How do corporate boards work, and how should they work in this chaotic and volatile world? On 19 January, we were privileged to learn on the topic from the global economist and veteran board member, Dr. Dambisa Moyo. During our free webinar, she explained the key responsibilities of a company board, how corporate governance is changing, and also offered ways in which boards can become better equipped to confront the challenges of the 21st century.
Before the session with Moyo, we had an intriguing discussion with Eli Moe-Helgesen, the National Leader Assurance from PwC. Below you can find a visual summarization of that session by Linda Saukko-Rauta.
And next, we give you a brief summary of Moyo’s insights.
What are the responsibilities and the role of 21st-century corporate boards?
The question might sound a bit blunt, but according to Moyo’s expereince it appears that the role of a corporate board is a bit hazy to many. Therefore, she began by emphasizing the three mandates of a corporate board:
What are the challenges corporate boards face?
Moyo started by pointing out that the macroeconomic situation is one of the most obvious challenges boards and businesses face.
In addition, she emphasized the fact that the world is becoming more fragmented. Before, when the world was lead by the West, you could easily do business across boarders and borrow money cheaply from almost anywhere. Now, deglobalization will make things more difficult as barriers to trade and capital are restricting global operations. Company boards need to make sure that businesses can run even in a more regional world.
An issue related to deglobalization is the war for talent. Hiring the best talent from around the world will become more difficult in a more fragmented world, which will be an issue for corporate board to consider.
Moyo again raised up that today, we are moving away from the thinking “financial shareholders first”. Companies and their boards are being called upon to address issues that are not directly in their area. As she mentioned earlier that, for example, diversity, social injustice, environmental concerns, and income inequality are increasingly becoming challenges for corporate governance to deal with.
Furthermore, digitization can be one of the challenges for many companies and their boards. “How does technology actually drive returns in your business?”, Moyo suggestd you to ask yourself. Naturally, it depends on the nature of the business when it comes to how the company can deploy technology.
What are the best ways for corporate boards to navigate in the future?
Moyo mentioned that the levers corporate boards have to tackle their responsibilities and challenges are compensation and punishment. Especially with different compensation instruments, companies can incentivise people to drive the outcomes that they wish to see in the long term. She also highlighted that even though monetary compensation is the most obvious one, there are tools beyond financial benefits to incentivize stakeholders.
According to Moyo, corporate boards can navigate in the future by also focusing on the following aspects:
Bonus: What are the characteristics of a good board member?
Finally, during the Q&A session, Moyo emphasized that first of all, every board member should understand the basics of business. She underlined strategy and financial expertise especially. For example, being able to read and interpret key financial statements is crucial. “There’s no way I would put somebody on a board without financial skills.”
In addition to having the basic understanding of business operations, every person who would like to become a board member should think long an hard about what are the industries and companies that they find interesting. Also, larger corporate boards are divided into committees, so it is important to think what areas of business, i.e. which committee would be eager to serve and add value to. So, it’s also important to think about what is the expertise that you can bring to the table. “How you specifically are going to add value to the business?”
A global economist and bestselling author, Dr. Dambisa Moyo, gave a comprehensive overview of the impacts of the COVID-19 crisis on the global economy in her talk at our online event in May 2020. She took us through how corporations […]