Seizing the Opportunity To Change Board Culture

© AdobeStock
Disruptive forces in governance are giving boards a unique opportunity to improve—but we have to use our own voices and listen to others to get there.

Disruptive forces in the business world today continue to change, in some cases dramatically, the long-standing culture of public company boards. Not that long ago, boards were composed primarily of retired C-Suite white men, who typically were referred by another board member or an executive of the company. Once a director joined a public company board, they were essentially guaranteed a seat on the board for many years to come. Not surprisingly, this led to less true independent thinking at the board level, group-think mentality and too many ceremonial boards that had cultures of rubber-stamping management’s recommendations.

In the current environment, that board culture is being challenged. I am seeing the evolution with my own eyes. For context, since 2015, I have had the experience of sitting on three different public company boards. During this period of time, I have had a window into these permanent, disruptive changes and I believe we are now at the most transformative time our history. This change enables us, as board members, to embrace these changes and take an active role in the changing cultural expectation of public company boards to positively influence the outcome.

Changing composition of the board

The most visible change in public company boards is physical composition. Like never before, we’ve seen a strong outcry to have more diversity on boards, and this is being accomplished by legislation, institutional investors and social change that has been on the front page news. In 2018, California became the first state to mandate gender diversity in boardrooms with the passage of the bill SB 826. The state followed that with the passage of bill AB 979, which mandates appointment of underrepresented minorities. Just as other states followed California by adding women to boards, the same is happening with other minority groups.

I am living this change. On the previous boards that sat on, I was the only woman. The current board I sit on has two women and we are openly discussing ongoing inclusion of all forms of diversity. Historically, there have been linkages between the CEO or chairman and the other members of the board, such as having worked together in the past, had provided a service to the company or even went to church together. This is changing. We are utilizing recruiting firms to bring in a wider spectrum of candidates.

To leverage this changing cultural expectation of public boards, the board must have an open mind to actively recruit for talent—not title or professional friendships—to add these diverse candidates to the board. We have to open our minds to a broader set of talents, experiences and technical skillsets of individuals. Also, we should consider board members that are still actively engaged in the workplace because they may be more versed in the current issues of the competitive and ever-changing business climate.

We need to recruit and seriously consider new board candidates from the perspective and experience of what they can bring to the table to improve the company. This may very well require using a recruiting firm to search for these candidates, because the current board members more than likely do not have a good selection of diverse candidates in their current network. The Nominating and Governance Committee of the board has a more challenging job than in the past. They must consider board candidates who are change agents, who can make an immediate impact by bringing skills that other board members do not have, and who mesh well with the culture of the board. Given that the candidates may not be a known resource, the recruiting and vetting process can take a good deal longer than it has in the past.

Accountability by the board

Despite external pressures for boards to fulfill their fiduciary duties by looking out for the company’s and shareholders’ best interests, there are still boards that act as support clubs or cheerleaders for the CEO and executive management; that has to change. Boards must be independent to actively providing input and ideas that create the environment for healthy disruption and positive tension needed in the boardroom, particularly in today’s fast-moving and disruptive business environment.

To accomplish this accountability, all members of the board must be actively engaged in their role by, at a minimum, arriving at each board meeting prepared and ready to contribute. Then the board members must think and investigate beyond what they receive from management to identify if there are gaps in management’s thoughts and approach. I have been in board meetings where I was convinced that board members had not read the provided material, because if they had read the material, they would not have asked the question they just asked. Also, I have seen board members that rarely speak at the board meetings, which results in a wasted voice at the table. On the other hand, I have seen board members that dominate and overpower the other board members. No one wanted to say anything to these unengaged or disruptive board members because they were all close personal friends and they did not want to rock the boat.

This environment is changing for various reasons. First, bringing in active diverse members of the board that do not have a loyalty to executive management or the CEO, allows them to say the unspoken. In a room where there are different points of view, backgrounds and experience, there is a greater opportunity for cross-pollination of ideas, fewer unspoken assumptions, less “group think” and a greater likelihood of innovation. It now becomes diversity of “thought,” not just gender or ethnicity. This allows the board to ask the probing questions and tackle the challenging issues.

Secondarily, regulators, investors, prosecutors, special interest groups and the media are increasingly holding directors accountable. Specifically, activist hedge funds are constantly looking for their next target. The activist hedge funds can make things very difficult for board member, as we have seen time and again.

How to leverage this changing board culture

We all recognize that disruptive forces create opportunities to improve. So we must ask ourselves as board members, what can we do to be a force to leverage this changing board culture to have the most positive impact?

First, we must use our voice on the board to express our thoughts, opinions and concerns. This includes leveraging our influence when and where possible so we can shape the successful companies and organizations of the future. To use our voice, that also means we need to be educated and learn as much about the company, the competitors, the outside risks and opportunities, and any new regulations that could impact the industry.

Secondarily, we need to influence other board members to voice their thoughts. I find it helpful to share relevant articles and information with other directors, which encourages the whole board to think about the subject and develop their opinions, which they should then be encouraged to share at meetings. Then, embrace the diverse thoughts.

Given that the number of board meetings are limited in a given year to anywhere from 4 to 8, typically, the time that the board is together should be structured in a manner that it is the most efficient to spend the most time on the most critical strategic discussions. As such, the board can designate certain sections of the board material that is informative in nature to be considered “as read” and only discussed if a board member has a question. This sets the expectation that the board members should read the material before the meetings.

Also, the board may consider developing a separate Risk Committee or having “risks and opportunities” as an agenda item, so they can ensure there is an understanding of the primary risks and opportunities. Historically, this has been discussed within the Audit Committee; however, the difficulty with this is that it does not always get the appropriate focus in this committee because it is one of many subjects discussed at this meeting and does not have the benefit of the experience of all the board members.

Now, like no other time, we have the opportunity to influence the culture of the board. We must ask ourselves, as responsible board members, what are we going to do to further develop the board culture to sustain the future.

  • Get the Corporate Board Member Newsletter

    Sign up today to get weekly access to exclusive analysis, insights and expert commentary from leading board practitioners.



    20th Annual Boardroom Summit

    New York, NY



    Board Committee Peer Exchange

    Chicago, IL