A decade ago, the Financial Crisis shone a spotlight on Boards and found them wanting.
Over the past 10 years much work has been done to fortify the effectiveness of Boards. Arguably this has been a godsend given the complexity and challenge facing Boards today.
As all major economies face a time of profound and disruptive change, business has an exceptional role to play in shaping the future and, as such, Boards are being asked to address questions and make decisions for which there are no easy answers and no ready templates.
In Fidelio’s assignments with Boards internationally, there are five major questions that are high on the Board Agenda. These questions require understanding and judgement making the role of the Board Director both vitally important but also exceptionally interesting for those who are curious to continue learning.
We will also address these five tough questions at Fidelio’s upcoming “A Seat at the Table” Board learning programme, drawing upon our experience and insight, as well as the expertise of Chairs and Directors internationally.
Read on to see how Fidelio and our key contributors, experienced Chairs and Non-Executive Directors, will address these five thorny questions on the Board Agenda:
1. How does the Remuneration Committee Chair establish ESG KPIs?
ESG is becoming non-negotiable, in particular for listed companies. Companies that fail to make progress will limit their access to capital and risk the licence to operate. As companies adopt ESG policies and strategies, investors expect a linkage to remuneration and vote against Boards that fail to achieve this. But ESG metrics are in their infancy; they are varied and frequently not comparable; and based on imperfect knowledge these metrics will almost certainly have unintended consequences. With experienced Chairs and ESG experts, including Emma Howard Boyd, Chair of the Environment Agency, “A Seat at the Table” will explore how a Remuneration Committee Chair can approach this challenge; the importance of heavy lifting and the need for strategy; as well as the pragmatism and communication skills which must accompany a remuneration framework that has to be capable of change and evolution. These themes were laid out clearly in recent webinar where Gillian Karran-Cumberlege explored with Julie Baddeley, Chair of Chapter Zero, Richard Gillingwater, Chair of SSE plc & Janus Henderson Group plc, and Susan Hooper, Remuneration Committee Chair of Affinity Water, how to define KPIs for the ‘E’ in ESG.
2. As a Board, how to achieve diversity?
Certainly, Fidelio sees diversity firmly on the Board Agenda. While gender diversity was slipping as a priority for many companies early in lockdown, Black Lives Matter has placed diversity firmly on the Board Agenda. Experience and research have demonstrated that most companies aspire to greater diversity and at the very least recognise that diverse voices at the leadership table provide effective risk mitigation. Most companies also see that diversity and inclusion creates significant benefit and opportunity. While achieving diversity is aspirational it is also far from easy. Many Boards struggle. In “A Seat at the Table” we will explore the Board’s role in driving and embedding diversity within the organisation. To challenge our thinking, Fidelio welcomes Ann Cairns, Executive Vice Chair of Mastercard & Global Co-Chair of the 30% Club, and Margaret Casely-Hayford, Chair of Shakespeare’s Globe Theatre. We will also draw upon Denise Wilson’s earlier contribution as Chief Executive of the Hampton-Alexander Review, defining with Fidelio the role of the Board in driving diversity and building an inclusive culture.
3. How to have firm Board oversight of the algorithms underpinning the business?
Most business operations and government departments relyincreasingly upon AI and algorithms to make myriad and important decisions. Indeed, the recent exam results fiasco in the UK has highlighted:
the risks of relying on algorithms,
the disastrous repercussions when they are poorly designed,
and the inherent governance challenge.
As a Director how do you gain comfort that you have adequate understanding of the technology that underpins the business and can provide the governance required? This is relevant for each and every Board Member whether from a technology background or not. At the upcoming “A Seat at the Table” programme we will tackle ‘Governance and Data, AI & Trust’. To guide us through the challenges we will welcome Ann Cairns, Executive Vice Chair at Mastercard & Member of the UK Government’s AI Council, as well as Cyrus Ardalan, Chair of leading FinTech, OakNorth Bank. Marketing has also been revolutionised by AI. Genuine customer focus is required and Francesca Ecsery, Non-Executive Director at Air France and F&C Investment Trust, will enable us to think through the Board’s role in a digital world.
4. How to build a strong and effective Board relationship with the regulator?
A key outcome of the Great Financial Crisis for Financial Services Boards was an exponential increase in regulation. Much of this regulation has stabilised the system, so important for the crisis we currently face. But there are also instances of regulators trailing the pace of change, acting as a brake on innovation and serving to prop the existing players and business leaders at the expenses of new entrants and diverse talent. Fidelio will explicitly explore this regulatory relationship in Financial Services and other regulated sectors in the forthcoming “A Seat at the Table”. We will be joined by Sam Tymms, Managing Director at Promontory and Risk Committee Chair at DWF, as well as Cyrus Ardalan who chairs two major Financial Services organisations. Boards need to be compliant but increasingly they also have a role in setting and influencing the regulatory agenda. With an eye to surely the most pressing systemic risk of all – climate change – Emma Howard Boyd will also shed a light on how Boards can contribute to the good regulatory frameworks, so critical for business, society and the planet.
5. As a Board how to establish trust?
As business went into lockdown it became clear that Boards and businesses would be judged by how they treated employees. The same holds true as business returns to work.
Equally as a Board, how have you formulated decisions on dividends and remuneration? Have you accessed state aid? How have you balanced the interests of shareholders and stakeholders?
Boards are being called upon the to exercise judgement – this is the role of the Director. Too frequently decisions need to be made on imperfect information. How does the Board ensure the best possible basis for a decision? How does the Board engage and communicate when circumstances change?
With Ed Humpherson, Director General for Regulation & Head of the Office for Statistics Regulation at UK Statistics Authority, “A Seat at the Table” participants will explore the importance of trust for Board Members – their trust in the data and the information that underpins key decisions and, as a Board, the importance of building and maintaining the trust of key stakeholders and shareholders.
Board Directors need broad shoulders to carry the weight of expectations of stakeholders from government to the public: employees, suppliers and customers, as well as shareholders. Beatriz Araujo, Partner at Baker McKenzie and Expert on Governance Projects at WEF, will draw upon her international governance experience as to how leading Boards develop the trust that governance is based upon.
To learn more about Fidelio's “A Seat at the Table”Board Learning Programme, contact Amy at firstname.lastname@example.org.