How should the mandate of the board change and expand as the business world evolves?

Photo: Dr. Dambisa Moyo - how Should Boards Work

Listen to Episode 61 on Apple Podcasts

Guest: Dr. Dambisa Moyo, Author of How Boards Work – And How They Can Work Better in a Chaotic World

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

  1. Inside How Boards Work: Moyo details her inspiration for writing her latest book and what key takeaways and recommendations it offers.
  2. Rising ESG Prominence: Moyo gives her predictions for the most critical issues boards will face in the coming years and how they can work proactively now.
  3. Perspectives in the Boardroom: Moyo discusses boardroom composition and the importance of unique backgrounds and skill sets.

Summary:

As we operate in a rapidly evolving world, how has the mandate of the board changed, and what does that mean for their responsibilities and duties movie forward? Hear from global economist and experienced leader Dr. Dambisa Moyo as she shares insights from her latest book: How Boards Work – And How They Can Work Better in a Chaotic World. Dr. Moyo is a featured panelist at our upcoming Modern Governance Summit, where she will share her take on board diversity and strategy as part of the panel discussion on “Leading with Purpose: Building the Modern Board.”

Inside How Boards Work

Our hosts asked Dr. Moyo why she decided to write her latest book, How Boards Work – And How They Can Work Better in a Chaotic World, and more specifically, why she decided to write it now. Her first reason: “My previous book focused on geopolitics and global trends. Those aspects are in this book, but this time I was driven by a need to reassert the role of corporations in the 21st century.”

Moyo then touches on a growing societal anti-capitalist sentiment: “The virtues and opportunities of progress from a capitalist environment has been diminished. I wanted to reassert and restate that corporations are important for job creation and providing a tax base, but also in terms of innovation.”

She goes on: “The other reason why I wrote this book now is that it has become clear to me as I continue my board service is that many people don’t really understand what the purpose and mandate of a board is.” Moyo elaborates: “This has become an urgent conversation because the mandate of the board is changing and shifting more towards ESG. As we move away from the primacy of financial shareholders into a world of stakeholder capitalism, we need to understand the mandate is and what levers corporations and boards have to effect change.”

“It’s become clear to me as I serve on boards that people don’t really know what the mandate of a board is, or what levers boards have to effect change.”

Dr. Dambisa Moyo, Author of How Boards Work – And How They Can Work Better in a Chaotic World

Rising ESG Prominence

In order to truly understand how boards can operate to address ESG issues, Moyo stresses the importance of context: “The first evidence of boards dates back to the seventeenth century. I’ve been on boards that have been around for over one hundred years. Throughout the centuries, there have been lots of changes that preceding board colleagues or members have had to navigate to keep these companies alive, and to contribute to the economy and society more generally. The mandate has been set in stone: care, loyalty, and overseeing strategy.”

Now though, Moyo recognizes that this mandate is shifting: “Much more now, governance is embroiled in ESG. Six months ago, I didn’t know that boards would have to think about voter rights, for example. One thing is for sure, with this new responsibility in governance, things are moving away from tradition.”

She then goes on to reiterate the sheer size and scope of ESG: “If we think about the host of ESG, it’s areas of voter access, obesity, worker advocacy, data privacy. The traditional structure of the board is broken into committees: audit, risk, governance and others. Those committees will have to change and adapt as well as we think about ESG metrics in this new world.”

Moyo highlights the prevalence of trade-offs when it comes to ESG: “Looking at diversity, there’s so much compelling data proving it’s benefits and importance. It’s also true that from a board perspective we don’t want to fight discrimination with discrimination. We want to make sure that efforts to diversify should not suggest that certain groups don’t have a chance of success.” She looks at climate change from this lens: “People recognize the importance of fighting climate change. But we cannot totally defund the fossil fuel industry immediately, because that would leave millions of people without a job. We have to think carefully about how we affect change.”

Perspectives in the Boardroom

In order to tackle new and evolving issues as the board mandate shifts and expands, Moyo stresses the need to include new perspectives around the table: “The issues the board has to think about hits everything from deglobalization, the rise of trade issues with China, capital flows, the splinternet and BREXIT, to name a few. We have to think about talent, anti-immigrant sentiment, and how to deploy talent to standardize practices and draw on global talent. What does that mean for staffing the board?”

Moyo draws on her own background to illustrate this point: “I am not a conventional board member; I did not come from the C-suite. My first board seat was not offered to me only because I’m a black woman, but because of my career background. I built a career around writing and investing in global trends, and corporations eventually realized a need to have that perspective in the boardroom.”

The need to expand the aperture to draw in new talent and skill set backgrounds into the boardroom is another big reason why Moyo wrote her book: “It’s important to know that we’re looking for people with good judgment. The challenges the world and corporations are facing are incredibly complex. We need to effectively balance decision making with as much information as we have in a rapidly changing world.” Moyo goes on, “This means we absolutely need people who can bring different and diverse perspectives to the board. I encourage people from varying backgrounds to put their hands up and have a real understanding of how boards really do work.”

“The challenges the world and corporations are facing are incredibly complex. We need to inform decision-making with as much information and perspectives as we have in a rapidly changing world.”

Dr. Dambisa Moyo, Author of How Boards Work – And How They Can Work Better in a Chaotic World

Also in this episode…

Moyo discusses post-pandemic economic conditions: “Pre-pandemic, we were already experiencing low growth. Many large developed and developing countries were falling below the 3% rate. Germany posted a 0% growth rate in Q4 before the pandemic. There was weak public policy, concerns around monetary policy, worry about corporate, household, student, and government debt all before covid hit.”

She fears a downturn: “I fear COVID has accelerated our worries. We are seeing the increasingly negative societal impacts of climate change and rising inequality. We haven’t solved a lot of this issues, and many of them have grown worse. I’m not exactly euphoric. We’re not out of the woods, and there’s lots of work to do for corporations and governments.”

Resources from this episode: