Roles of Board Chairs Continue to Evolve in Pandemic Era
March 23, 2021 – Board priorities are rapidly increasing in today’s challenging environment. According to a recent report from RSR Partners, the granularity of the work for chairs has dramatically increased over the years and is now much more intense.
The report, which gathered insights from more than 25 recent interviews with board chairs, says that many of these high-profile responsibilities are becoming urgent tasks for the chair of the nominating and governance committee. In addition to their existing focus on board composition and effectiveness, as well as board and CEO succession planning, RSR Partners says that chairs are now grappling with new business imperatives such as environmental, social, and corporate governance (ESG); workforce safety and transformation; and diversity, equity and inclusion (DE&I). They are also expected to be experts on governance, the organization’s strategies, and the leadership capabilities of the management team. Often, chairs also act as the hub of information for the board, coordinating responses across all board members and committees.
“A confluence of issues confronting boards and their organizations today is landing on the doorsteps of the chairs of nominating and governance committees,” said Brett Stephens, chief executive officer of RSR Partners. “The more we speak with chairs about their needs and objectives, the more we are inspired by the high priority, interlaced initiatives they are leading and executing.”
It is crucial today for boards to be both informed and proactive around topics such as ESG and DE&I and recognize their influence on board composition. Chairs are at the center of this conversation due to their role in sourcing and championing new directors. “Every board I serve on is having these conversations and pushing forward on ESG, diversity, and replenishment,” said Deb Henretta, director at American Eagle, Corning, Meritage Homes and NiSource. “The goal is to achieve a more enlightened and more forward, future-ready board.”
RSR Partners says that having these conversations is a step in the right direction, but chairs also need to set goals and apply metrics to measure and communicate achievements. “Committee activities have become more interconnected as boards strive to make progress,” the search firm said. “As a result, developing a clear action and communication plan can be a challenge, especially for chairs trying to amalgamate messaging and reporting. Moreover, chairs are often responsible for conveying the plan to stakeholders and leadership teams.”
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Margaret Preston, director at Otis Elevator and McCormick, asked: “How do we communicate to our various stakeholders on these topics and how do we incent and reward management against these priorities? This is an opportunity, and at the same time this creates a structure for us to do this work and do it with real transparency and deliver results. But it will take some organizational effort and a clear delineation of roles and responsibilities to get there.”
RSR Partners found that chairs continue to spend a significant amount of time on succession planning for all committee chairs as well as board leadership. To be effective, the firm said, chairs must be well versed on corporate governance and board refreshment strategies. Topics such as mandatory retirement age and whether to set limits on director tenure continue to be hotly debated. Determining limits and appropriately setting expectations regarding board tenure for new and existing directors has become another duty for the chair.
“Chairs need to set expectations for all directors so that a board seat is not a lifetime appointment,” said Laura Unger, director at Nomura Holdings, Navient and CIT Group. “It is imperative to set expectations when directors join, to depersonalize the process, so it won’t be as difficult as it has been to refresh the board and change out directors as necessary.”
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In this new environment, RSR Partners says that boards have become more open and receptive to annual board and individual evaluations. Evaluations can help boards understand their strengths and gaps in relation to the capabilities and experience needed to support the organization’s strategic plan – and its ESG and DE&I goals. How to strengthen these annual evaluations will become a decision left to chairs as they refresh the board’s skills and experiences and aim to increase diversity.
“Written responses to questionnaires alone are quickly becoming a dated practice,” said Greg Lau, head of RSR’s board advisory practice. “Now, individual director and selected management interviews are becoming the norm to not only gauge effectiveness but help the chair facilitate refreshment. The conversation is around how to conduct them productively, how to appropriately communicate the results, and how those results should inform refreshment decisions.”
RSR Partners says that as the dynamics of succession planning, DE&I, ESG, the company workforce, director evaluations, and setting board expectations on tenure – and the goals, metrics, and communication that accompanies these priorities – all converge with the nominating and governance committees, the agility of the chair will be tested. As many chairs hold themselves to higher levels of accountability, especially to stakeholders, they are working overtime to meet their new challenges and pivoting in new ways. They are agents of change, personified, noted the search firm.
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Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media