencies on our board? Are there any gaps that we may need to fill in the coming year?
- Do we have a variety of perspectives and background experience represented on our board?
- How does our board makeup compare with our organization’s stance on diversity, equity and inclusion?
- Are we working effectively and collaboratively with management or is there an opportunity for improvement?
It would be easy to fall back into old patterns and habits and pretend the past year never happened! Many board members (and employees alike) want nothing more than to go back to the way things were.
But old ways of doing things may no longer fit the new reality. So, you have to know when you need to get more help. This may be an opportune time to consider engaging advisors to help you evaluate your current board, including looking at the experience and competencies of current members, identifying any gaps in your board structure, and developing a multi-year plan for evolving your board to better fit your long-term goals and strategy in the new normal.
Source: Directors and Boards
