In an environment of constant, rapid change, a strategic plan can only take a company so far, Merit Janow, chair of the board at Mastercard, told Summit attendees. “You develop the strategy of the company and then you test it as best you can in your baseline sort of scenario of what you think the world is likely to serve up,” said Janow. “But that’s not going to be a steady state, so change is an essential part of that assessment of the strategy. You know that things are going to come at you that you can’t anticipate. So you need to rely not on having the perfect plan, but having the structure and the processes that will allow you to pivot as the world requires it.”
For global companies, that means having the capability to respond quickly to external developments, such as Russia’s invasion of Ukraine. “Making a judgement of what was necessary, moving quickly, taking care of MasterCard’s people on the ground in Russia and in Ukraine—there’s an incredibly story to be told about corporate responses,” she said. “Now, how do you get there? In the boardroom, it’s about making sure you understand the world in which you’re operating.”
Today’s directors can start by incorporating three shifts that have been gathering momentum over the past five years into board agendas, noted Ram Charan, author of Boards that Lead. “The first that is big and new is geopolitical risk and how it could affect your industry and your company, negatively or positively,” he said. “The second is digitization, AI and all of these developments that are changing industries, changing the game. And the third is dramatic regulatory changes. Because they’re not caught up in the day-to-day, board members bring an outside perspective that can really help management not to lose sight of those priorities.”
Being present and inquisitive can go a long way in ensuring that robust and regular discussion of evolving areas of opportunity and risk take place, added Simon Freakley, CEO of AlixPartners. “From my experience, board members have more power than they sometimes think,” he said. “Often the most powerful thing a director can do is ask an open-ended question on an issue. And, if you don’t get a satisfactory answer, ask management to come back with a more thoughtful answer at the next board meeting. As a CEO, I can tell you that nothing puts you more on notice than when a board members does that.”
The scope and complexity of potential crises coupled with the speed at which they often unfold complicates the challenge, noted TK Kerstetter, co-founder of Corporate Board Member and the former host of Inside America’s Boardrooms. “It used to be that when there was a crisis you had till the next morning to call all directors, figure out what you were going to do and take a position,” he said. “Now you have a matter of minutes until it’s on the web—and it doesn’t even have to be the truth. The speed of communications and degree of misinformations is off the charts. So you have to be prepared for all these moments because you won’t have time to sit there and figure out, ‘What am I going to do?’ You need to know what you’re going to do.”
Having industry expertise in the boardroom can help, asserted Dale Wolf, chair of Molina Healthcare. “I know there are some who believe that the governance function of a board is transportable into any industry,” he said. “I’m not one of those. I’ll stop short of saying that it’s an absolute requirement, but it’s extremely helpful.”