2021 Directors' alert

Article

2021 Directors’ alert

A new era of board stewardship begins (December 2020)

Authors: Dan Konigsburg (US) & Sharon Thorne (US)

Many organizations will need to transform themselves to overcome the systemic challenges and inequities that have surfaced during COVID-19. Change will require bold steps—and new skills—from board leadership. The time is now.

AS the world continues to be impacted by COVID-19 lockdowns and looks to recover from the economic turmoil the pandemic has wrought, boards of directors are finding their world—and their boardrooms—fundamentally transformed. Even the boardroom table is changing—from oak, walnut, or glass to pixelated squares on laptop screens. Traditional topics of boardroom discussion like growth, profit, and cost structure are making room for broader, more far reaching ones, including new risks to the business, workplace safety issues, increased stakeholder interest in governance, serious discussions about social and political turmoil, and racial injustice. There is also growing demand among stakeholders for companies to directly address societal challenges. While some forward-thinking boards were already making time for these discussions, the pandemic has brought them to the fore.

Take just two of these issues: climate change and social purpose. Even in the midst of the crisis, the push to have businesses respond and commit to climate has not abated. In Europe, the European Union’s non-financial reporting directive established a common reporting framework across a broad range of nonfinancial environmental, social, and governance (ESG) areas, including climate change. And in Asia as well as the United States, investor interest in ESG investing continues to rise.

For boards, the pandemic has been a reminder of the multiple systemic risks they need to consider, and that navigating these risks will take ingenuity and thoughtfulness. At the same time, it has highlighted that no company is an island. There is, indeed, a social license to operate in many places, and boards that ignore the responsibilities their companies have to the wider world do so at their peril. And while the 2019 Business Roundtable “Purpose of a corporation” statement1 addressed these themes, the pandemic has prioritized them as top concerns. Now, many directors are evaluating how their companies are contributing to the wider response to the pandemic, and how they are taking care of their people and their people’s health and safety. Increasingly, too, board members are thinking about the key role that business has to play in the search for social and racial justice.

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