The Nasdaq Center for Board Excellence’s Boardroom of the Future Series discusses the changes that will affect the composition, mission and expectations of the boardroom in the near future to meet the needs of evolving stakeholders both inside and outside companies today.
Our second post covers the importance of lifelong learning, with unique and relevant insights garnered from the Nasdaq Center for Board Excellence Advisory Board Members: David Chun, CEO and Founder at Equilar; Roosevelt Giles, Board Director of JUST Capital and Endpoint Ventures; Jennifer Robertson, Managing Director and Governance Practice Leader at Board Matters; and George Vlachos, International Director of Board Advisory Services at Stanton Chase in addition to James Beasley, Head of Board Advisory, EMEA at Nasdaq, Kaley Childs Karaffa, Head of Board Advisory, Americas at Nasdaq.
Resilient boards evolve with a changing world, whether its global economic disruptions like the COVID-19 pandemic and the global financial crisis, corporate failures like the Enron collapse of 2001, or societal shifts, such as the enhanced focus on stakeholder capitalism and sustainability incentives. Staying ahead of unforeseen events, adapting when necessary and preparing for a dynamic future requires board members to be intellectually curious and continual learners. Adopting the mindset of a lifelong learner helps directors remain critical drivers of excellence in the boardroom and helps guide management towards innovative strategies that differentiate their companies in the market.
Today, businesses operate within a complex and interconnected global network, comprising of a wide range of stakeholders in addition to shareholders, including employees, suppliers and the communities in which they operate. Boards should consider the interests of these stakeholders as they make decisions that fulfill their fiduciary duties to shareholders, understanding that consideration of these interests adds new responsibilities for directors, like evaluation of climate impact, promotion of inclusive and equitable workplaces, ethical use of artificial intelligence and the implementation of prudent cybersecurity practices.
In the first piece of the boardroom of the future series, Jenny Robertson highlighted the need for board members to be dynamic and agile in their thinking, to build resilience into the company’s strategy, operations and culture. Being inquisitive to uncover around-the-corner challenges and downstream impacts of a disruption, as well as evaluating previously unconsidered alternatives, or identifying new opportunities, has become an essential skill for directors in an ever-changing world.
Lessons in Lifelong Learning
History suggests that boards that are unwilling to learn are less resilient to a changing economy, business conditions and even misconduct or negligence of employees and leaders. For instance, Roosevelt Giles recalled the Enron collapse in 2001, noting, “board members didn’t understand the business they were governing, which led to lack of financial risk oversight—and look what happened.”
Many boards have learned from past corporate failures, expanding their compliance model to include ethics education that helps board members be more educated and proactive in preventing potential fraud and addressing misconduct by employees. Following the Enron collapse, the United States government passed The Sarbanes-Oxley Act (SOX), mandating certified financial reporting by both management teams and boards. SOX drove the boardroom to become better educated on risk oversight while building a stronger board composition, which now includes financial and risk experts at the table and a more collaborative relationship with management.
More recently, the increasing popularity of sustainability initiatives and stakeholder capitalism became a lesson in staying abreast of new and emerging trends, turning them into opportunities for advancement and distinction. One McKinsey report from 2019 analyzed over 2,000 studies on the impact of ESG proposition on equity returns. 63% shared positive findings while only 8% shared negative findings. The study concluded that ESG links to cash flow in five important ways, bringing value to companies who were open to learning about new opportunities of value creation:
- Facilitating top-line growth
- Reducing costs
- Minimizing regulatory and legal interventions
- Increasing employee productivity
- Optimizing investment and capital expenditures
Today, the COVID-19 pandemic remains an ongoing environmental change that has required boards to learn and ensure the corporation’s strategy and business practices adapt to new circumstances. Results from a McKinsey Global Survey, based on responses of more than 800 board directors and executives, shows that boards adjusted their priorities during the pandemic. Many started equating innovation and growth—the leading topic on board agendas—with corporate resilience and education on new strategies, topics and risks to pivot through changing times.
David Chun emphasized the importance of continual learning as an avenue of opportunity through the famous quote from hockey legend, Wayne Gretsky, “I’m a big fan of what [he] said: skate to where the puck is going to be, not where it is, because you’ll never catch it.”
Board members who are willing to engage in ongoing education and anticipate the unlikely challenges while embracing innovation will better prepare their companies for tumultuous times, even helping them thrive in the advent of these changes. Robertson brought up emerging technologies like ChatGPT and other artificial intelligence tools that may be the next economic disruptor that boards can learn about, get ahead of and plan strategies for to increase their opportunities and add value to their companies.
Becoming a Lifelong Learner
Learning and education should be tenants of effective governance as they provide board members with the requisite knowledge to make well-informed decisions that advance long-term growth and value. For board members looking to be lifelong learners, the Nasdaq Center for Board Excellence Advisory Board has compiled three ways for boards to foster a culture of learning in the boardroom and throughout the company at-large.
Tap Outside Peer Networks
Chun suggested peer networks as a means of sharing information and gaining education outside of the boardroom.
“Given how rapidly things are changing around governance, having access to continuing education is important; to be able to continue to stay on top of trends, going out and learning from peers, through peer networks, whether it’s something through a continuing education opportunity or through other organizations,” Chun said.
He advocates for directors to join peer networks and take advantage of learning through colleagues. This kind of learning helps board members consider new perspectives, stay relevant and bring in outside knowledge to the boardroom that can create more holistic thinking.
Attend Consistent Continual Education
Directors should also attend regular training sessions, both individually and as a group, to expand their understanding on areas pertaining to their committees, as well as disciplines pertinent to the changing governance, regulatory and business landscapes – including the economy, sustainability and cybersecurity. This is critical to board members’ ability to ask questions and contemplate scenarios that may impact the business in addition to having access to information necessary to make the right decisions.
George Vlachos echoed the importance of education, focusing on finding gaps in board understanding as the starting point to inform training.
“The education of the board should involve identifying the gaps in skills the board needs in order to work effectively, either in the soft or hard skills…that’s what’s important,” said Vlachos.
Exemplify a Lifelong Learning Mindset
Board members can also nurture an internal mindset and grow the value of lifelong learning. The Harvard Business Review coined one of these avenues, the passionate explorer. The passionate explorer is someone who does not just improve their skills in certain disciplines for certification or continued training. The explorer has three distinct traits:
- A long-term commitment to achieving impact in a specific domain that excites them.
- An excitement in the face of unexpected challenges.
- An immediate desire to seek out and connect with others who can help them get better answers faster to increase their impact.
The benefits of fostering a culture of learning can also emanate throughout an organization, according to the Forbes Business Council. Encouraging management and employees to be lifelong learners can increase employee engagement, which can lead to higher employee satisfaction and retention, greater productivity and profitability.
Additionally, a lifelong learning mindset among the board may be the key to bringing passionate members into the room, providing an environment where learning is intentional and creativity is embraced to define future success.
Boards that advance lifelong learning are then better prepared to live by Robertson’s challenge to “turn every risk into an opportunity.”
In the next article of this series, the Nasdaq Center for Board Excellence Insights Council compares the similarities and differences between EU and US corporate governance landscapes.
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The views and opinions expressed herein are the views and opinions of the authors and do not necessarily reflect those of Nasdaq, Inc.
