Pressures on corporate boards members and chairs have increased significantly in recent years. Alongside traditional duties around corporate governance and compliance, today’s board directors must also navigate big, thorny issues relating to sustainability, DE&I, innovation, and digital transformation.
Whether you already serve on a board or are looking for your first board role, it is important to understand how expectations on board members are shifting.
We look at the traits and skillsets that are in high demand today.
A sustainability mindset
Sustainability has quickly climbed to the top of the corporate agenda. A broad set of stakeholders—investors, customers, employees, and communities—increasingly expect businesses to play a critical role in addressing societal challenges. At the same time, there is mounting evidence that sustainable business practices boost financial performance and shareholder value. Doing good is inexorably linked to doing well.
Sustainability is now a leadership imperative. All directors should now be able to engage with the challenges and opportunities around sustainability—and help pivot their organizations towards a more environmentally conscious, equitable, and profitable future.
Working with the United Nations Global Compact, we recently defined the specific skills that board directors will need if they are to embrace their role as changemakers and drive real progress towards sustainability outcomes:
- A Sustainable Mindset: Firmly believes that both sustainability and profit are in the organization’s best long-term interest.
- Multi-Level Systems Thinking: Integrates economic, societal, and environmental factors into a purpose-driven strategy, turning sustainability into a competitive advantage.
- Stakeholder Inclusion: Understands and incorporates viewpoints from all key stakeholders to drive decision making and share the benefits.
- Disruptive Innovation: Delivers breakthrough innovations and business models that create value for all stakeholders, continually challenging traditional approaches.
- Long-term Activation: Sets audacious business and sustainability goals, driving concerted action and investments, and stays the course in the face of setbacks or push-back from short-term oriented stakeholders.
The courage to champion diversity at all levels
In a recent Russell Reynolds Associates’ survey, 67% of NomCo chairs said DE&I expertise is important for new board directors. One director we interviewed, who serves as a nominating and governance committee chair, asks director candidates “how they advance greater D&I in their various walks of life. […] If they say it can’t be done, that is concerning. A fatalistic response is a sure death. They won’t be helpful and may be obstructionist. So, they’re a burden not worth putting on the board.”
Today’s board leaders must be avid champions of diversity at all levels. This includes increasing the diversity of slates for CEO roles and other senior executive teams, ensuring succession plans identify a diverse pool of future leaders, and creating mentoring programs to unlock the potential of the entire employee base and prepare people of all backgrounds for leadership positions. It also means working to improve the diversity of the board itself.
Increasingly, directors also need to help lead conversations about the company’s political position and societal activities. This can be a complex issue to navigate. As one director told us, it requires the “courage to challenge, to be curious and to be prepared to do things that are maybe not fully embraced by shareholders.” The ability to pick when, where, and how to engage with issues will be critical.
An ability to build robust relationships with senior management
The relationship between board directors and senior management is critical to success in today’s fast-paced world. When we analyzed more than 350 supervisory directors across 12 countries, we found that highly effective board directors were 41% more likely to actively cultivate relationships with the broader executive management teams. This gave directors a better understanding of the strengths and weaknesses of business units. They were able to ask better questions, demonstrate better judgment on strategic issues, and constructively challenge management, when appropriate. No wonder that boards are increasingly looking for directors who can foster effective relationships with top teams, while also maintaining their objectivity, independence and oversight role.
The capacity to adapt and stay nimble
The Covid-19 pandemic challenged corporate boards in unforeseen ways. While many boards rose to the occasion, others found themselves unable to contribute or even causing unnecessary distractions. For example:
- Directors whose skills and experiences couldn’t keep pace when the company rethought strategies or pivoted to new products, services, and operating models.
- Over-boarded directors who couldn’t be counted on to show up for multiple crisis meetings.
- Sitting CEO and CFO directors who must necessarily pay attention to their own business first.
- Directors with too much time on their hands who overstepped into operations, wasting management’s limited time and resources.
Today’s board directors must remain abreast of current issues and challenges and focus on forward-looking, value-creating strategic issues. This means going beyond review and compliance responsibilities to complete strategic planning or review, providing oversight on major transactions and C-suite succession planning, as well as engaging in enterprise risk review, board refreshment activities, and crisis management scenario planning. Now more than ever, boards need future-ready leaders who understand how the world is changing—and are ready to act.