As the nation once again erupted in protests and demonstrations over racial inequity this summer, the clearest, most useful article for board members we read came, as you’d probably expect, not from a consultant or a journalist but from a director—Gaurdie Banister, Jr., who is lead director for Russell Reynolds Associates and serves on the boards of Tyson Foods and, as of August, Dow.
In his piece, “How Black Lives Matter In Corporations—This Time Can Be Different,” he spoke pragmatically about how to actually make progress on the issue. “I am not here to advocate that companies jump head first into criminal justice reform because it is difficult to engage in public debates on social issues,” he wrote, “I do believe, however, that companies have the opportunity to drive change deeper to get at the root of the problems. Directors must first get past the naiveté of believing that the systemic racism and injustice encountered by Black Americans does not exist in their companies.”
Banister—who is quick to point out that he speaks only for himself and not for the companies on whose boards he serves—has seen his share of volatility and disruption. As a member of the Tyson Foods board, he’s had to help management respond to the Covid pandemic and plant shutdowns, as the company installed a slew of enhanced health and safety protocols while ensuring a seamless leadership transition as part of a planned CEO succession. Those skills were developed earlier in his career as CEO of Aera Energy, one of California’s largest independent oil companies, where he traversed the boom-bust cycles by matching chaos with fundamentals: adopting a people-centric approach, building a strong balance sheet with sufficient liquidity and a solid cost structure, flexibility and agility. “Plus, now, you better have your digital strategy rolling,” says Banister.
As this summer like no other drew to a close, we reached out again to Banister for his take on this current moment— about fighting fires, rethinking strategy, why human capital should be part of every conversation—and how boards should help their firms navigate a world that’s changing faster than ever before.
We’re six months into this prolonged, unprecedented crisis. What should boards be doing at this point to help management get to the other side?
The issue for the board now is, strategically, how are we positioning ourselves long term for what is likely to be an extended period of time in this kind of uncertainty and this kind of volatility.
I don’t think that people believed this crisis was like a storm or an earthquake where it would come and go, but I also don’t think anyone thought it would last for months and months and months. So now, we must ask ourselves as we settle in—and this is the way it’s gonna be for who knows how long—what are the implications on our business long term and how are we preparing for that? And what are the implications on our people long-term and how are we preparing for that? Long-term social distancing, testing, health, safety and welfare issues that are very different than the ones we thought we had in the beginning of this year.
On a good day, it’s tough to forecast the future, but right now the uncertainty is pretty out of control. Are you doing a lot more scenario planning to see around the bend?
I do think it comes back to scenarios. There are two or three that we could figure out might happen with the world, and I have always believed the best thing to do is have the discipline, resiliency and foundation in your organization to deal with all of them. So, you don’t prepare for one and then have to adjust—you make sure you have the foundation to deal with all of them and, as you get into them, then you can make tweaks and modifications.
The geopolitical implications of this are probably the fuzziest, in my mind, around trade, how countries interact, given what’s going on. We’ve already seen trade and supply-chain disruptions because we live in an interconnected world now. Governments can prevent individuals from moving across borders, but it’s really hard for products not to move given the economic consequences.
For boards whose companies’ balance sheets weren’t great going into the crisis and then took a beating, how can they balance that vs. the need to invest in technology to stay competitive?
When you’re in survival mode, you don’t balance anything. You find a way to survive. You do everything you can to safely keep the lights on, and, at that point in time, it’s about reducing costs, generating cash and getting through the next period of time trying your best to meet your customers’ needs. Customers are absolutely critical, and you need to be trying to at least understand what customer behavior is, so you can meet their needs.
How do you make sure you’re staying current with consumer needs?
We have to ask the right questions of the CEO and the management team, and we have to be making assessments of, and hearing from, a multiplicity of sources around what’s happening with customer behavior in this environment, then trying to get a grip on what’s going to be different or what the next phase of customer behavior actually is. I hate to say “new normal.” It’s about understanding the evolution and shift in consumer behavior and trying to get out in front of that.
What could that look like?
You could probably hypothesize that there’s some percentage of people who may choose to almost never go back in a grocery store, right? You might hypothesize that there’s some people who may never get in a ride-share vehicle again. So, how do you make an assessment on what the permanent change is with respect to consumer behavior so that you can position yourself for that?
Good, responsible directors, on their own, stay in touch with the dynamics in and around the business. They get their own sample of how things are happening in the market, and that allows us to be better prepared to ask the company questions when we’re in the conversation with the management team as they review the research they have conducted.
My experience is that good directors are awake, they stay in touch, and they use their lens to interpret what they’re seeing—which is why having a diverse board is so important.
What kind of diversity do you like to see on a board?
I think there are several dimensions. There’s skillset diversity, such as financial, manufacturing or marketing. There’s the growth vs. cost. And then, quite frankly, there’s ethnic and gender diversity— people who have different experiences, from different places, who see the world through different lenses is really, really important. Women see things differently than men do. Black people see things differently than White people. Hispanic people see things differently. This extends to nationality for a global business. It’s important to have that diversity at the board level. It’s also important to have that throughout the company. There’s plenty of research and data showing that diverse teams produce better outcomes than homogenous teams, so we don’t need to rehash the business case around it. I think this approach has worked well at Tyson.
But I will add, that only works in an inclusive culture. What you’re hearing more people talk about is that diversity actually is an easier first step. Meaning that everyone is fundamentally different to begin with, relatively speaking. The hard part is inclusion. Inclusion means that you’re willing to listen and hear what those perspectives are, and you’re willing to actually change and incorporate that into how you operate and what you believe. If you don’t do that, then why have the differences? People get frustrated if they are not valued, and they don’t give you their whole selves when they show up. That happens at all levels.
Do you think we’re going to see real movement on racial inequality, or will it be more temporary outrage and then back to business as usual?
I think this one has some staying power. The Black community is committed to keeping this issue prominent, and I think that there are a lot of White allies who also now get it, and who are trying to better understand, and who are acknowledging a problem and now trying to figure out how to deal with it. The whole tone and tenor around it is just very, very different. You could compare the images of people confronting law enforcement in the streets at the George Floyd protests to the civil rights movement and the images of those people are very different. The civil rights movement was virtually all Black. That’s not been the case post George Floyd. It’s been a much, much more diverse group of people. Particularly younger people saying, “Hey, wait a minute. We gotta fix this.” And that demographic is what’s going to give it staying power.
How much time do your boards spend talking about human capital issues?
If you’re a people-centric business, where people are the company and not just assets to be bought and sold, then you have to devote time that’s specific to the development of people in the company and the well-being and safety of people in the company. So, you have some designated period of time that you regularly are assessing how that’s going.
However, beyond that, when you are having your strategy conversation, you should be asking yourself, what are the implications of this strategy for our people? In a people-centric world, you’re not separating and saying, “Well, I’m gonna only spend 5 percent or 10 percent of time on people.” You’re regularly integrating that into your conversations around the state of the business.
CEOs right now are under tremendous pressure, and boards are having to toe the line between having their backs and knowing when they can’t hack it. How do you know when it’s time to make a change?
Every situation and circumstance is different, of course, but what everybody should have is an emergency succession plan and a long-term succession plan. If they’re seeing problems, and they feel like they need to execute the emergency succession plan, then execute the emergency succession plan. I would encourage my fellow directors to exercise wisdom, patience and understanding, but I heard a phrase the other day, to be “patiently impatient.” Be patient, understand what’s going on, but be impatient. If you’ve given performance feedback and you’re not getting a response to that, then, just like in any other circumstance, you need to do something about it. But you need to do it in the context of understanding what it means for the system when you make that change.
Income inequality has been exacerbated by the pandemic and recession. Do companies and boards have a role in closing that gap?
Yeah, so that’s a really big question. First, income inequality is not just a domestic issue; it’s a global issue. While there are fewer people in poverty today than there were 30 years ago, income inequality continues to be an issue. As a company, I think it comes back to, are you people-centric, and are the communities where you operate thriving? There is no one size fits all. But having an eye towards what’s happening in each community where you operate is really, really important for all companies. Civic unrest starts at the local level.
What companies really ought to be asking themselves is, what is the future of work? And how will we nurture and develop and have the workforce we need in the future so that, as a business and organization, we can thrive and be successful?
So you’re just as focused on environmental issues as you were before this all started?
Whether companies like it or not, society and institutional investors have decided that climate change is an issue. And in order for you to be successful in business, you better have an eye toward and promote leaders who are aware of the implications for you given climate change, and, by the way, there are generations of people, millennials and Gen Zs and others, who are asking, “What are you doing about climate change?” And you better have an answer because they’re making choices about where they spend their money and where they work.
Is the increased focus on ESG ultimately good for companies, or is it a distraction?
It’s good. It’s funny because I actually don’t behave any differently as a director than I did as a CEO. I was a people-centric person as a CEO in the oil industry, and I’m a people-centric person as a director. I consider myself “green minded” and very aware of the implications of what I do on the planet. Companies are moving, responding because they recognize and acknowledge that it is something that’s in the best interest of everyone. I’m glad that the Business Roundtable came out with their statement, but some of us were doing that and thinking that way before they made that statement.
At the end of the day, I guess I just keep coming back to, if a company says to themselves, “Look, we are made up of people who are human beings, who live here together, then how are we running this business in way that is appropriate for those people to thrive, to be able to have energy and enthusiasm and be successful?” If that’s your foundation, then the rest of the business kind of falls in place. You don’t have to have a debate about climate change. You don’t have to have a debate about Covid and safety. You don’t have to have a debate about the need to eliminate oil spills. You just know because you’re rooted in how you want to deal with your people, the planet and your company.