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Helle Bank Jorgensen of Competent Boards says social and environmental impact issues are rising to the top of the C-suite agenda
I spent the beginning of the New York Climate Week together with over 1,800, primarily American, board members. I was not in New York, however, but in Washington DC, where the National Association of Corporate Directors holds its yearly summit to discuss what boards across the country are talking about, or should be talking about.
Missing the New York Climate Week was a purposeful decision on my part. Although I didn’t get to see all the great people I know, and hear all the commitments, I believe that it is the tone from the board of directors that will make the commitments stick and result in true impact.
We are getting closer to valuing and encouraging integrated thinking, based on a sense of purpose. There is, however, still a long way to go
To my delight, ESG, climate and sustainability were discussed in most of the NACD sessions I participated in, and if they were not, the audience, including myself, asked questions related to those topics. The new Business Roundtable statement on the purpose of a corporation was mentioned frequently, as was Larry Fink’s CEO letter. If the more than 1,800 directors present at the conference can be viewed as a proxy for the average board in the US, there is no doubt that an interest in examining the wider societal impact and responsibility of corporations has climbed closer to the top of the corporate board agenda.
The former CEO and chair of Vanguard, Bill McNabb, said in his presentation that Vanguard, under his leadership, had existential discussions, asking “Why do we exist?” The result of the discussions made Vanguard rethink and reshape its business strategy to focus on the bigger picture.
Those who know that I have spent close to 30 years talking about and helping companies on their sustainability, ESG and climate strategy, execution, and reporting efforts will understand that I’m thrilled. We are getting closer to valuing and encouraging integrated thinking, based on a sense of purpose. There is, however, still a long way to go before integrated reporting becomes a mainstay, and we embed all positive and negative externalities into the financial statements – the vision I presented 30 years ago in my Master.s thesis.
Nowadays, as I spend a lot of my time talking to board members, I can’t help but reflect on the purpose of the board of directors. The role of the board is to hire and fire the CEO and provide oversight.
And it’s clear that this governance role has undergone a transformation: from a time when the board, chosen by the CEO, was nodding along to what the CEO presented before dinner to a time when board members get to work on a Monday morning and are expected to question the management team and articulate the company strategy to investors. Investors need to get a sense of how well the board understands and oversees the strategic direction; how well they support management in getting the best possible short- and long-term results for shareholders and stakeholders, and how well they support management in a crisis situation.
Even though the commitments and workload for board members have increased exponentially over the last years, it seems like every day there are stories about questionable business practices in the news – practices that beg the question: why did the board allow an unethical behaviour that led to lost lives and/or trust in a company and its leadership, and financial value destruction?
Do board members ask themselves why so many people are joining the climate strike and blaming leaders and corporations for not doing enough? Do they ask themselves why companies are accused of a range of negative social and environmental impacts on society, and on the lives of the many people – including the corporation’s own employees, customers, and ultimately, shareholders and stakeholders – the corporation relies upon. Do they know why kids, some of them the children of those shareholders and stakeholders, are taking to the streets?
I would say yes: the board knows that those shareholders and stakeholders are the people they rely on to be successful in the long run. Most know that acting in a way that works for only the few will lead to unrest and volatile markets that don’t benefit companies.
We are looking downstream instead of upstream; solving symptoms instead of tackling problems
I believe that boards of directors need to carve time out to discuss not only the purpose of their companies but “Why do we, as a board, exist? What do we want our legacy to be? What should not happen on our watch? And what should happen? What future do we imagine, and how do we create it?”
All too often we discuss tabletop exercises on what we would do if x happened. Only belatedly do we discuss why it happened and how we could have prevented it. We are looking downstream instead of upstream; solving symptoms instead of tackling problems and creating the future we envision.
I’m happy to say that the purpose of Competent Boards is not only to provide insight so that boards can provide oversight, but also work with boards to make well-informed decisions about what to do better.
We need not only competent boards – we need courageous boards.
Helle Bank Jorgensen is founder of Competent Boards. She serves on HRH Prince of Wales A4S Global Expert Panel, the Cornerstone Capital Global Advisory Council, the WBCSD governance and internal oversight high-level advisory group and is a board facilitator for the UN Global Compact Board Program.
This article is part of the in depth Inclusive Capitalism briefing. See also:
NACD Business Roundtable ESG Larry Fink