At Diligent, we have the good fortune of serving nearly 500,000 board members around the globe, each with a unique perspective on helping to guide organizations and providing good governance. To tap into this collective knowledge and share best practices, Diligent hand-selects a group of distinguished directors to come together twice a year in an exclusive location and discuss the unique challenges facing corporate boards.
For our third year of this series, we headed to Napa Valley in June and earlier this month, we had the opportunity to spend three days with a group of public company board directors in Lake Como. Both events allowed the group to share real life stories, discuss governance challenges (e.g., activism, #metoo, global risk) and of course, enjoy some fantastic local food and wine.
Our sessions are “Chatham House Rules” to encourage free-flowing sharing of ideas and experience, but I would be remiss not share some of my personal take-aways from being surrounded by such an incredible group of board directors. Over the next few weeks, I’ll be sharing some insights from each event and what I think directors from various geographies and backgrounds can learn from each other.
I was incredibly proud of the diverse, impressive group of board members who were able to attend our Napa event this year. The group collectively sits on more than 150 boards when you include their private company and non-profit board seats. More than 40% are women and we had directors represent an international mix of companies, from Mexico to Singapore to Sweden and beyond. Not surprisingly, this group had a lot to say on some of the most pressing board issues.
Culture – The board can play a material role in culture (or at least very least a check and balance)
A dynamic session let by Maggie Wilderotter, former Chair and CEO of Frontier Communications and a public company board member 30 times over, kicked off with the adage “culture eats strategy for breakfast.” I learned that the board can and should drive transparency from the top down. That starts with understanding the existing culture of the organization, then through ongoing interactions with management (and the hiring and firing of the CEO). If the CEO is wary of a push for transparency, that is likely a warning sign. It was a lively discussion from the group with some healthy debate; I thought having an open dialogue was a victory enough.
Activism – Do not underestimate the rise of passive investors in driving governance changes
Since this event series started, we’ve brought in a variety of activist investor perspectives, so I was thrilled this year to hear a new spin on shareholder engagement from Rakhi Kumar, Senior Managing Director and Head of ESG Investments and Asset Stewardship for State Street Global Advisors. In the past, a lot of criticism has been wielded at index investors for running on autopilot but from her session, it is apparent Rakhi and her team are not asleep at the wheel. Whether its voting against directors who failed to address board gender diversity or pushing for disclosure on sustainability practices, these investors now have a core set of governance principles to abide by and will not be shy about pushing for change that they believe drives long-term shareholder value. If you’re interested in reading more about Rakhi’s perspective, you can check out this blog post from Boardroom Resources.
Cyber – Transparency leads to stronger organizational resiliency
In a post-Target, Equifax, Yahoo! (and the list goes on) world, oversight of cyber risk continues to be top of mind for most directors – and rightfully so, there are huge financial and reputational implications on the line. And that pressure may be getting to your security leadership; the average lifespan of a CISO is apparently 18 months these days. We had a great panel with the next generation of cyber leadership – Nicole Eagen of Darktrace, Kumud Khalia of Cylance, Ralph Loura, formerly of Rodan + Fields, HP and Clorox, and Marten Mickos of HackerOne – who shared their thoughts on how boards can ensure a stronger partnership with executives responsible for leading security protection, detection and response. The group called for board members to show a bit more compassion when the CISO delivers bad news. It took me aback at first and while I think board members must always ask tough questions, there was an interesting suggestion to learn from the no blame, share everything culture of airline safety – that an environment of transparency amongst the CISO, the CEO and the board will create a stronger, more resilient organization.
Digital – Directors understand digital transformation is imminent, but navigating these unchartered waters keeps them up at night
Throughout the event, we also surveyed attendees on some of the other big issues their boards are tackling. Embracing digital disruption emerged quickly as one of the most significant challenges, taking over 30% of the vote on a poll that included other challenges like recruiting talent, adapting to regulations and managing cyber threats. In my conversations with directors, it became apparent that no playbook exists on how to do this effectively. It really comes back again to understanding the company’s culture and having strong leadership in place to manage change.
I’ll be sharing my thoughts from our fantastic Lake Como event, where we hosted a group of board and audit chairs, next week. I hope you’ll check it out.