Board Agenda 2018

De accountants- en adviesorganisatie EY heeft recentelijk een nieuwe Board Agenda 2018 gepubliceerd. Een must read voor iedere bestuurder. Voor ons is het niet verrassend dat een groot aantal van de top prioriteiten voor de leiderschapsteams van bedrijven te maken hebben met thema’s waar The Culture Club Company zich met name op richt. Zo geeft EY als eerste prioriteit aan: Developing long-term value and defining corporate purpose. En verder wordt als prioriteit benoemd: Enhancing talent and corporate culture.Het hele rapport kan je hier lezen. De integrale tekst van de twee genoemde top prioriteiten geven we ook hieronder. Daarbij worden een aantal interessante vragen gegeven die leiders zich zelf kunnen stellen.

Developing long-term value and defining corporate purpose

Boards face a growing set of challenges in 2018, as greater scrutiny from stakeholders begins to gather pace. In short, boards must demonstrate how they plan to deliver sustainable returns over the long term. To a large degree, this has sprung from the trust deficit that has grown up around business in all sectors since the financial crisis. Growing mistrust of big business and short-termism, concerns over inequality, and demands for greater focus on sustainability and fairness — all combine to challenge and disrupt how boards perform.

Boards are now under pressure to articulate their long term plans in order to demonstrate an understanding of how underlying trends affect the creation of value in their business. That will take in issues such as energy use, employee satisfaction and diversity, and how they aid long-term value creation.

This is a reflection of the fact that different stakeholder groups have different priorities. Boards have grown used to communicating their short-term aspirations and performance, but must now widen that to discuss the drivers underlying long-term value creation. For instance, long-term investors seek different assurances from those demanded by other stakeholder groups.

In the past, board members enjoyed far more power over the company’s narrative: they could choose which parts of the story to emphasize. But, with greater access to information, investors are increasingly prepared to make their own judgments based on information they can glean from a range of resources.

This will involve a number of tools, including data mining, analysis and web scraping, as investors, analysts and others mobilize a new range of tools to build their own perception of a company’s performance and prospects. That will require not only a well-crafted response but also a proactive approach to shaping that narrative.

Given these trends, there are three key issues for boards to consider: first, are you being transparent in how your value creation strategy is transforming in a fast-changing political, economic and social environment?

The second question centers on how stakeholders are assessing the value the organization delivers for them. As a corollary to that, are your stakeholders’ rapidly evolving needs being recognized? How is that narrative playing out?

The third and final question is more intangible, but nonetheless one that cannot be ignored: the social contract that businesses have with society is coming under threat, so is the board genuinely engaging with all its key stakeholders to address that? Is the board clear about its corporate purpose, and does that purpose address all stakeholders? Just as important, is it delivering against that purpose and is it seen by its stakeholders to be doing so?

Boards that choose to sit on the sidelines of this fundamental debate run a serious risk. Society will drive politics, and that will drive regulation, which may hinder future plans. The Shareholders’ Rights Directive (SRD) is just the latest example of activist legislation aimed at realigning business with social good.

Failure to engage with these questions in the years ahead could represent a genuine threat. If boards don’t seize the opportunity and respond to the prevailing trends (diminished trust in business; the growth of a populist, protectionist agenda; and growing regulatory activism), they face a challenge in demonstrating long-term value.

Make no mistake, politicians across the world are expressing concern about corporate behavior and, for many, legislation is the next step. For many boards, there is little time to waste in developing and articulating an adequate response.

Questions for the board to consider:

  • Is the board clear on the company’s corporate purpose? Can it adequately summarize and explain it?
  • How does the board plan to measure the creation of value for its stakeholders?
  • If the board is on a journey of transformation, does it have the right metrics in place to measure its progress?
  • What would it take for the board to disclose these measures and regularly report on them to improve transparency and trust in the business?
  • How is the company aligning its strategy and business with long-term value concepts? If it needs to transform to do this, what is its approach?

Enhancing talent and corporate culture

Board members have a critical role to play in developing a healthy corporate culture that supports the company’s purpose and underpins the delivery of its strategy. Stakeholders increasingly expect to see board directors understanding and nurturing their company’s people as a key asset.

The links between diversity — both at boardroom level and beyond — and better corporate performance are growing in both strength and number. Boards need to grasp these links and ensure they are embedded into recruitment and talent management. Diversity does not simply mean ensuring a balance of ethnicities and gender in the workplace. It also requires boards to seek out and champion a diverse set of voices from a range of educational and cultural backgrounds.

By doing so, companies should develop a more innovative and engaged workforce. Increasingly, external stakeholders expect these issues to be measured and reported on. From basic KPIs such as employee turnover to more sophisticated qualitative analysis tracking staff engagement and productivity, businesses are now expected to monitor how their culture and people are affecting performance.

More transparency is expected on how their approach to performance management is working to nurture and develop these people assets. Stakeholders who are concerned with the long-term performance and sustainability of the business will expect to see boards empowering management to pursue innovative and effective hiring and development practices.

They will also want to see a culture of independence and challenge present at board level. That should include a well-crafted succession plan for senior executives that takes into account not only the requirement for technical and leadership skills but also the need to inject fresh impetus into the highest levels of the company.

Boards must be ready to be transparent with stakeholders. This includes how decisions are arrived at, how challenge and criticism are dealt with, and how standards of personal behavior are maintained. In an age of engaged stakeholders, setting the right tone from the top has never been more important. Not only should this increase diversity, it will also help embed in the corporate culture an ethos of openness to new thinking and a long-term view of risk and opportunity.

Questions for the boards to consider:

  • How is the company treating its people as a strategic asset?
  • Is the board clear on what sort of culture it wants to underpin the company’s purpose? If so, how is this being measured to ensure that it is on track?
  • How is the board approaching diversity and inclusion both at board level and within the company itself?