Board governance in today’s world isn’t for the faint of heart. Board directors must learn how to govern in an era of increasing digitization which has brought new and complex issues like a volatile economic and social climate, and disruption. When we add the challenges caused by innovation and globalization, it’s easy to see that board directors need to be able to think on their feet, be inquisitive, and respond to a variety of circumstances as swiftly as possible.
In today’s corporate world, it’s not uncommon for new businesses to spring up overnight and threaten to put long-standing companies out of business in short order.
In addition to strategizing to stay ahead of the competition and competing with new types of businesses, today’s boards are challenged with having to quickly address public scandals, cyberattacks, data breaches, sexual harassment, and a host of other hot-button issues. We can add activist investors, a demanding marketplace, and public concern over fraud to the list of major board concerns. These issues and more have made it increasingly difficult for shareholders and stakeholders to trust boards of directors and other corporate leaders.
All in all, governance is undergoing a transformation of its own. There’s a renewed focus on governance, board composition and its relationship to performance, and risk management especially as it relates to cybersecurity.
Today’s effective boards are digital boards, and that requires creating value, being adaptable, strategizing for success, addressing risk, and being accountable in governance.
Digital Boards Create Value
In the beginning stages of starting a company, the excitement and momentum of early success were often enough to keep the company on the right track. As time goes on and the market changes, board directors are tasked with how to keep that momentum going.
Disruption and digital transformation pose major challenges for today’s companies. As a result, boards need to keep these issues on their agendas and continue debating them. Boards need to make many new decisions about if or when to introduce new products or services and if they should transition to an entirely different offering to stay viable as a digital board that functions in a digital world.
Shareholders are becoming increasingly demanding and vocal. Board directors are having to evolve their practices to keep up with stakeholder concerns.
They need to keep more closely in touch with changes on many fronts, so they’re better poised to address trends and developments. To create greater value, boards need to learn new things from their own industries, as well as from other industries.
Boards must focus more intently on the long term and use candid discussions to strengthen how they function as a whole board. Deeper conversations with an eye on growth are the key to enhancing value creation.
Digital Boards Are Adaptable and Resilient
Many forces join together to create unpredictable and uncertain circumstances for boards. Strong governance and an environment of trust help boards to create value, manage risk, and successfully navigate today’s uncertainties.
The lack of oversight causes boards to become reactive rather than proactive. The cure for this is for boards to be resilient and adaptable on the front end. Fraud, data breaches, and crises happen when the board doesn’t have the right information at the right time to confront issues in a timely and direct manner.
Boards need to get the right people on the board and in executive positions to be able to be adaptable and resilient. Corporate leaders need people who are willing to challenge each other. Board meetings shouldn’t always be easy and uneventful. It’s important for board directors to be respectful and collegial and it’s even better if they’re candid as well.
Digital Boards Address Risk Existing and Emerging Risks
As the media produces negative reports about such issues as data breaches, sexual misconduct, regulatory violations, and other issues, it places an urgency on risk management. Such reports leave stakeholders asking, “Where was the board of directors?” They also want to know what the board knew and when and why they failed to act. The lack of board oversight can quickly destroy a company’s bottom line and reputation.
To address these issues successfully, boards need to educate themselves more and better on emerging issues like cybersecurity, secure digital communications, and other valuable digital software solutions like BoardEffect’s board portal. They also need to keep in better touch with management. Digital boards are eager to use technology to obtain the right information so they can discuss it, debate it, research it, and act on it. Digital boards also know when they need to form committees or risk teams to keep the board informed on whether the news is good or bad.
Digital Boards Strategize for Success
Companies that once graced shopping malls and their perimeters like Toys R Us and Borders enjoyed a long stretch of profitability. Seemingly overnight, they closed up shop. Strategy makes a big difference in the companies that survive the times. The marketplace is now a place where companies can enjoy great success or devastating failure at the drop of a hat.
Vision can help bring a business to life. Boards need to execute the vision by making strategic decisions. Governance professionals provide valuable leadership and guidance in these areas.
It’s customary for boards to spend much of their time reviewing financials and other reports. Digital boards need to dedicate more time to strategizing for the future. Today’s norm finds board directors often taking a more hands-on approach by touring facilities, talking with management, checking in with customers or key investors and other stakeholders.
Digital Boards Commit to Accountability
Many companies are beginning to factor ESG in their investment decisions and chart the progress of their initiatives because it’s an issue that is of importance to stakeholders. There are detriments in the wings for companies that fail to consider ESG. Boards and executives need to better engage with stakeholders and get their feedback so they can grow in ways that satisfy their stakeholders and fulfill their bottom-line demands and make a positive imprint on the communities they serve.
The digital age is here to stay. Boards have many challenges to face now and in the near future to thrive and remain competitive so that they don’t become a once famous and successful bygone company.