The urgency of ESG has become intense. It is a prism through which companies are selected and judged. Its KPIs have become determinants of success for the Executive and the Board needs to care. Complicated, contradictory and urgent, ESG makes very real demands on the Chair and the Chair ignores ESG at her or his peril.
Through Search and Evaluation, Fidelio sees ESG shaping the role of the Chair.
Environmental, Social and Governance factors are emerging as a major challenge for business, as climate change climbs the Board agenda and the COVID-19 virus reminds us of the fragility and interconnectedness of our world. Fidelio was therefore recently pleased to host a Chair breakfast on “ESG and Expectations for the Chair”. We welcomed a distinguished group of FTSE and international Chairs, as well as Board Members from across a range of sectors. A key participant was Anne Broeng, Chair of Velliv and Board Member at ATP and NASDAQ OMX Nordic, who brought the Scandinavian Chair and investor perspective.
In particular Fidelio’s debate shed a light on:
- how the investment community is responding to the ESG challenge
- and, in turn, what investor demands mean for Chairs of companies they invest in.
In this Overture Fidelio reviews how the role of the Chair is evolving to accommodate the demands of ESG, in particular:
- ESG Investor Trends
- Engagement vs Divestment
- Alignment of Interest / Alignment of Horizon
- Chair Challenges
- Alternative Realities for the Chair
- Attracting Talent
- The Role of Government
- Business and Regulation
- Changing Behaviours – Flying Less
- New Standards
- The Chair and ESG
- ESG Investor Trends
The Chair and ESG
Fidelio’s Chair breakfast highlighted that ESG:
- represents a significant context shift for Boards,
- is increasingly important for investors,
- and is driving behaviour change in companies.
This has clear implications for the role of the Chair. There are three clear requirements for the Chair:
- The ability to interpret a complex ESG landscape and to recognise how shifting social, political and regulatory expectations can have a very profound impact on the business model and outlook
- A firm grasp of value that satisfies both shareholders and stakeholders
- An understanding of communication and engagement, in order to guide and challenge the executive in conveying core messages about value, purpose and strategy.
There has been much focus recently on the lack of diversity among Chairs of leading companies. Fidelio has previously argued that incorporating the skills set out above into the Chair role will very clearly widen the pool of eligible candidates and increase Chair diversity.
Stakeholders and shareholders require Chairs to step up to the plate on ESG. This requires a strong moral compass, an ability to navigate complexity, a firm understanding of value and strong engagement skills.
Without these skills around the Boardroom table, Boards will not be able to master the ESG narrative and support the executive in acting upon that narrative.
For the full analysis of ‘ESG – Expectations for the Chair’, click here.