NACD identifies, interprets, and delivers insights on critical issues that shape board agendas. Through actionable resources, NACD enhances directors’ ability to fulfill their roles to enhance the value of the enterprise.
Organizations face increasing
cybersecurity risks and threats to their customers, financial information,
operations and other data, processes, and systems—and state and federal governments
are alert to the threats imposed on their constituents. To understand just how
widespread concerns about these risks are, look no further than the abundance
of cybersecurity legislation that is currently on the dockets of state
legislatures across the country.
For example, California, New Jersey, Washington, and Illinois are among the latest states to enact breach notification legislation that will significantly impact businesses operating in those jurisdictions by defining whether, when, how, and to whom notifications of a breach must occur. Some of these laws are going into effect just months after being signed and the cost of noncompliance can be severe (in California, fines are assessed per record breached).
As stewards of the strategy,
finances, reputation, and overall
direction of an organization, corporate directors have an important role to
play in ensuring adequate policies and protections are in place to answer the
demands of such regulations—and that their whole board is ready to meet the
oversight demands of new regulations.
Directors are in a position
to provide the leadership and strategic direction necessary to help their
organizations balance the need to safeguard information, minimize disruption in
case of an attack or breach, provide transparency, and manage a sustainable
cybersecurity program with competing strategic
There are four key steps boards should take to ensure adequate cybersecurity program development and oversight in response to emerging regulations and threats:
1. Understand the threat landscape and how companies are expected to respond under the law. Corporate directors and leaders need a clear picture of the threats at play to assess and implement an appropriate response framework that both meets the business’s needs and is compliant with a complex web of laws.
Adversaries’ tactics will vary based on their motivations. Nation-states may be focused on cyber warfare while garden variety criminals (including internal threats) are likely to commit fraud or steal information. Each of these threat types will warrant their own response, and may also warrant involving different law enforcement and regulatory agencies.
It is also important to note that the nature
of threats will vary by industry. A real estate company is likely to face a
higher risk of wire fraud, while a manufacturer might be a target of theft of
information by foreign governments. Directors should spend time in their busy
schedules understanding the appropriate responses required per
In addition, the range of threats—from phishing and social engineering to attacks on the supply chain—is constantly shifting. Boards must be aware of emerging threats, ensure they have the right team in place as first responders, and ensure people and processes are in place to help mitigate and address regulatory and compliance consequences from cyber incidents.
2. Ask relevant executives, leaders, and legal counsel the right questions. The board is tasked with gathering information from leadership, but the value of the exercise is dependent on asking the right questions. This ability becomes much more acutely important in light of a cyber breach, but should be practiced early and often. While these types of questions have been suggested for review by many in the cybersecurity community, it is worth asking the following in light of increased regulatory action:
On risk: What are our risks and how are they being mitigated? Who is the owner of a particular risk?
On capabilities: What are the people, tools, and processes we have in place to implement our cybersecurity framework? Do these comply with the demands of new and existing regulations?
On controls: What controls are currently in place? What are the organization’s cybersecurity policies and procedures (e.g., incident response plan) and when were they last reviewed, tested, and updated? What training do employees receive regarding privacy and security?
On trends: What industry-leading best practices should be considered? What stories of disaster should we read and learn from?
On regulation: What is taking shape at the local, state, and federal levels that will impact the business? What is the plan to get compliant and stay compliant?
3. Know the potential costs and how they influence risk tolerance. In the event of an attack, it will be important to demonstrate to regulators good faith efforts to identify and remedy risks. The extent to which an organization can show regulators that they did the work up front and put controls into place based on industry standards and best practices will determine the strength of their case for reduced penalties. For most organizations, cybersecurity incidents and regulatory noncompliance are associated with legal, financial, and reputational risks.
Compliance and risk mitigation come with
their own set of financial costs. In Arizona, the maximum fine is $500,000 per
breach event while Alabama can impose a fine of $5,000 per day for failure to
comply with its notification law. To make decisions about risk tolerance,
companies need to balance the risk with the cost of everything from business interruption
to notification costs and potential fines.
Directors of companies should also closely review their own director and officer liability insurance policies frequently to see if cyber-risk-related incidents are covered.
4. Establish metrics for governance. One of a board’s most important roles is to establish and assess metrics to enable oversight of the company’s cybersecurity program. The board should prioritize the development of a well-documented plan that is designed to account for and address evolving regulations, including a board-level metrics portfolio focusing on the following categories:
status, including cybersecurity strategy milestones and program tracking;
environment updates such as patching and the state of infrastructure, and the capacity of people to prevent phishing and data
environment updates, including the ability to gather threat intelligence and
respond to emerging cyberthreat trends;
and audit figures on cybersecurity audit planning and regulatory compliance
figures on disaster recovery, business continuity, and incidence response planning.
Board members’ oversight of
cybersecurity programs is crucial to protecting business interests from current
and future threats. This requires boards to take an active role in strategy,
validation, detection, and response
plans, ultimately steering the dialogue with stakeholders to better understand,
assess, and identify cybersecurity needs and deficiencies that need to be addressed.
It is impractical and
inefficient for organizations to revamp their cybersecurity risk management
program each time a new law goes into effect. Organizations with a presence in
multiple jurisdictions should instead think holistically about their programs.
With the cyberthreat landscape
constantly changing, it requires that risks be regularly weighed against
strategic goals—and that the company meets the regulatory demands created to
protect businesses and consumers alike. By ensuring the quality of a company’s
cybersecurity framework through leadership and oversight, a board can fulfill
its obligation to protect the overall health and sustainability of the
Ross is a principal and the cybersecurity and privacy practices lead at Baker
The 2019 proxy season was notable for companies’ efforts to
disclose actions taken to develop a diverse and inclusive (D&I) workforce. Their
efforts are like a rolling stone that will accelerate in the coming years, and
may bring others along with them as corporate D&I efforts gather momentum.
The empirical research on the benefits of diverse
experiences and viewpoints among a broader workforce is now widely accepted.
Corporations in turn are orienting their hiring and development strategies towards
increasing diversity among their worker populations. Companies leading these
efforts tend to be larger, with more resources to commit to these plans and
more attention from the outside world on their efforts and results.
The chart below illustrates the results of a simple keyword
search within Russell 3000 company compensation discussion and analysis (CD&A)
proxy statement disclosures since 2012. The number of companies citing D&I in
the CD&A has increased nearly sevenfold and represents two percent of the overall
index. Since this year’s data is current as of July 1, the final number for
2019 will almost certainly be higher.
It is noteworthy that the median revenue of companies
referencing D&I in their CD&A disclosures has fallen by 75 percent in
the same eight-year period to $6.5 billion. This implies that more boards of
medium-sized companies are recognizing and reflecting the value of D&I in
compensation decisions. (For reference, the median revenue of all Russell 3000
companies is approximately $1 billion.)
The large majority of these D&I references are listed as material factors in discretionary elements of pay decisions, but the usage of such references in formal, metric-driven portions of pay programs is also increasing. This trend will continue over time as D&I approaches become more standardized and commonly accepted, or even expected by investors and other stakeholders.
Including appropriately designed D&I goals in senior
executive pay programs sends an important message to stakeholders about
nonfinancial goals and priorities. Below, we address four critical action items
to consider when setting up and executing D&I-linked compensation programs.
1. Evaluate measures that reflect near- and long-term
Many D&I imperatives focus on improving existing diversity
metrics and have both near-term and long-term elements. For example, addressing
gender pay gap issues can be measured in the near-term, i.e., annually, while shifting
the demographics of an entire employee population has a longer path to
Both types of initiatives require a four-stage process:
understanding the current state of diversity
within the company;
developing long-range goals;
setting a multi-year strategy; and
executing the plan.
The right measures are those that can be replicated and benchmarked
against internal or external targets, and are easy to understand and
2. Get the timeframe right on measurement and pay.
Linking new measures to pay programs is fraught with peril.
Adding any new measure by definition means that one or more existing measures will
be scaled back or replaced, which could impact the pay incentives that drive
performance on other metrics.
After determining the right measures, the board must decide
the level of performance for which it wants to hold management accountable.
This could include immediate actions and progress (for example, closing any
systemic pay gaps), achievement of a long-term standard (such as a better
gender or racial balance at senior organizational levels), or a combination of
Only when these measures and the desired performance level are
determined should the pay program be considered. Near-term immediate goals lend
themselves well to being included in the annual bonus, especially when new
goals can be set each year as progress occurs. Longer-range D&I measures
and objectives could determine a small portion of performance share awards
(these typically have overlapping three-year measurement periods),
acknowledging that broader initiatives have longer timeframes for execution.
3. Report progress consistently to participants, the board,
The consistent communication of progress made on those
D&I metrics used to assess appropriate compensation will ensure that the
initiatives remain important to the executive team and board members. Contact
on this front at the board and management levels primarily takes the form of
consistent meeting materials at regular intervals.
Broader communication to the employee population and beyond
can occur in many different ways, including by town hall discussion, through internal
and external internet sites, and through celebrations of individual and group
successes. As always, consistent messaging to a company’s various audiences is
4. Use clear disclosure that focuses on principles, then actions
If you’ve made clear, measurable efforts towards increasing
diversity that are reflected in executive pay incentives, then disclosure in
the CD&A is a positive opportunity to exhibit this progress. A demonstrated
commitment to D&I, in conjunction with other nonfinancial objectives like
learning, development, and community support, builds company culture and
increases employee engagement.
Consider allocating some space in the proxy executive
summary to the company’s efforts on D&I and other environmental or social
topics. Contemporary proxy designs allow greater usage of infographics and
professional layouts to create digestible messages for shareholders on
The pay programs are more of the final word than the leading
statement. Leading with the message of “these things are important for us to make
our company successful and to contribute positively to our communities” is
powerful, but is already becoming common. Backing this message up in the
CD&A and in pay tables with real measures, goals, actions, and an impact on
pay for success or failure is the next-generation differentiator.
Todd Sirras is a
managing director at Semler Brossy Consulting Group working out of the Los
In today’s world of real-time communications, companies are
now expected to respond immediately to emerging crises, and boards are feeling
more pressure to ensure that their companies can navigate effectively through
challenging crisis moments. Peter Gleason, NACD president and CEO, explains, “Boards
have always provided oversight of crisis response plans, but the key difference
today . . . is [that] with the advent of social media, the window for response
time has all but disappeared. It’s critical for directors to engage with
management on a regular basis to discuss the outline of the crisis response
The 2019 NACD Public and Private Company Governance Surveys find that less than a third of companies have delineated roles for the board and management in their crisis preparation plans, while fewer than 20 percent indicated that they’ve assessed the effectiveness of early-warning capabilities—a critical aspect of crisis preparedness.
While each crisis is unique, there are leading practices boards can adopt to improve their governance of crisis readiness. To help directors prepare for this issue, NACD, Heidrick & Struggles, and Sidley Austin LLP cohosted a meeting of the NACD Nominating and Governance Committee Chair Advisory Council—comprising Fortune 500 company nominating and governance committee chairs and lead directors—on April 24, 2019, in Washington, DC. The meeting was held using a modified version of the Chatham House Rule, under which participants’ quotes (italicized) are not attributed to those individuals or their organizations, with the exception of cohosts. A list of attendees’ names are available here.
Participants identified three important benefits of
effective board-management dialogue on crisis planning and preparation:
Effective crisis planning
identifies skill gaps within the executive team.
Thoughtful crisis planning exposes
potential risks related to information flows to the board.
Nominating and governance
committees can use insights from crisis planning to inform their reviews of
board structure and composition.
crisis planning identifies skill gaps within the senior management team.
Crisis planning offers more benefits than just a routine
hygiene check. As one director noted, “When
you are doing a good job as a board overseeing crisis preparation, issues are
going to rise to the top that you need to address.” These issues can take
many forms, including identifying potential disconnects in the assignment of
roles and responsibilities. Ted Dysart, Vice Chair at Heidrick & Struggles,
noted “Crises can accelerate to a point where senior leadership is no longer
equipped to serve in some roles—for example, acting as a spokesperson for the
organization. As part of the crisis planning process, the board can discuss
whether any skill gaps have been identified, and how they will be addressed
with training or other support.”
Delegates discussed that the right candidate isn’t
always the most obvious one. One participant noted, “We need to ask the questions about whether the CEO is fully prepared
if a crisis arises, but it goes beyond that. Some crisis response roles should
be assigned according to skills, not necessarily titles, so the board needs to
know who else in the management team is crisis ready.”
crisis planning exposes potential risks related to information flows to the
While it’s important to have a process around what
information is escalated to the board, judgment is often more important than process.
One delegate commented, “At one of my
companies we had an issue with a senior leader that never reached the board.
The reporting process was part of the roadblock. What worries me most [are the
gaps in information.] What does the organization know, [that] the board does not?”
Another participant noted, “The [glaring]
crises that are acute and major are easier to prepare for. It’s the
under-the-radar ones that result from a series of seemingly insignificant
activities that can be more difficult to detect, and they’re often the ones
that the board is most accountable for.”
Some council participants indicated that their boards use
the latest news stories as a mechanism to evaluate the effectiveness of their crisis
readiness. One director noted, “In the
aftermath of some of the recent headlines related to culture and #MeToo, we’ve
had discussions with management about when the board will receive information
about issues that may not be financially material, but could be culturally
The relationship between the board and the general counsel
(GC) also emerged as a critical component of effective crisis planning. A
delegate said, “I have a conversation
with the GC monthly. [This practice] started when I was new to the [nominating and
governance committee chair] role, and was an opportunity to set up a trusted
relationship, that has strengthened over time.” Another director shared a
similar approach: “Before every committee
meeting, I sit with the GC and review the agenda. Then we have an open
conversation about anything else on the GC’s mind. The regular rhythm of these
conversations helps me stay informed about potential challenges.”
and governance committees can use insights from crisis planning to inform their
reviews of board structure and composition.
Delegates discussed benefits outside those traditionally
associated with crisis preparation, zeroing in on board structure. Sara
Spiering, principal at Heidrick & Struggles, commented, “In our board
search work, we’re seeing clients asking questions about prospective directors’
past experiences with turnarounds or other challenging situations. One of the [qualities]
boards are starting to [recruit for] is confidence and calmness in
Directors are also using these insights to weigh the
merits of changing committee structure. One participant explained, “We had a situation on one board that
required establishing a special committee. Luckily, [the board] had enough
independent directors with the [requisite] capacity and skills— [that is,] the
ability to get into the details [and] ask tough questions, [as well as] the
time commitment and energy to take on the [additional] workload. As nominating
and governance committee chairs, we have to factor this into board succession
The boards of companies in heavily regulated industries
often align committee structure with risk management and crisis planning. One
director remarked, “I’m on several boards
with a separate safety committee. Other industries have compliance or
regulatory affairs committees; some are [establishing separate] cybersecurity
committees. In all cases, it sends a strong signal about the importance of the
issues and the level of oversight. On our safety committee, we’re looking at [granular]
information—if a truck hits a ditch on Christmas morning, [the committee] hears
As Benjamin Franklin pointed out, “By failing to prepare,
you are preparing to fail.” In light of growing public scrutiny, board and
management preparation for crises is likely to remain a priority for nominating
and governance committees. When confronting these complex and unpredictable events,
Holly Gregory, partner and co-chair of the Global Corporate Governance &
Executive Compensation Practice at Sidley Austin, advised directors to closely
monitor corporate culture, noting, “Periods of crisis are when the cracks in an
organization’s, and a board’s, culture really show up. If there’s been a
tendency to avoid difficult conversations, if relationships with management are
strained, if there are skill gaps or factions within the board, these things
will all make a bad situation worse.”
As directors scan the horizon for potential risks,
they should not lose sight of seemingly insignificant, but persistent,
problems. As a delegate framed the issue, “Major
crises don’t come along very often. We can learn not only from crisis planning,
but [also] from more minor issues. Both of these can help the board identify
underlying tensions and open up important conversations about the skills and
processes needed to weather a serious crisis.”
Is there a crisis-response plan in
place? How often is it revised? How often is crisis planning discussed in board
Is there a common understanding among
management, the board, and board committees about their respective roles,
responsibilities, and accountabilities for crisis management?
Have we identified which crises the
company is most likely to face? What steps can be taken to mitigate the risks
that would lead to those crises?
Have we achieved a common understanding of what circumstances
trigger bringing an issue to the board’s attention? Has our management team
identified key indicators that offer early warnings about increased risk exposure
that could lead to a crisis? What is the threshold, and the process, for
reporting to the board about sudden changes to the company’s risk profile?
Does the organization’s culture support a level
of trust between a) the board and the executive team and b) the executive team
and middle management that encourages candid discussions about risks? How
willing are employees to speak up about problems that can cause a crisis for
A 2018 joint report prepared by NACD, Protiviti, and NC State’s Enterprise Risk Management (ERM) Initiative advanced the view that boards may not be overseeing the appropriate risks and outlined a road map for strengthening the board’s risk oversight in today’s complex and unpredictable marketplace.
the business environment changes, so must the board’s risk oversight. As the
pace of change quickens and the stakes for “getting it right” increase, a
question arises: Is our board risk oversight process still fit for purpose?
is a refresher of four points from the report’s road map that continue to apply
1. Revisit the board’s risk governance model and
director skill sets. Depending on the nature of the enterprise’s
risks and the extent of the expected change in its risk profile over time, the
board should assess whether it has access to the requisite expertise and
experience needed to provide appropriate oversight—either on the board itself
or among its external advisers. For example, with digital disruption affecting
many businesses, do directors have sufficient understanding of digital business
models, digital ecosystems, and the potential that hyperscaling digital
platforms has to facilitate rapid growth and reinvent the company’s business
model? These are trends that bring both opportunity and risk to the business,
and understanding them is essential to sound oversight. In addition, the board
should rethink how it organizes itself for risk oversight, including the
delineation of responsibilities among its various committees and the full
2. Make culture an
enterprise asset as well as an oversight priority. Culture is
almost always the source of reputation and financial performance outcomes, as
it is a potent source of strength or weakness for an organization. A strong
culture is a critical asset for any brand. It is of vital importance to both a
differentiating strategy and superior performance. Accordingly, the board
should expect management to understand the culture at lower levels of the
organization, and whether the mood in the middle and the tone at the top are
aligned. Concerns that this topic may be “too soft” for objective assessment
should not distract the board’s focus on the real question:
Does the CEO really want to know the unvarnished truth about people’s
perceptions across the entity, and is he or she prepared to act on that
A “speak up” culture that encourages transparency and sharing of contrarian data and bad news entails convincing employees that they can indeed speak up without fear of repercussions to their careers or compensation. Anonymous and confidential surveys are an example of how executive management can learn what they need to know. Metrics addressing such things as mission and values alignment, innovation, resiliency (speed), collaboration, and employee satisfaction also offer insights regarding culture. Candid, open, and constructive board and management interactions should prioritize the tough questions on directors’ minds.
3. Focus on the quality of the risk management
process. Given the
pace of change experienced in the industry and the nature and relative
riskiness of the organization’s operations, does the board understand the
quality of the process informing its risk oversight? For example, how much
manual effort is required by management and various board-reporting departments
to generate the reports used in board meetings? How actionable is the entity’s
risk information for decision-making? These and other questions focus on how
mature and robust the risk management process is and whether it is effective in:
the critical enterprise risks from the day-to-day risks of managing the
accountability for results;
an open dialogue to identify and evaluate opportunities and risks; and
key decision-making processes with current, reliable information.
4. Ensure management integrates risk considerations
into strategy, performance, and decision-making. The unique
aspect regarding exposure to disruptive change is that it presents a choice: On
which side of the change curve do organizations want to be? Organizations must
make a conscious decision about whether they are going to be the disrupter and
try to lead as a transformer of the industry, or whether they are going to play
a waiting game, monitor the competitive landscape, and react appropriately and in a timely manneras an
agile follower to defend their market share.
These market realities strongly suggest that the board should
ground its risk oversight with a solid understanding of the enterprise’s key
strategic drivers and management’s significant assumptions underlying the
strategy and risk appetite. Directors need to ensure that risk oversight and
management are not appendages to strategy-setting, performance management, and
decision-making, but contribute information and insights relevant to the
success of these core processes.
We encourage everyone to read the joint report from 2018. Boards should take a fresh look at how they are approaching risk oversight, including how the company’s ERM is informing that oversight. With risk management practices for many industries largely rooted in the prior century, the big question is:
Are we prepared to
improve our risk management and risk oversight, or do we face the challenges of
the next 10 years in the digital age with what we’ve been doing over the past
The nature, velocity, and persistence of risks have changed. Consequently, it’s time for boards to revisit their governance model and skill sets and refresh the focus of their risk oversight.
Innovation is top of mind for most C-suite executives and directors of companies, and both have every reason to prioritize innovation as part of the company’s strategy. According to a study by Credit Suisse, the average lifespan of a S&P 500 company is now less than 20 years compared to 60 years in the 1950s. Additionally, Mercer’s 2019 Talent Trends Survey found that 73 percent of executives predict significant industry disruption in the next three years, up sharply from 26 percent in 2018. In many industries, continued innovation is critical to a company’s ability to survive and thrive.
In the recent past, having a dedicated, centralized innovation team seemed like the obvious answer to this corporate imperative, and companies made the move to create such teams—the number of corporate innovation centers has grown from over 300 to 580 from 2015 to 2017. Unfortunately, the success of these innovation centers has been mixed. Centers that tend to lag in performance usually have unclear strategic goals, suboptimal set-up, and vaguely defined success metrics.
Developing a culture of innovation requires commitment from the top, starting with the CEO. The company’s CEO needs to define what innovation means to the firm, be its biggest advocate, and get the entire leadership team’s buy-in and support—including the backing of the board. Boards should make sure that the innovation strategy is forward looking with a balance of incremental and disruptive goals. Once the vision is defined, leaders need to infuse innovation into the company’s DNA by cultivating an open-minded and intellectually curious culture that is ready for change.
The role of the CHRO has evolved, and it has never been more critical for the board to focus on this role’s ability to drive a culture of innovation throughout the organization. To enable innovation at scale, having a sound people strategy is equally important as having the right infrastructure, processes, and tools.
When considering the CHRO’s role in setting the framework to build a
workforce that drives innovation, the board should consider how the CHRO is
leveraging the following four building blocks.
The most important building block for the
CHRO’s talent strategy is identifying the right people. One could argue that
innovation is an innate skill, and not a skill that is developed. In reality,
the answer is, “it depends.” The company’s definition of innovation drives the
types of talent needed, whether the talent can be developed from within, and if
recruitment from outside needs to happen. People also have varying degrees of
innovative talent. Organizations may have a limited number of innovation
whizzes available to create transformative ideas, but many are capable of
developing incremental innovations to improve existing solutions or modernize core
businesses with the right training, support, and tools.
The board and management need to think beyond
traditional approaches to identify the right talent and teams to lead
innovation initiatives. Depending on the level of disruption required, the
board and management may need to urge the CHRO to consider external talent such
as seasoned entrepreneurs to get an injection of fresh ideas. The CHRO should
keep a close pulse on innovation talent across the firm, meet with innovation
teams on a regular basis, and report back to the CEO and board to ensure the
firm has a strong pipeline of talent suited for innovation.
Diversity and inclusion
It is no secret that diversity drives
innovation. Diversity in this context extends beyond gender, race, and ethnicity,
and includes experiences, expertise, perspectives, and even working styles. Individuals with differing thoughts can
result in dissent and conflict, but this should be viewed as the gateway towards
developing breakthrough ideas. Inclusion must come hand-in-hand with diversity.
One can only maximize the potential of a diverse team when each individual’s
differences are respected and valued. In addition, a diverse and inclusive
workforce ensures that the innovations created are reflective of the
organization’s diverse customer base. The board should embrace and work with
the CEO and CHRO to measure how diversity and inclusion impacts innovation and
the company’s people strategy on an ongoing basis.
Since innovation development processes are
agile in nature, workforce performance management and metrics should align with
“test and learn” principles. The “test and learn” approach ensures that
projects can fail fast and pivot as needed. To encourage such behavior,
performance management also needs to allow continuous and open feedback to
enable individuals to adapt according to project needs. The board and CEO can
make this feedback loop a priority by measuring how the CHRO structures
performance reviews at the firm.
Disruptive innovation initiatives require a
longer time horizon to realize their potential and impact. As such, these
initiatives should not be measured on a quarterly basis. Setting key milestones
that could be an early indicator of success will help boards monitor progress. Although
driving revenue, profit, and return on investment growth are the ultimate goals
of innovation, non-financial metrics are not to be ignored and are arguably
equally important. These metrics include, but not limited to, enhanced company
brand, increased ability to attract top talent, improved customer satisfaction,
speed to decision making and execution, ability to break down silos, the number
of ideas in the pipeline, and increased digital presence and digitization
across the firm.
In this rapidly changing environment, it is
critical for all employees to be on top of key trends and develop new skills—the
board included. Besides formal training courses, entrepreneurs and start-ups
are excellent channels for corporate “intrapreneur” learning. Including
exposure to these resources as part of a corporate people strategy could yield
measurable benefits that the board could use to assess efficacy of the program.
As an example, Mercer piloted a learning program with NewCampus, a startup that
invites entrepreneurs around the world to share their expertise and experiences
with Mercer colleagues. This type of alternative learning is a great source of
inspiration for new ideas. For companies with dedicated innovation centers,
having rotational programs will enable organizations to build stronger
innovation muscle, share what has been learned, and develop skills with broader
employee populations to achieve greater impact.
CHROs to drive innovation, they need to innovate and reimagine the HR function
they lead. The CHRO and his or her team at entrepreneurial companies are more
progressive in their thinking, willing to experiment, and thrive on setting new
industry standards. If companies believe that their people are the ultimate
sustainable competitive advantage—the power for creating innovations for the
firm—the CHRO and that person’s entire team should be the key to unlocking human
capital potential at the firm. The board and CEO need to empower the CHRO to
experiment, and that could be as simple as trying out new technologies and
policies. The time to do so is now.
Patty Sung is a senior principal
and innovation leader in Mercer’s Global Digital Innovation Hub.
This fall, NACD will release the findings of our latest Blue Ribbon Commission report (BRC). Carrying forward a tradition we have kept for more than a quarter century, seasoned directors and advisors will opine on yet another challenging new topic. In recent years we have tackled corporate culture and disruptive risk. This year, the topic will be the future of board leadership.
the strong progress made in governance over the last decade, board leaders are
now being confronted with a wave of interconnected and simultaneous forces that
will only intensify in the next 5 to 10 years, requiring a profound
transformation of how boards deliver value. The BRC will offer a blueprint that
board leaders can use to prepare themselves and their boards for a much more
demanding future that in some ways has already arrived.
Can an NACD BRC help to shape that future? With 25 BRCs to date, and multiple recommendations made in each BRC (typically 10), our overall impact is hard to trace. Still, as was shown four years ago in a blog post about “Blue Ribbon Impact,” our voice is being heard. If you compare governance practices in the year of any given BRC to practices two or so years later, you will undoubtedly see that our BRCs do move the needle.
To focus on reports that had significant impact, I turned to Chief Knowledge Officer Emeritus Alexandra Lajoux’s insights from her 2015 blog post (excerpted and condensed below) as a reminder of the prescience exemplified by these reports. That changes in board governance and oversight practices are brought about by these BRCs is supported by data collected in NACD’s public company surveys on how our members have adopted these practices over the years.
1995: The BRC on Director Compensation recommended director
payment in equity, with dismantling of benefits. Before vs. After: Whereas in 1995 it was
common for directors to receive benefits but no stock, by 1999 the trend was
the opposite. By then, nearly two-thirds of companies included stock as part of
director pay, and less than 10 percent paid benefits.
2001: The BRC on Board and Director Evaluation recommended formal evaluation of boards and directors. Before vs. After: The 1999 survey showed 32 percent of boards conducted evaluations; the 2003 survey showed that 85 percent did so. This was no doubt due to new stock exchange requirements mandated in the Sarbanes-Oxley Act of 2002 and issued in 2003. But, the stock exchange rules themselves were born in part out of NACD recommendations made March 4, 2002 (included in this NYSE report). In fact, 9 of NACD’s 10 recommendations—all based on the Blue Ribbon Commission’s recommendations (including one on board evaluations)—subsequently became stock exchange listing requirements.
2003: The BRC on Executive
Compensation recommended an entirely independent compensation committee for
all public companies. This change was notable because it suggested an independent
compensation committee beyond those covered by the Sarbanes-Oxley–mandated
stock-exchange rules that would be issued in November of that year. Before vs. After: The 2005
survey showed a rise in overall independence of compensation committees
compared to 2003: “Three-fourths (75.9%) of firms overall, up from 65.5 percent
in 2003, indicated that they had only independent outsiders on their
2004: The BRC on Board Leadership recommended that boards
consider using an independent lead director in cases where they did not have an
independent chair. Before vs. After: In the immediate and near-term aftermath of this report there was
an apparent surge in the use of the lead director—even greater than that seen
when the “presiding director” disclosure requirement of the New York Stock
Exchange became effective in 2003. The 2005 survey indicated that over a third
(38.5%) of the boards studied had a designated lead director, almost four times
the number (10.0%) shown in the 2003 survey. The 2007 survey said that “44.8
percent of respondents’ boards have a designated lead director.”
2007: The BRC on the Governance
Committee recommended director orientation (as well as ongoing director
education). Before vs. After: In 2007, 60 percent of respondents said that their boards had a
policy or program on director education. In 2009, 72.8 percent said they had
such a program.
2011: The BRC on Lead Directors recommended continued use
of the lead-director role as a viable alternative to an independent chair. Before vs. After: The 2011 survey showed that
at the time this group was convened, only 65.4 percent of respondents sat on
boards with lead directors; the 2012 survey showed that 82.8 percent had a lead
2017: The BRC on Culture as a Corporate Asset recommended stronger
oversight of this area, including not only oversight of the tone at the top,
but also oversight of the buzz at the bottom. Within one year, the impact of
this recommendation was already evident. Our 2018–2019 survey reported that
directors’ understanding of the mood in the middle rose 10 percentage points,
to 45 percent. It also found that 27 percent now say they clearly understand the
buzz at the bottom levels of the organization, a 9 percentage point increase
compared to 2017.
So, what will the 2019 BRC recommend, and will it help predict the future? The Future of Board Leadership report will recommend practices to future-proof the boardroom. Our Commissioners have already begun convening, and here are several of the action items that they foresee for boards and their leaders:
Change the board’s structure to become more
Disclose more about governance methods and
results to investors and stakeholders.
Deploy data analytics capabilities and new
technology to enhance board oversight.
With accelerating turnover, become more diverse.
Increase accountability for individual and collective
Prioritize the fastest-changing drivers of
corporate strategy and risk.
Represent a wider variety of stakeholder
These recommendations are all
credible and important. Will they provide an accurate lens into the future of
board leadership and predict where we’ll be in a few years? Perhaps. But the
important thing is not predicting the future of board leadership. Rather, it is
in making that future better through decisive, informed board leadership. That
is the goal of this Commission, and I am confident that they will meet it.
No C-level role has evolved as quickly and radically as
chief information security officer (CISO). The CISO role first sprang from the ground-breaking
“mega breaches” of the early 2000s, when it became apparent that cybersecurity
issues could have serious business ramifications. Back then, the role was
largely technical in nature (they would put up a technology perimeter to stop breaches
from happening) and, really, it was C-level in name only—most CISOs reported to
chief information officers and did not have a direct line to the CEO like other
The early days of CISO evolution also had a dark chapter. As
the breach epidemic picked up steam, so did the scapegoat status of CISOs, who
often found themselves in career jeopardy following publicly disclosed data
breaches. Life in those days was difficult for CISOs. There was still a general
belief in boardrooms that breaches could be prevented with some degree of
certainty, so CISOs were tasked with an impossible job: preventing the
That perception is changing today. I would venture to guess that no CEOs or board members in the Fortune 500 believe data breaches are 100 percent preventable. Those same enlightened executives and directors want to understand if the company is prepared to effectively respond to a major security incident. After all, if breaches are not completely preventable, then breach-response preparedness becomes the most effective tool for managing business risk associated with data breaches, which can include operational disruption, litigation, regulatory fines, customer attrition, and loss of intellectual property.
Cybersecurity has become similar to the electric grid. Utilities
can do their best to reduce the likelihood of blackouts, but violent storms
will still cause power outages. Therefore, the measure of competence for an
electric utility is not so much its ability to withstand violent storms without
blackouts. Rather, the company’s success is measured by how effectively it
minimizes impact and how quickly it can bring power back online after the
storm. Likewise, the measure of competence for a CISO is not so much their
capacity to prevent every conceivable breach, but whether or not they have a
codified, rehearsed, and company-wide incident-response plan in place that can contain
the incident and minimize the damage caused by a data breach.
Which brings us back to the evolving role of the CISO.
From those early days of being technical people and easy
scapegoats, today’s top CISOs have a much broader role within business. That
broader role requires a fuller skillset. They still need to understand the strategy
and technology of cybersecurity, not to mention IT in general, but they also
need to have the management acumen to make strategic investment decisions and to
effectively deploy staff and third parties. They also need to have the
vocabulary to translate security program objectives into business terms for the
board of directors.
And, most importantly, they need to be able to instill
confidence in the board that they know how to prepare the company to respond to
a data breach, because breach-response effectiveness can mean the difference
between a “blip” of bad publicity and an ongoing morass of litigation,
regulatory fines, and customer loss. It is for this reason that what was once
the career “kiss of death” for a CISO—being in charge when a data breach
occurred—is now a resume builder. Boards rightfully want to ensure that the
CISO knows how to “land the plane” following a breach, so what better
experience could there be than to have already managed a breach-recovery
situation—particularly when the outcome was as favorable as possible?
It’s been a wildly complicated ride for CISOs. Moving from
“tech jockey” to strategic business executive in little more than a decade is
not an easy shift. There is still a long way to go, as many CISOs are still
viewed as technical hands by senior management and directors, but the trends
are clear: more and more CISOs are getting a seat at the boardroom table. And with
savvy boards of directors, breach experience gets CISOs invited into the
boardroom, not thrown out of it. That’s a change for the better.
Mark Adams is the senior practice director of risk
transformation at Optiv.
Ten years ago, US Airways Flight 1549 departed from La
Guardia airport with Captain Chesley B. Sullenberger III (“Sully”) in command. Shortly
after takeoff, the engines ingested a number of large geese, the aircraft
faltered, and the Captain was forced to make the life or death decision between
trying to make the runway at Teterboro, New Jersey, or landing the plane in the
Hudson River. His choice was the water, and he made a rare successful water
landing, coined the “Miracle on the Hudson” and made famous a second time in
2016 by the movie Sully.
Sully’s leadership during that crisis formed the backdrop of
a recent panel discussion at NACD’s Strategic Asset General Counsel event in
New York. The panel focused on the personal and professional ramifications of a
crisis and featured Miracle on the Hudson passenger and experienced public
company director, Maryann Bruce; senior vice president, general counsel, and secretary
of Spirit Airlines, Thomas Canfield; and Andrew Cole, co-president and board member
at Sard Verbinnen & Co (SVC), a global strategic communications firm. Key
takeaways from the discussion follow.
The right person at the helm is critical. Sully was the right person at the right time during the crisis. For companies, having the right CEO is likewise critical, as is being ready for a change at the top. “Companies must be prepared for unplanned CEO departures, whether they are due to the #MeToo movement, health problems, or something else,” Cole said. “Someone has to be the quarterback during such a crisis, and if it’s a CEO departure, it won’t be the CEO.” One of his clients even did tabletop exercises for a scenario in which the CEO never returned from an overseas vacation.
According to Bruce, who joined a
board just as that company’s CEO was asked to leave, suggested that the best
approach is to get the right leader in the position in the first place—a
critical role of the board. For that company’s new CEO hire, Bruce believed
more structure was needed. “I suggested that the board create qualitative and
quantitative internal and external metrics to define success for both the CEO
and the company, as we needed to ensure board alignment as well as a
methodology to hold the new CEO accountable.” She recommends that companies
have both an emergency CEO transition plan as well as a succession plan.
Canfield agreed on the importance
of succession planning. “Spirit Airlines recently completed a smooth, year-long
transition of our CFO into the CEO role.”
Having courage in a crisis is a must, and preparation can help. Sully had the courage to make a difficult call quickly on the day he landed the plane in the Hudson River. Some of that courage came from years of experience and preparation.
According to Canfield, Spirit
Airlines constantly prepares for a variety of scenarios, including customer and
cyber incidents, as well as airline-specific emergency preparedness. “We have a
dedicated emergency response department that includes people highly experienced
in airline operations and disaster recovery,” he said. “Between 80 and 100
people participate in tabletops, including the general counsel and outside
counsel, representatives of the pilots’ union, insurance carriers, and
government representatives. These rehearsals use fictitious but real-world
simulations, which are not revealed to participants prior to the session. While
the board is not part of a physical disaster exercise, the board is briefed
regularly on the company’s safety systems and procedures, including emergency
In a non-aviation context, unexpected
courage also can be required. Cole mentioned a retail client that learned one
of its suppliers was using detention camp labor in China. Despite the potential
blow to the bottom line, “the company had the courage to cut off that
particular supplier, acting in line with their values, even though they
recognized there would be near-term impact to their business.”
Put the corporation ahead of yourself. Sully was the last person off the plane in 2009. For directors and general counsel, the circumstances may be less dire, but the duty to put the corporation first remains. This duty could lead to stepping off a board when doing so is best for the company, according to Bruce. Cole stressed that taking personal feelings out of a situation can be tough, “especially for founders during a crisis.” Shareholder activism can often feel personal as well, but the best approach is to rise above personal attacks. For all boards, he added, “preparation and level-headed advice from the general counsel can be helpful to get people to separate personal and professional interests.”
“The GC must be able to tell it like it is,
with a firm and unsparing analysis,” added Canfield.
Stick to the script in a crisis. Sully faced heavy governmental and media scrutiny, but stuck to his “script” about the events on the day of the water landing. In any crisis, sticking to the script is important; however, crafting the script can be tricky. For the general counsel, there must be a balance between liability concerns and providing a swift response. “Very few lawsuits threaten the long-term success of the company,” said Canfield, so tipping the balance toward a swift response is appropriate. Cole agreed, emphasizing the need for transparency and authenticity in crisis communication and the need to tailor the response to the appropriate channel.
The panel agreed that a crisis can be an opportunity as well as a challenge, sometimes both professionally and personally. Bruce summed up the point. “Prior to the Miracle on the Hudson, I had always managed my career and led my life guided by what I refer to as my two ‘P’ philosophy: have purpose and passion. Yet it wasn’t until 2009 when I was looking at the city skyline from a raft in the middle of the Hudson River that I realized I was missing a third and the most important ‘P’: perspective. I will always have passion and purpose . . . but without the benefit of perspective, the context is missing. I now realize that . . . we make a living by what we get, but we make a life by what we give . . . . And, quite frankly, that’s the only perspective that matters.”
Kimberly Simpson was
the panel moderator. She is an NACD regional director, providing strategic
support to NACD chapters. Simpson, a former general counsel, was a U.S.
Marshall Memorial Fellow to Europe in 2005.
The slow pace of progress
toward increasing the representation of women and minorities on public company
boards is often blamed on lack of available seats. With directors routinely serving
for 7 to 10 years, institutional investors and other diversity advocates are increasingly
calling on boards to adopt governance practices that enhance board refreshment.
To date, boards have primarily responded by implementing mandatory retirement ages that typically range from 70 to 75 years old. Term limits too are being considered as a mechanism for stimulating board refreshment. They are presently much less common than age caps, however, with only five percent of S&P 500 boards specifying a term limit for non-executive directors, according to the 2018 US Spencer Stuart Board Index. While helpful, these practices are not enough. Thoughtful succession planning is also required.
Leverage a skills matrix. Being intentional about board refreshment is an important part of
achieving a diverse and inclusive board. Accordingly, organizations with
leading practices take a forward-looking approach to anticipating mandatory
retirements as well as to filling sudden vacancies due to voluntary
retirements, death or illness, non-performance, or any number of personal
factors. This forward-looking approach often involves leveraging a skills
matrix to understand the gaps in competencies, experiences, and perspectives
that would occur if any given director resigns. Importantly, this matrix should
be continually refreshed to ensure that desired and varied skills are present
and align with the organization’s evolving strategy.
Cultivate a network. Beyond identifying potential gaps, leading-practice organizations
develop a bench of diverse talent for filling them. Here, individual directors
can make a big impact. Building the pipeline is a long-term game and directors
can add value to their boards by cultivating a network of diverse rising
leaders. Industry associations, professional organizations, and non-profits are
excellent avenues for building these relationships.
Through involvement in
these organizations, current directors and up-and-coming talent can work
together and get a sense of what it would be like to serve jointly on a board. In
addition, good, old-fashioned networking also has its place. Generosity of time
and spirit in mentoring others who are different from you and understanding
what their priorities are, perhaps over a meal or a beverage, can go a long way
toward making connections that can be mutually beneficial several years down
Widen the search aperture. Another leading practice in building a pipeline
of diverse candidates is defining the search criteria more broadly. Board leaders
are increasingly acknowledging that the traditional practice of primarily recruiting
retired or sitting CEOs may not deliver the diversity of background, thought, and
experiences needed to govern a complex company in today’s disruptive
environment. Indeed, many institutional investors are speaking up in favor of expanding
the search criteria, and some have declared their intentions to vote against
CEOs who sit on more than one other board in addition to their own. Widening
the search aperture to include people from the military, government, academia,
nonprofits, and a broader set of C-suite roles can help companies not only to
identify more female and minority candidates but also to achieve diversity of thought
in a broader sense.
a slate of diverse candidates who can be immediately considered to fill
vacancies is one way to advance diversity through succession planning. But
another non-traditional method is also gaining traction. Increasingly, directors
are keeping an eye out for talent that can add value to their boards, even when
they are not planning for a specific transition.
The by-laws of some boards provide
the capacity to “flex up,” or to increase the number of board seats for a
period of time. For instance, a board may know that a director will soon be
retiring. In order to facilitate a smooth transition, leadership will bring on
one or two new board members 12 to 18 months in advance of the director’s
departure. Or, a board may simply come across outstanding diverse candidates
with valuable skills, either through networking or an intentional search.
By flexing up, the organization can seize the opportunity to add these valuable strengths and perspectives, while simultaneously achieving diversity. Research suggests that some boards may be taking this approach. According to the Missing Pieces Report from Deloitte and the Alliance for Board Diversity, the number of Fortune 500 board seats increased from 5,440 in 2016 to 5,670 in 2018, reversing a trend of flat to negative growth since 2010.
Remember inclusion. No discussion of advancing diversity is complete without addressing
inclusion. Leading-practice boards are very meticulous about not only
identifying and recruiting candidates, but also onboarding them and providing
mentorship so that they feel comfortable contributing to boardroom conversations.
Targeted committee assignments are one way of encouraging fresh directors to lean
into their new roles. For example, the audit committee may invite a new
director who has extensive financial
expertise to contribute their perspectives on financial reporting, risk, and
Go the Distance
As more institutional
investors speak out about the importance of diversity, and more boards
understand the importance of inclusion to sound governance of their companies, having
a succession plan that better matches their investment horizons—perhaps
extending 5, 10, or 15 years into the future—may soon be expected, not simply
preferred. But, proactive, long-term succession planning for boards can often
be neglected amid myriad competing responsibilities.
To ensure a board
continuously has the broad range of skills, experiences, and perspectives
needed to govern a complex company today, the succession planning process has
to be thoughtful, intentional, and thorough. This means it should start with
cultivating a diverse bench of talent and move all the way through onboarding
new directors. Whether by leveraging a skills matrix, flexing up, or some other
means, going the distance on board refreshment is an essential component of achieving
a diverse and inclusive board.
DeHaas is a vice chair and national managing partner, Center for Board
“May you live in interesting times.” Given the current
period of profound geopolitical change and turmoil—the US-China trade war,
tensions with Iran, populist nationalism in Europe, and Venezuela’s economic
collapse—corporate leaders today are certainly living in interesting times.
Characterized by ambiguity, these events pose real threats to supply chains,
business models, revenues, and profits, making geopolitical risk a critical board
While business leaders develop strategies to mitigate these risks, the NACD Blue Ribbon Commission on Adaptive Governance recommends leveraging adaptive governance. As the report warns, organizations can have “a pattern of blind spots, where senior leaders [report] high levels of confidence in their ability to transform in response to a fast-changing business environment, but significantly [underestimate] the importance of specific threats.”
NACD recently spoke with former Allied Commander of NATO
Admiral James Stavridis about how companies and their boards can best adapt to
changing international conditions. Stavridis currently is operating executive
of The Carlyle Group, chair of the board of counselors of McLarty Global
Associates, and chair of the board of the US Naval Institute. He is a monthly
columnist for TIME magazine and chief international security
analyst for NBC News.
The wide-ranging interview covered the key developments shaping uncertainty, volatility, and disruption in the world of geopolitics, as well as the future of board leadership. NACD will publish a second blog based on our conversation with Stavridis, who will be a featured speaker at the NACD 2019 Global Board Leaders Summit.
der Oord: The world’s changing rapidly. What do
you see as the critical geopolitical trends that will impact American companies
in the short- and long-term?
Admiral Stavridis: At the top of the list is cybersecurity—we’re so utterly dependent on operating in the digital world, and yet we’re still grossly unprepared for malevolent activities. Second is the rise of authoritarian regimes globally, and their accompanying populist tendencies. On this issue, I’m cautiously optimistic that we’ll work our way through the challenges. (See why in a piece I wrote called “Democracy isn’t Perfect, but It Will Still Prevail” in Time Magazine.) Third, the rise of technology, as seen through the rivalry between the US and China, especially around artificial intelligence (AI). Fourth, the population explosion in sub-Saharan Africa will have significant economic and geopolitical impact on the world. And finally, the rise of India both as a key market and geopolitical actor. I would argue that over 300 years from today, the history of this century will say more about the rise of India than that of China, principally because of demographics and democracy.
Oord: As you work with clients and meet
with executive teams, what are the biggest blind spots you observe during these
Stavridis: Let’s start with the rise of great
power competition. Here it reminds me of the pre-World War One world, when
there was an assumption that there may be small skirmishes, but that we’ll never
have great powers come into conflict with one another. I’m not so sure about
that. It’s unlikely that we’ll end up in a nuclear exchange, but the possibility
of kinetic military activity in the South China Sea, the Arabian Gulf, or the
Eastern Mediterranean is not impossible.
Additionally, there’s an increasing assumption that, despite
minor or occasional outages, the Internet will remain open and accessible to
all. So many companies have not taken any precautions to guard themselves
against a prolonged shutdown. However, there are significant structural
challenges today in terms of small and large nations being able to block access
to electric grids, or control networks in ways that corporate executives haven’t
Lastly, India, which is almost invisible in our current
dialogue, and then Africa, will experience an enormous population boom
mid-century that will really distend geopolitics and demographics.
Oord: Can you talk more about Africa and the
continent’s predicted demographic boom? How might that manifest itself?
Stavridis: People in more desperate regions of
the continent will increasingly migrate north. This may have destabilizing
effects, and cause humanitarian crises. A big boom in human capital is also
expected, which in some parts of the continent will be relatively well managed
over time, resulting in major productivity centers. Of note, Africa is a market
of increasing importance, but a difficult one to tap into because it’s so
differentiated. Strictly because of its size, the continent will have an
increasing impact on global culture in ways that may be hard to foresee and
predict today. I believe there will be a cultural explosion that will bring new
thinking from that domain into the global zeitgeist, in the mid- to
Oord: Many boards don’t spend much time in
dialogue with management on the topic of geopolitics. But a growing number are
considering formalizing oversight of this issue. In your view, what’s the right
approach to engaging management teams on these complex issues?
Stavridis: It really does depend on the board;
though I do generally believe that all boards need to spend more time on this.
I’m on the board of a Greek shipping company with vessels operating worldwide. Its
international trade is the absolute métier of the corporation, so it’s
extremely sensitive to geopolitical risk, both tactically (in
terms of where our ships go) and
strategically (as global trade becomes less
stable). That board is extremely focused on geopolitical risk. In the middle of
the spectrum, I sit on the board of an international financial advisory mutual
fund. The company is fairly aware of geopolitics because
of international funds and the general importance of that.
My main point is that it varies, and that’s okay. Boards should assess
and have a clear-eyed view of their specific needs. This should all be driven
into the strategic planning process of the business. It’s necessary but
insufficient for directors to have a conversation about what’s going on in the
world and how that might impact their companies. Instead, as corporate leaders
lay out five, 10, or 50-year plans, they ought to be thinking about
geopolitics, and that should be included in the strategic planning process at
the front end.
Oord: How are you making sense of what’s
happening now at the nexus of cyberinstability and geopolitics, particularly
with China, and how do you place that in a long term context?
Admiral Stavridis: In my view, there are four big irritants in the US-China relationship—cyberwarfare, intellectual property [IP] theft, imbalances or “unfair” practices in trade, and territorial disputes over theSouth China Sea. In the end, the easiest to address will be trade. IP over time will likely also resolve itself, given that China is developing its own intellectual capital with extreme rapidity. I also believe cybersecurity issues will likely be resolved through a rough, nuclear-like deterrence regime that emerges over time.
The hardest one will be the South China Sea. China is adamant that they own it. The US is adamant that they do not. That said, China has the advantage of geography and determination—because it’s critical to its Belt and Road Initiative. But I am cautiously optimistic that over time, Washington and Beijing will avoid an open conflict with one another. Ultimately, it’s in neither side’s interest to get into a war; and neither side is trying to fundamentally change the other. So I would categorize outright conflict as a low, but not impossible, probability. It’s certainly worth watching; and for those who want a deeper dive, I would recommend Graham Allison’s book Destined for War: Can America and China Escape Thucydides’s Trap?
Oord: NACD staff are working on a major study
right now on the future of board leadership in the United States. What are
critical skills and abilities that boards or directors should adopt in next
five to 10 years?
Stavridis: First in my mind is proficiency in
cybersecurity. Board members themselves have to be a hard target, because they
represent their corporations. Each board member should undergo a checklist from
the company’s chief information risk officer, ensuring that they’re effectively
protecting themselves against potential attacks.
Directors also need dedication to the task of being a board member. I’ve been passing out copies of the book Bad Blood: Secrets and Lies in a Silicon Valley Startup to my fellow board members. It’s a great cautionary tale about the abject failure of arguably the most prestigious board assembled in American history. These are preeminent folks who just didn’t pay attention, and didn’t have the hard core skills needed. Directors should have respect for the craft of being a board member—if you sit on the board of a biotechnology company, consider who in the boardroom possesses the requisite expertise. This doesn’t mean every board member has to have every skill, but directors individually and boards collectively should be thoughtful about composition.