Author Archives: Karen LOON

Announcing the Winners of the 2021 IDN Awards

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Announcing the Winners of the 2021 IDN Awards

22 October 2021

Winners of the 2021 IDN Awards

The INSEAD Directors Network (IDN) is an official Global Alumni Club, whose mission is to foster excellent corporate governance through networking, communication and self-improvement.

Our more than 1,500 Alumni work on boards around the world, sharing knowledge and managing businesses across all industrial sectors. They also provide invaluable support for Not-for-Profit organisations.

We want to celebrate this success by recognising some of our impressive members.

Outstanding Mandates

Winners were selected from over 100 mandates, shared via the quarterly IDN Board Position Announcements. This is the second year IDN spotlights outstanding mandates of our IDP-C members.

Selections were based on the size and importance of the organisations they represented, their global relationships and the position at the board, in combination with pursuit of INSEAD’s mission ‘Force for Good.’ Two winners were selected, each of which has an outstanding track record and has demonstrated the highest levels of integrity.

The winners are:

Non-Profit Category

Doris Albisser

IDP-C 10 2015

Member of International Senate

SOS Children’s Villages

President

SOS Children’s Villages Switzerland

 

For Profit Category

Lale Saral Develioglu

IDP-C 7 2014

Board Member

Anadolu Efes (Brewery, Turkey)

 

IDN Good Governance Award

New in 2021, this award recognizes excellence in governance. Our winner was chosen from a competitive field of nominees based on two criteria: contribution to good governance and evidence of impact.

Sadia Khan

Commissioner, Securities & Exchange Commission of Pakistan

MBA 1995

IDP-C 17 2018

 

*         *         *         *         *

The IDN Award Committee comprising five members of the IDN Board worked to define the selection criteria and examined the candidates. Candidates for awards are members of IDN and exclude current and recent board members. Verifications were made by INSEAD’s Corporate Governance Centre and the winners were unanimously supported by the IDN Board.

The awards were presented at INSEAD Directors Network 2021 Annual General Management Meeting.

Thomas Seale, Chairman of the IDN Award Committee stated: “We congratulate the winners. They reflect well on IDP, INSEAD and IDN and we can be proud of their achievements.”

 

On behalf of the IDN Board,

 

The IDN Award Committee

Karen Loon, Hagen Schweinitz, Jeff Scott, Thomas Seale and Helen Wiseman.

Governance of Corporate Renewal and Sustainability

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Governance of Corporate Renewal and Sustainability

Sustainability is increasingly moving to the top of many company agendas. As a result, investors increasingly require reporting on their ESG (Environment, Social and Governance) agenda with concrete actions to follow. What is the board’s role in guiding companies on this new path? What are the better practices that are emerging?

By Karen Loon IDP-C and IDN Board Member

In an increasingly fractured world, many of the significant global risks which the world faces relate to sustainability risks. These risks include climate action failure, human environmental damage, biodiversity loss and extreme weather. These risks, in addition to other challenges arising from the increasing adoption of technology, the pandemic and geopolitical risks are having a significant impact on companies and their boards.

What is the role of company boards to guide their companies on this new path? Further, what are some of the better practices which are emerging?

In a session facilitated by Liselotte Engstam IDP-C and IDN Board Member, INSEAD Directors Network (IDN) members, together with members of the INSEAD alumni Community Impact Challenge recently learnt more about these areas from Mats Magnusson, Professor in Product Innovation Engineering of the KTH Royal Institute of Technology, and Ludo Van der Heyden, Emeritus Professor of Technology and Operations Management, and the INSEAD Chaired Professor of Corporate Governance at INSEAD.

Increasing pressures require boards to better guide companies to renewal

Companies need to renew themselves more and faster than ever before.

“This renewal [is not] actually about becoming slightly better at things – it’s about changing things quite radically,” noted Mats Magnusson.

These changes are not only due to digital – organisations also need to address new values, with sustainability being one of them.

Mats added that various studies by academics and consultants have shown that companies have reacted differently to these challenges, with some trying to innovate, and others struggling because of the present pandemic. However, what is common to most of them is that companies realise that if they just continue the way they have been doing things the last few years, they will not be successful in the future. As a result, there is a huge need for innovation.

“Actually, a large part of that innovation has to address sustainability”, he added, something which is not new to boards.

Sustainability and climate change require all companies to revisit their purpose, strategy and business model.

Based on research, most board members and directors agree that they spend a lot of time discussing governance about risk, regulation, and reporting, which is necessary.

However, there are several aspects that boards are not discussing enough. These includes sustainability, as well as culture and new technologies. Finally, boards need to spend more time on their strategy, value creation disruption, innovation.

These are not new findings; however, boards do need to improve their level of discussion on these areas to ensure that they are addressing them.

 

The importance of sensing, pivoting and aligning by boards

Three dynamic capabilities that boards can adopt are sensing, pivoting and aligning. Both sensing and pivoting have a positive correlation with innovation performance. Further, aligning positively impacts firm performance. However, pivoting can also harm firm performance.

Areas which boards can work on:

  • Sensing – Look at the external world and understand what is changing and impacting us, whether technology, business, customers or the environment. Become better at scanning the horizon for changes with an open mind. Observe changes in the broader environment, not only in your own industry but adjacent and completely different industries. For example, technology-wise, this may mean that companies need to consider completely new technologies that they have not considered before. However, Mats notes that “what we should not address is to focus on our purpose. If we focus on our purpose, then we’ll have some kind of limitation once we are actually looking.”
  • Pivoting – is about taking the right opportunities, taking action and daring to make strategic changes that include some form of innovation. Develop your company’s risk and opportunity profile by looking into the things disrupting your companies – perhaps new technologies, the new business models, or new companies. This information should be used to inform the company’s strategy.
  •  Aligning – This is about combining the new and the existing capabilities and business models. Find a good balance between the short-term value pressure – companies do need cash as well as longer-term value creation. It is essential to ensure that the innovation strategy is a key part of the business strategy.

 

Boards need to discuss their approach and capability to guide their company’s ESG agenda

Mats shared that more can be done by companies to integrate sustainability into their strategies. Of companies recently surveyed by SISU Boards:

  • Lack of integration of sustainability into strategy – Almost 45% actually do not yet integrate sustainability into their strategy. Companies need to become more granular – set goals for the sustainability action and find ways of evaluating if the things they are doing are the right ones.
  • Lack of board accountability for sustainability – As many as 60% of boards have not yet discussed how to engage and consider sustainability. For instance, should they have a committee focusing on this or several committees, and in what areas?

Boards can improve their sensing, pivoting and aligning capabilities

Boards can do more work to improve their capabilities when it comes to sustainability.

  • Sensing – 46% don’t have good processes to foresee changes and impacts on sustainability and business. Additionally, 48% don’t actively monitor new solutions that expedite their business sustainability towards their purpose.
  • Pivoting – 49% aren’t good at taking balanced risks towards ensuring corporate renewal. Further, 56% do not ensure that their strategy harnesses and reshapes the ecosystem for better sustainability and differentiation.
  • Aligning – 51% are not yet good at balancing short- and long-term value creation. In addition, 61% have not yet implemented a clear and effective innovation system, monitoring innovation activities and culture.

Board best practices to experiment with

Ludo Van der Heyden suggested some case studies and best practices for board renewal on sustainability around sensing, pivoting and aligning.

He also noted that it is important to select a modern, ambitious and humble chair, and board members. Boards should also rethink their role and focus, using Fair Process Leadership as support.

It is critical to structure the board and the organisation for sensing, developing the capability of timely pivoting, and continuously aligning and re-aligning.

Finally, it is vital to have collective leadership at the board level, and that it is proactive and engaged.

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights with our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year, we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service, and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance

 

The Unintended Consequences of Corporate Governance

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The Unintended Consequences of Corporate Governance

The ethical and legal drivers of stakeholder primacy

As an independent director, to whom are you accountable? Should law or ethics be defining your decision-making position at the board?

By Karen Loon IDP-C and IDN Board Member

Over the past 18 months, the debate between shareholder versus stakeholder primacy has come under the spotlight.

With a heightened emphasis on the collective well-being of stakeholder communities worldwide, corporate boards are under intense scrutiny to find a delicate balance between maximising shareholder and stakeholder value.

The COVID crisis has revealed that focusing on shareholder value alone is no longer a viable option. Business leaders and corporate boards have a critical role in creating sustainable value for economic performance and societal progress. While stakeholder capitalism is the key to unlock inclusive sustainable growth, corporate boards must not overlook the associated risks involved in stakeholder governance.

Why is this important to independent directors?

Directors who operate in common law countries would be fully aware of their “fiduciary responsibility,” and use it broadly when discussing their responsibilities as independent directors.

However, not all countries have principle-based laws, which impacts the role of independent directors.

With the rising need for companies to focus on sustainability and digital resilience, board members need to consider whether their companies can afford to wait for regulatory and legal frameworks to be implemented (reactive). Alternatively, should market-driven strategies be based on stakeholder expectations and ethical considerations driving decision making (proactive)?

IDN members recently discussed these critical topics in a session led by Helen Pitcher OBE, IDP-C and IDN President, and Cleopatra Kitti IDP-C and IDN Cyprus Ambassador held on 8 September 2021.

New realities for businesses, governments and societies

Climate change, the pandemic, social inequality and digitalisation have ushered new realities for businesses, governments and societies.

Helen Pitcher OBE noted that in the past 15 months, there has been increasing and wide-ranging debate about the unintended consequences of corporate governance.

“Up until, maybe five or six years ago, the view was boards were there, basically to look at, and ensure that the investors were being appropriately safeguarded … It [was] very much [focused on] fiduciary duty,” Helen noted. This is the reason why, in the past, there were more former CEOs and accountants joining boards.

“Now days, it’s a much broader agenda,” she highlighted.

The pandemic has now accelerated all of this, with the need for companies and their directors to address all of the environmental, social, and governance issues, as well as fiduciary issues.

Helen mentioned that some have debated whether boards could say that they are only there to look after shareholders.

There has been a change in views towards companies thinking much more broadly about their culture and values and doing the right thing for the environment, society, etc, within an appropriate governance framework.

Further boards have a fundamental role in overseeing the sustainability of their organisations instead of just the here and now.

Adding to this, she said, “the executive is there for the here and now, within the context of the longer term. But typically, board directors serve for longer than the average CEO or CFO, so they are custodians of the future.”

“There was a recognition that there needs to be a change in how we link remuneration to these goals, to make sure that attention is being paid to them because we know what gets measured gets done usually. [A question is] how we still take account of the fiduciary responsibilities within the broader context of all stakeholders, and not just investors.” (Helen Pitcher OBE)

Areas for boards to consider

  • Sustainability is no longer a choice – it is an imperative.
  • Shareholder and stakeholder interests are not an “either, or” option. It is an imperative.
  • The Business Roundtable has set its mission towards the welfare of all stakeholders (not just shareholders). How is that welfare defined? How is long term value defined?
  • How do boards reframe the agenda for executives in order to ensure “sustainability and stakeholder welfare?
  • Should regulation drive the agenda, or should leaders lead by values that frame strategic decision making in doing what is right for business and society?
  • What is the methodology for making trade-offs (decisions that serve the interests of shareholders vs stakeholders?).
  • Are some stakeholders more important than others? Who decides and by what criteria?
  • How does the board ensure the dividend and the long-term value for sustainable societies?
  • How does the board align executives’ compensations/incentives and interests towards what determines “sustainability”?
  • How do accounting rules adapt towards sustainability, and how does the regulator enforce disclosure on ESG rules?
  • Who does the board owe fiduciary responsibility to? Does “fiduciary responsibility” apply to all countries in all legal systems?

 

Increasing focus by larger investors, and other stakeholders on ESG and longer-term sustainability rather than shorter-term returns mean that boards need to openly and frequently discuss what this means for them.

Cleopatra Kitti added that boards also need to consider that stakeholders have increasing expectations of transparency. So, an important question for directors is how their companies track what they define are the right things to do, considering, for instance, the tensions between shareholder value and stakeholder value, sustainability and profitability, or cashflow preservation and sustainability.

She also noted that the upcoming COP26 (UN Climate Change) Conference in November 2021 is likely to increase investors’ focus on transparency and robust accounting mechanisms, leading to more clarity on how companies explore these areas. Further, the expected European Central Bank taxonomy on banks’ risk of capital may increase the cost of capital for certain types of industries.

“Not every legal system recognises fiduciary responsibility as a board obligation or responsibility. So, it brings us back to the point that this is about ethics and culture, and setting the tone at the top, more than a compliance or regulatory, for a regulated decision-making process. So, it’s up to the board to define in practice values of what is sustainable and the right thing to do.” (Cleopatra Kitti)

Areas which IDN members discussed included:

  • Companies should do the right thing – pursuing sustainability and profitability and support shareholders and stakeholders need not necessarily be a trade-off.
  • It is crucial to get ESG into the mainstream board agenda. Responsibility for this rests with both the board and management.
  • Set the right KPIs as the wrong ones could lead to unintentional consequences. Some leading organisations now have integrated their ESG ambitions into their company ambitions and aligned this to the bonus system of executive committees.
  • Reset remuneration levels for non-executives, given the increasing levels of responsibility and accountability they hold.
  • Stakeholders will likely ask many more questions including on ESG at AGMs in 2022. Again, these are more likely to be in person rather than virtual.

In conclusion, as Helen Pitcher OBE summed up, “it is a hard topic but it’s not a topic that boards can avoid. It should be part of the strategic imperatives of the organisation.” It is a constantly evolving journey instead of a static situation on which boards need to go on.

Cleopatra Kitti added, “it’s an innovation journey. There is not a one size fits all and there are not prescriptive indicators or decision-making processes.”

 

Recommended reading and viewing

So Long to Shareholder Primacy

https://corpgov.law.harvard.edu/2019/08/22/so-long-to-shareholder-primacy/

Directors’ Oversight Role Today: Increased Expectations, Responsibility and Accountability—A Macro View

https://corpgov.law.harvard.edu/2021/05/10/directors-oversight-role-today-increased-expectations-responsibility-and-accountability-a-macro-view/

The Future of the Corporation: Moving from balance sheet to value sheet

http://www3.weforum.org/docs/WEF_The_Future_of_the_Corporation_2021.pdf

Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Value Creation

http://www3.weforum.org/docs/WEF_IBC_Measuring_Stakeholder_Capitalism_Report_2020.pdf

Measuring Stakeholder Capitalism: Full List of Revised Core and Expanded Metrics

https://weforum.ent.box.com/s/ieauc14olfozu1k8d4i6qovscu42a4dz

Webinar – “The End of Shareholder Primacy?”

https://video.insead.edu/playlist/dedicated/122053032/1_l1rr6r52/1_utyenvtn

 

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights with our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year, we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service, and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

 

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance

Chair Best Practice Exchange

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Chair Best Practice Exchange

A discussion with INSEAD Professor Stanislav Shekshnia and IDN President, Helen Pitcher OBE

By Christiane Schloderer IDP-C, IDN Middle-East Ambassador

The role of a board’s chair is not new. Yet the picture of the “grand old man” making autocratic decisions of a company’s fate has long vanished. In times of unprecedented change and transformation requirements, the Chair’s role is gaining complexity – it resembles more a conductor who is “First among Equals”. Overall, the changes are substantial: faster, shorter, with more Zoom, especially with Covid putting a huge pressure on boards.

In an inspiring web session, Professor Stanislav Shekshnia, Affiliate Professor INSEAD presented the findings of his latest research around Chair best practices, with comments by IDN President Helen Pitcher OBE. 

An effective chair

  • Focuses the board
  • Adjust the board’s processes and structures
  • Organizes the strategic process.

Focusing the board

Boards tend to get more pressure from the outside, but have limited time, energy and attention span. The chair’s role is to establish ways to determine how the board fucuses. Focusing a board is less about what to focus on, but rather how to focus.

Professor Shekshnia identifies four levers to establish focus:

  • Board purpose
  • Board agenda
  • Discussion questions
  • Evaluation

Purpose

Boards need a clear answer to a few fundamental questions like “Who do we work for? What do we try to achieve? What functions do we exercise? What are the Do’s and Don’ts for this board? And how do we measure ourselves?”.

Around 33% of survey participants during his research said they have discussed the purpose, half of them said they have changed it during the pandemic.

However, even more important than the actual purpose is to have a shared purpose. It’s the chair’s role to generate this by ensuring space for a healthy discussion around the board’s purpose. Putting the purpose in writing allows to continuously refer to it, it’s a yardstick for discussions, decisions and the agenda setting.

Agenda

A board’s agenda reflects the “right” issues: it fits the board’s purpose and its strategic. The topics under discussion should be material, they should have a long-lasting effect and should allow for a meaningful discussion. If the discussion topic cannot be handled within the time given in the board meeting, it should not be on the agenda.

Typical core topics of the board’s agenda are leadership, strategy, company configuration (where to invest in, what to divest), risks, ESG and sustainability and stakeholders (what, when and how to tell them).

Agenda setting can happen in various ways: the CEO proposes the agenda, the (very involved) secretary draws it, or the boards gives its own agenda. However, no matter who proposes the agenda, an effective chair owns and feels responsible for it. The chair has the last word.

Discussion questions

Once the board meeting is on, the chair’s role is to frame the discussion by formulating the question – a very powerful tool.

Effective chairs solicitate ideas from other board members before and after the board meeting, they provide context around the situation and the challenges involved, they frame the question to make it understandable to all board members and reframe if required. They also give each director enough space to develop their opinions, while ensuring that each director gives enough input.

Evaluation

The board’s evaluation ties up with the purpose: how does the board perform against the purpose and why is the board making decisions the way it is. Further evaluation topics center around the quality of the agenda, the board’s process, its decision making and the board’s fitness.

A combination of formal and informal evaluation proofs effective. Whereas a formal evaluation is conducted once or twice a year, after each meeting, informally it should be decided what to keep and what to change for the next meeting.

The core questions a board should ask itself is if it has collective time and energy to lead the company going forward. If the answer to this is no, drastic changes become necessary.

Adjusting the board’s processes and structures

As a consequence of focusing the board, adjustments to the board’s processes and structures might need to be required. Again, the chair should own the adjustment process, after taking input from other directors, the CEO, shareholders or other stakeholders. Changes to the external environment should be taken into consideration.

Emerging trends for adjusting the process are a hybrid form: face-to-face for substantial debate and virtual for more straightforward issues. The pandemic has forced shorter notice meetings with a more flexible agenda as well as shorter and more frequent meetings.

Emerging practices for adjusting the structure are an annual board competency mapping, temporary board committee, a nomination committee closely cooperating with the chair and drawing in experts.

Boards should match the strategy with the competencies of its board members whereas the chair would be strongly involved in building the board composition.

Organizing the strategic process

When looking at the strategic process between boards, chairs and the CEO, there is no one model. It depends on the context of the industry, the company and its competencies and the individual situation. The most common forms are as follows:

  • Board provides guidelines and approves strategy developed by management
  • Board develops strategy with heavy management input
  • Strategy committee proposes strategy
  • Joint board-management effort
  • Continuous strategic conversation at the board
  • Chair: leads, facilitates, makes sure it happens, supervises

Some boards define that strategy is being considered in a one-off meeting, other say that strategy never stops. The chair’s role drives, supervises, facilitates – it depends on the company. It is important that the chair, but also all other parties involved are clear and agree about each participant’s role.

The role of the chair

Covid has put a huge pressure on boards. It has often required a lot more of interpersonal contact between the chair and the rest of the board. Accordingly, the chair role has become more onerous in terms of time commitment as well as crucial role outside the organization with stakeholders.

A chair’s workload is probably double to other board members; yet chairs need to be careful not to overstep the boundaries into the executives. Chairs have the privilege of more information and thus find it easier to guide the executives. Being a chair requires a different skillset. “Nose in, hands out” is a good guideline, although there is a tendency that chairs work more according to “nose in, hands on”.

Follow on discussions

During the IDN call’s polls, the breakout room sessions and the following Q&A, generally similar views were exchanged:

  • Only 38% of participants responded positive about having a yearly discussion around focus, whereas 48% responded they do not have a yearly discussion around focus
  • However, 31% disagreed when asked if they have a yearly discussion around adjusting board processes and structures and 44% responded they do have a yearly discussion.
  • An impressive, yet not surprising majority of 86% are significantly more involved in strategy development since the pandemic started compared to earlier years, with only 3% disagreeing.
  • The new norm of short, but frequent video conferencing does not prevent drastic corporate restructuring from happening. Although a face-to-face interaction is likely preferred in that situation, results from a virtual format can be impressive too.
  • An active chair leads to inactive board members and vice versa. Not too weak, not too strong, not too cozy for the directors. A chair needs to keep the distance yet be available. Push, yet, let others drive. She or he should seek a healthy balance.
  • Yet, the chair role is pivotal to setting the right dynamic, keeping the board on track, ensuring the board remains functional.

After all, being a chair is a balancing act. It’s never straight forward.

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights with our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year, we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service, and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance 

Positive Board Dynamics and Coaching: Key to Superior Performance

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Positive Board Dynamics and Coaching: Key to Superior Performance

Given that the impact of a board’s functioning as a team is a more significant predictor of corporate performance than individual directors’ backgrounds, skills and experience, it’s time for boards to spend more time focusing on their group dynamics and for boards and directors to dedicate time for coaching and mentoring.

By Karen Loon IDP-C and IDN Board Member

Board practices are changing at a rapid pace. As a result, dynamics in the board room are more challenging during time-pressed hybrid or virtual meetings. So, what can Chairs and board directors do to improve board dynamics? And how can board and director coaching and mentoring enhance their effectiveness?

INSEAD Directors Network (IDN) members recently learnt more about these areas in a topical webinar for members.

The session opening remarks were provided by Vincent H. Dominé, Adjunct Professor of Organisational Behaviour at INSEAD, with IDN Board Member and NED Helen Wiseman IDP-C sharing her perspectives as a board chair, an executive coach and mentor. Liselotte Engstam IDP-C facilitated the session with support from Hagen Schweinitz IDP-C, both IDN board members.

The challenges of group dynamics in the board room

“The knowledge is in the room”, stated Professor Dominé. However, the mindset, behaviours, and professional experiences of individual directors can have a significant impact on collective decision making.

A chair, for example, who has worked as a Big 4 audit partner may focus on data with a more historical lens, whereas a chair with business development experience may be more forward-looking. Thus, the experiences of individual directors and the way they take up their roles shape the group dynamics in the board room.

Professor Dominé highlighted that “collective behaviour at the board level has an 800% greater impact on a firm’s performance than the characteristics of individual directors”, according to the benefits of boards working effectively as a team.

Invest time in group dynamics and board development

Working effectively as a team is not without its difficulties. One of the significant challenges for boards is making enough time for group dynamics.

“Do we have time to address group dynamics… Is it an agenda item? And if it’s not, we’re not going to cover it,” stressed Professor Dominé.

When it comes to high performing boards, a key consideration when it comes to board dynamics is not just having the right board competencies and structure, but also having positive board behaviours.

Using an analogy of being a restaurant chef, it’s not just about the ingredients and processes, but also the personalities, values, norms and relationships of the people in the kitchen that make the difference, noted Professor Dominé.

Beware of the primary vs. secondary tasks of the board

Whilst boards have primary tasks, this being the formal and technical nature of their work (the ‘hard governance’), boards also need to be aware of the secondary tasks (‘soft governance’) which are below the surface and not easily accessible. Unaddressed, they can distract from effectively pursuing the primary tasks and lead to ineffective group dynamics in the board room.

It’s the “air or atmosphere in the board room that we do not really talk about”, noted Professor Dominé.

Be mindful of non-verbal signs

Board directors should be mindful of non-verbal signs in the board room, accounting for 65% of the message in face-to-face exchanges.

“When we observe boards, a lot is not what is being said. And if it’s been said, it’s often about the song behind the words and the body language,” said Professor Dominé.

“Are we able to go, in a way, on the balcony and see what is systematically happening, and capture all these elements of, for instance, body language?” he added.

Roles in the board room – formal and informal

Often board directors focus on tasks and actions, given their responsibilities and roles.

A dynamic in groups, including in boards, which we need to be aware of, are our informal roles.

Whilst on boards, board directors may take on some informal roles such as being a strategist, expert, mentor/coach, team player, owner or facilitator, they may also take on other less identifiable energising roles. These could include being a ‘devil’s advocate’, a ‘coordinator’ or a ‘gatekeeper’.

In other cases, the informal roles they take on may be unproductive and unhelpful, such as being an ‘attention-seeker’ or that of an ‘observer’ who is not engaging.

Board diversity, tensions and group dynamics

A fundamental tension of directors and executive teams is balancing the anxieties between feeling their need to belong to the group (relatedness), while remaining independent and existing as an individual (autonomy).

“What we want in boards are dissenting views – we want people who bring their own views that – maybe because of their psychology – they might not otherwise bring in.” – Professor Vincent H. Dominé.

Having greater diversity of thought requires boards to invest more time as a board on group dynamics.

Recommendations for mastering board dynamics

Professor Dominé suggested three recommendations.

  1. Acknowledge the impact – Can we make it a board agenda item?
  2. Build awareness – Consider non-verbal communication, informal roles, context and unspoken issues/elephants in the room.
  3. Action – Practice checking in and checking out; experiment with different roles (such as other directors taking on the ‘devil’s advocate’ role in the board); seek professional development for directors; make the most of board assessments; and leveraging the support of a board coach.

Finally, Professor Dominé shared a board development methodology he co-developed, the GROW 7A methodology. Digitally enabled, it provides a holistic approach to board development by addressing both the development opportunities of individual directors as well as the board as a whole. By practising being a ‘learning board’, boards are role modelling a leadership culture where leadership development is imbedded in the work.

The importance of psychological safety in the board room

Both Professor Dominé and Helen Wiseman remarked that having psychological safety in the board room is critical.

Sometimes our identities as board directors – our egos and backgrounds – can get in the way and, at times, should be left at the board room door. Helen stated that this is particularly so for corporate boards where directors are being measured on their performance for solving problems:

“It is critical that we create psychological safety in the board room so that directors can be fully open about where they are at.” – Helen Wiseman, IDN Board Member.

Creating a reflective space: The role of board and director coaching and mentoring

Helen shared her views, practical tips and strategies on coaching and mentoring, both of the board and of self.

The importance of coaching and mentoring for boards and board directors

Emphasising the importance of the coaching process, she noted that “we often think of coaching as support, encouragement and accountability to achieve goals. But I see coaching as a distinct process, the effect which is to help the coachee achieve their particular goals.”

“Board work involves a complex interplay of relationships – that’s the wellspring of board dynamics. And so not only do we need to make board dynamics conscious, we also need to be conscious about the role that coaching as a process can play to healthily manage them,” she added.

Helen noted that the role of a coach is to be a neutral facilitator – the power is in the questions asked that generate new thinking.

“The art of a good coaching question, is that you end up solving your own problem and [that it] helps you to be more productive on the board.” – Helen Wiseman, IDN Board Member.

This is another informal role that a chair or director can perform in order to enhance board effectiveness. Helen highlighted that there are several relationships within the board where coaching can enhance effectiveness. These could include:

  • Coaching the Chair
  • Chair coaching the CEO
  • Chair coaching the directors
  • New director peer coach (board “buddy”)
  • A coach working with the entire board

Given the high degree of external scrutiny and complex dynamics in place, she highly recommended coaching, particularly for new chairs.

Having a growth mindset

Helen stressed the importance of both individual directors and boards as a whole having a growth mindset.

“(One) challenge I see on boards and in executive life as well is mistaking what is a complex adaptive problem for a technical problem and rushing in to try and solve it. I think that’s a real risk … and the creator of adverse board dynamics when we seek to do that,” she said.

She suggests that directors and boards be more aware of board dynamics and cognitive biases.

The value of mentors

Coaching is a powerful tool to help directors clarify their thinking and understand their board dynamics. Mentoring can include coaching but has the additional benefit of mentors sharing their experiences. Mentoring is invaluable for newer directors.

Helen shared more about the IDN INsights Director Mentoring Programme, in which more experienced mentors mentor less experienced IDN members as part of a structured programme over six months. In addition, IDN member participants are supported by their peer mentees, who also meet monthly.

She highlighted that the programme’s benefits include clarifying your purpose, positioning, identity and how you operate as a board

IDN mentees said that one of the critical benefits of having a mentor was that it created a trusted listening space to help directors to work through and ultimately develop their own solutions to their challenges:

“Having a mentor and a mentee peer group meant I had a ‘safe’ place to discuss issues, seek feedback, brainstorm… My mentor gave me very practical advice about various situations I raised with him. Just having someone so experienced to talk things out with helped me gain new perspectives. My mentor was always very positive about my capacity to work through the issues.” – Martin McCourt, IDN INsights Director Mentoring Programme 2020 Mentee

 

Additional reading

Board Dynamics

The Group Dynamics That Define Well-Functioning Boards (INSEAD Knowledge) by Professor Vincent H. Dominé

Mastering group dynamics: embedding a learning and coaching culture in board work, by Professor Vincent H. Dominé in Dynamics at Boardroom Level: A Tavistock Primer for Leaders, Coaches and Consultants, edited by Leslie Brissett, Mannie Sher and Tazi Lorraine Smith

Board Coaching and Mentoring

How can IDN’s mentoring programme help your board career

Why every aspiring director should consider a mentor

How having a board mentor supports lifelong learning

 

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights with our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year, we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service, and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

 

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance

INSEAD IDN Q2 2021 Board Position Announcements

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INSEAD IDN Q2 2021 Board Position Announcements

47 board appointments for INSEAD Directors Network members

6 July 2021

Members Board & Corporate Governance Positions Announcement Q2 2021

INSEAD’s International Directors Network, IDN is proudly sharing the recent appointments for the quarter ended 31 May 2021 of board and corporate governance positions of our members, truly recognising our members and the strength of our IDN network.

IDN members have been appointed to 47 new board positions in 20 countries, summing up to 445 position announcements since 2017.

As a member of IDN, the network of INSEAD International Board Directors, (full membership is open to all INSEAD Alumni with appropriate directorship experience and is automatic for Certified Directors (IDP-C) from INSEAD’s International Directors Program (IDP)), you can be truly proud of your network!

You will find the IDN members with new board positions below.  Why don’t you help share our network’s achievement via Linkedin, as well as also position yourself and your membership of a vibrant network via this Linkedin post.

And take the time to connect with your fellow IDN members at LinkedIn and expand your board contacts by clicking their names below and connecting with them!

To date, IDP has been completed by 1,378 IDP and IDPB participants, with 1064 certified IDP-C/ IDBP-C directors, and our International Board Network IDN of INSEAD Alumni of 1,526 members.

IDN works closely with INSEAD Corporate Governance Centre, which undertakes cutting-edge research and teaching tailored to the needs of boards and international directors.  The Centre fosters a global dialogue on the challenges of corporate governance and leadership in an international context.

INSEAD Directors’ Network – Members New Board & Corporate Governance Positions

IDN members – Certified IDP-C Board Directors

Vitor Augusto Brinquete Bento – May 2021 – Chairman & CEO of Portuguese Banking Association (Private, HQ Portugal)
Dan Bihi-Zenou – January 2020 – Chairman of Capital Real Estate SA & Chairman of Arcenter SA (Private, HQ Switzerland)
Gianfranco Bisagni – January 2020 – Chairman of the supervisory board at Unicredit Bank Austria AG (Listed, HQ Austria), October 2020 – Deputy Chairman of Supervisory board at Unicredit Bank Hungary ZRT. (Private, HQ Hungary), April 2020 – Deputy Chairman of Supervisory board at AO Unicredit Bank (Not Listed, HQ Russia), October 2020 – Member of Supervisory Board at Zagrebacka Banka D.D. (Listed, HQ Croatia)
Stefan Buser – April 2021 – Board member at Sedimentum AG (Private, HQ Switzerland)
Roberta Casali – April 2021 – Non-Executive Board Director and Chair of the Internal Control Committee at ARCA Fondi Sgr (Private, HQ Italy)
Katia Ciesielska – May 2021 – Non-executive Director at Pears Global Real Estate (Private, HQ Luxembourg)
Timothy Cosulich – April 2021 – Vice Chairman and Board Member of International Bunker Industry Association (Private, HQ UK)
Pierre Dejoux – April 2021 – Non-Executive Board Director at Bowman Power group (Private, HQ UK ), January 2019 – VP and Board member of Special Olympics France (NGO, HQ France)
Liselotte Engstam – March 2021 – Chair at Boards Impact Forum, Climate Governance Initiative Nordic in collaboration with World Economic Forum (Foundation, HQ Sweden)
Daniel Frutig – April 2021 – Chairman at Cicor Technologies Ltd (Listed, HQ Switzerland) & March 2021 – Board member at AGRO AG (Private , Switzerland)
Jean-Marie Greindl – April 2021 – Chairman of the Board at XLG (Private, HQ Belgium)
Dr. Heinrich Hugenschmidt – April 2021 – Non Executive Board Member of Fankhauser Media Ltd (Private, HQ Switzerland)
Caroline Jellinck – May 2021 – Chair’s Advisory Board Member  at Science World BC (NFP, HQ Vancouver Canada)
Nooraya Khan – March 2021 – Non Executive Director MTN South Africa (Private, HQ South Africa)
Noelle Ahlberg Kleiterp – May 2021- Member Board of Trustees & Member of Governance Committee at Zurich International School (non-profit, Switzerland)
Reinhard Krickl – May 2021 – Chairperson and Non Executive Director at Axem Neurotechnology (Private, HQ Canada)
Richard LePere – March 2021 – Independent Non Executive Board Director at Fullerton Lux Funds (FLF) SICAV (Private, HQ Luxembourg)
Colin Low – March 2021 – Independent Board Director at  Kacific Satellites Group Limited (Private, HQ Singapore)
Bert Meerstadt – May 2021 – Managing Director at Hendrick de Keyser (NGO, HQ Amsterdam, Netherlands)
Elena Pistone – May 2021 – Independent Board Director of REVO SPAC (Listed, HQ Italy)
Pamela Ravasio – May 2021 – Independent Non-Executive Director at Polygiene AB (Listed, HQ Sweden)
Michel Rzonzef – March 2021 – Chairman of the Board at SGI,  Non-Executive Board Member at LBAN (Luxembourg Business Angel Network), & Non Executive Board Member at BML(Business Mentoring Luxembourg)
Thomas Seale – May 2021 – Member of Board of Directors at Columbia Threadneedle SICAV (Private, HQ Luxembourg)
Mark Shmulevich – October 2020 – Chairman, Digital Transformation chapter, and Board Member at SGTech (Trade federation, HQ Singapore)
Nicoline Spruijt – April 2021 – Advisory Board member at ACA-IT Solutions (Private, HQ Belgium), Non-Executive Board Member at Valisana (Hospital Government, HQ Belgium) & May 2021 – Non-Executive Board Member at Armen Tekort (NGO, HQ Belgium)
Sheila Struyck – April 2021 – Non-Executive Director/ RvC at Meatless (Private, HQ Netherlands)
David Surdeau – April 2021- Non-Executive Director at Red Dragon Pubs Ltd (Private, HQ Wales UK)
Kees van der Vleuten – January 2021 – Non-executive Chair, Fenix Investment Group, (Private, HQ Brussels/Amsterdam)
Dominique Vanhamme – April 2021 – Non-executive Director at Odyssey (Private, HQ France)

IDN Members – Board Directors

Wanching Ang – March 2021 – Non-executive Board member at HQ Holding GmbH & Co KG (Private, Germany)
Jan De Moor – May 2021 – Independent Board Member at VlaanderenConnect (Government Agency, HQ Belgium)
Morgan Fowles – May 2020  – Director at Tala Ltd (Private, HQ UK)
Andrew Kristensen – April 2021 – Non-Executive Board Member at Svensk Byggtjänst (Private, HQ Sweden)
Margot Schumacher – January 2021 – Non-Executive Board Member at Thales Netherlands (Listed, HQ France)
Jan-Paul van Term – March 2021 – CEO at Hill+Knowlton Strategies (Private, HQ Netherlands)
Liz Wall – May 2021 – Non-Executive Chair at Royal Road Minerals (Listed, HQ Jersey)

Previous announcements and more information

Previous board position announcements by shared by IDN;
April 2021 December 2020 September 2020 March 2020 October 2019 July 2019  February 2019  November 2018 July 2018 April 2018  January 2018   October 2017

For organisations interested in partnering with IDN, please contact IDN President, Helen Pitcher OBE, at [email protected]

On Behalf of the INSEAD International Directors’ Network Board,

Helen Wiseman, 
IDP-C, IDN & NAA Australia Board Member,
NED at multiple companies
www.linkedin.com/in/helenwiseman
[email protected]

For more information about :

How to become a partner of IDN, contact our President, Helen Pitcher here
INSEAD Directors’ Network, click here.
INSEAD Corporate Governance Centre here.

Governance of Social Impact Ventures

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Governance of Social Impact Ventures

Corporate governance of Social Impact Ventures can be challenging but yet rewarding for directors.

By Karen Loon IDP-C and IDN Board Member

Social impact ventures (SIVs) are increasing in popularity. However, what does this mean, and what are the challenges and the benefits – for society, companies and yourself? What is the trade-off between producing financial returns and creating social or other sustainability impacts? How can the risk of “impact washing” be avoided? How do you evaluate and engage with it as an investor? And finally, how do you engage with it as board director?

On 11 May 2021, INSEAD Directors Network (IDN) members interested in SIVs had an opportunity to learn more about engaging with SIVs as board directors.

The session framing remarks were provided by Professor Jasjit Singh, The Paul Dubrule Chaired Professor of Sustainable Development, INSEAD, with panellists who have completed the INSEAD International Director Programme (IDP), Roberta Casali, Luigi Passamonti, Rodrigo Sepulveda Schultz and Jerome Wittamer sharing their perspectives as directors and investors in SIVs.

Liselotte Engstam IDP-C facilitated the session with support from Hagen Schweinitz IDP-C, both IDN board members.

Governance of social impact ventures

The corporate governance of SIVs varies significantly, as the ownership structure of the ventures influences it.  While SIVs are purpose-driven, this focus can sometimes be diluted when they are acquired by a larger company, which is a common exit route for SIVs.

Highlighting some examples such as Ben and Jerrys and Body Shop, Professor Singh said that where an SIV is private, controlled by one or two investors, and is entrepreneurial, it tends to be closely aligned to the entrepreneur. However, “once you’re a part of a larger company or once you go public or things like that, it’s usually much harder”, noted Professor Singh.

Over the past decade, many companies have made a broad move towards having a sense of purpose and a stakeholder view, in line with the increasing focus on ESG.

“Even CEOs now feel much bolder than they did 10 years ago about how they communicated with shareholders who would very aggressively by asking them only to think of profits and nothing else as a metric.” – Professor Singh.

However, he highlighted that whilst private companies can do certain things, there can be limits on how much can be done if the SIV were to go public or sold to a large company.

A governance challenge for many SIVs is making a “trade-off” between purpose and value proposition.  A growing area that aims to enhance the governance of SIVs is that of independent assessments and certification. However, there is still work to be done by many companies in this area, which is not easy, given the varied stakeholder interests.

Finally, Professor Singh reminded participants that many different vehicles could be used for positive impact.  He suggested that “we need to go outside just thinking, purely of price as a signal of value to these alternative means of sustainable business.”  An important area is to ensure that people are looking into is ensuring that there is “ecosystem building and public policy” that enables corporate governance and sustains purpose.

Thoughts and advice from IDP participants

The panellists shared their personal experiences as directors of and investors in SIVs.  Views included:

Role of the board and directors of SIVs

1. Impact drives the strategy

Boards need to understand what the impact of the SIV is, which is challenging as the definition of ‘social’ is very broad. Boards and their directors should all agree on how to define it, making it explicit in the strategy, and measuring and communicating results – which is not easy as there is no one right answer.  Questions which they could ask themselves include:

  • What does it mean to make a real contribution to society?
  • How can we really make a difference?
  • What is the company’s purpose?
  • Who are we serving?
  • Are we really having an impact?

Boards and management need to ensure alignment of the organisation’s impact mission with profit-making/financial sustainability purpose.  The strategy should ensure that there are no concessions on either count.

2. Have a mindset for impact

Board directors should have a mindset for impact. They need to be aware of their role and the value of their responsibilities.  To be fully effective, their personal values should be fully aligned with the organisation’s mission.

They also should ask management challenging questions about how the strategy works, have we considered the interests of relevant stakeholders (including but not limited to shareholders, investors, clients, employees), and potential conflicts, which often will be a rigorous and intense process from the beginning. In addition, they must remain independent, competent and aware.

Finally, directors should also beware of oversimplifying – and over-focusing on the numbers.

3. Purpose needs to permeate through the organisation.

Boards should ensure that the SIV’s corporate culture and leadership are aligned.

4. Have humility and a willingness to learn

SIV board members should have humility and a desire to learn and participate inside the board with a large EQ engagement. They should ensure that they continually expand their horizons as a board member and go beyond their comfort zone to challenge themselves and management.  One way for board members to learn about SIVs is to mentor them on various business skills.

Current challenges for SIVs

  • Markets value certainty, clarity and simplicity. There is some way for impact investing to go in this area to define the different concepts more clearly.
  • Measuring impact – This is extremely important but hard to define. There is no ‘silver bullet’ answer – it depends on what you what to measure.  It is best when it is very specific – the outcome of what you do is what matters.
  • Ensuring that SIVs are properly funded.

Several participants expressed interest in a continued an IDN dialogue on SIV governance. A promise to organise more work in this space was noted in the webinar chat. Should you be interested in connecting with a community of other IDN members interested in SIVs, please reach out to Hagen Schweinitz at [email protected], or directly to any of the four IDN panel members.

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights with our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year, we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service, and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

 

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance

 

Best practices of independent directors in family owned-firms

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Best practices of independent directors in family owned-firms

Leading independent directors understand family board dynamics, build relationships with all board directors, and build a coalition of independent directors.

By Karen Loon IDP-C and IDN Board Member

Whilst family-owned firms are critical drivers of global business and growth, the role of their independent board directors is complex given the overlapping roles between family, ownership and business.

As a follow up to the session, Fit for Generations: How to Create & Lead a Family Business Board held in March 2021, on 26 April 2021, over 50 INSEAD Directors Network (“IDN”) members shared their international experiences of best practices in governance of successful family boards, focusing on their perspectives as independent board members.

The discussions were led by Martin Roll, Distinguished Fellow (Family Business) and Entrepreneur in Residence, INSEAD and Xavier Bedoret IDP-C,  IDN Belgium Ambassador, NED and Advisor.

Liselotte Engstam IDP-C facilitated the event with support from Hagen Schweinitz IDP-C, both IDN board members.

 

The role and challenges of independent board members

Martin Roll set the scene, sharing his views on family-owned companies, highlighting their global power and influence.

“They’re interesting, because first of all, there are a lot of them. They’re very significant in terms of the global economy. They’re very significant in terms of entrepreneurship, and they also have a very big heart when it comes to impact. But at times they do need help, and this is where the family board members coming in” – Martin Roll.

After noting some of the challenges of wealth preservation of family-owned firms, Martin emphasised that that family business strategy depends on clear roles, responsibilities and guardrails between family, ownership and business.

The roles and responsibilities of their external directors are not easy, Martin said.

“We are external – we’re bringing a different point of view. We sit in the business. You are going to work with people in the families that you have around you, and you are also going to work with some of the key owners, and some of them being the business.  You are in this triangle of a lot of different types of interests. As board members, we need to navigate that” – Martin Roll. 

In addition to family, ownership and business, other areas which independent family board members may support with include family office and impact (which relates to sustainability and aligns to the higher purpose for the firm). Martin presented his Family Business Strategy model to help guide this process (Figure 1).

Resistance to changes in the investment strategy and impact investing often arise as new generations come into the business.

Figure 1: Family Business Strategy (Copyright Martin Roll Company 2021)

Independent board members need to work with family firms to assist them in dealing with the dilemma of balancing the growth of their businesses with a long-term perspective and yet ensure family harmony and welfare. A key question is, how do they do that? Martin provided an overview – see Figure 2.

Figure 2: Traits of effective board members (Copyright Martin Roll Company 2021)

Martin reminded members that sustainability is deeply embedded in many firms, which makes family firms interesting.

He highlighted a quote by André Hoffmann – “That’s what separates us from non-family-owned businesses. It’s the concept of sustainability which (I’m glad to say) is much in favour at the moment.  And this sustainability is lived by the family.“

In order to be successful in their roles, Martin encouraged family board members to think of the following:

  1. Bring passion to family firms and build personal connections with key stakeholders across the business family system.
  2. Integrity is your key currency and never dilute its value. In the end, competence and experiences are the assets you contribute.
  3. Dare to renew! Renewal is the most important factor for business family success over the long term, so don’t hesitate to disrupt (with love)

Xavier Bedoret highlighted four challenges of independent directors:  These are:

1. Combine the best of both worlds

Finding the right balance between the paradoxical tensions of tradition and modernity; family values and financial logics; stability and transformation is not easy. These can both be combined at the board or executive committee level.

2. Help develop the family spirit

A director needs to decide at what level they should be active – whether it is the family association, shareholder, director or manager level.

“Family spirit is the glue that prevents frustration and dissent” – Xavier Bedoret

3. Take the heat out of the decision process

The duality of “family” and “enterprise” can increase anxieties. Independent directors have a role to play to support family firms in this area.

“Emotions are a bias in relationships, and in family decision making” – Xavier Bedoret.

4. Engage young family members

Independent directors can play a role to support younger family members in their transition into more senior roles, given the family challenges of maintaining family values and managing power.

 

Three best practices of independent board directors of family-owned firms

For independent directors, working with family businesses is exceptionally complex but extremely rewarding. They often play a critical role in:

  • Helping with communication (as often family members may not be on the same page);
  • Supporting the transition of roles between senior generations and the next generation; and
  • Assisting in managing conflicts such as finding a middle ground in situations of risk aversion.

Three best practices shared by IDN members included:

1. Understand dynamics of the family

The role of an independent director on a family-owned company can be much more complex than on a public listed board, given the chemistry.

Board members should understand why they were brought onto the board.

They also may need to prove themselves first as an expert to the board and the family to show what they can do before being trusted to assist them more broadly.

Board members may be expected to commit more time and be available much more than on other types of boards.

One suggestion was to “rush slowly” – understand time horizons, priorities, and the pace of change of the family shareholders. Family boards need to take their time to make the right discussions and decisions.

2. Build a coalition of independent directors

All independent directors should bring their own unique experience to the board. It is essential to ensure that independent directors are aligned and a force within the board.

3. Build relationships with all board members

This includes on a one-on-one basis. As not all board members may have the same knowledge of governance, help new board members succeed by arranging onboarding and an ongoing training programme to ensure they all have the necessary expertise to participate actively in board discussions.

 

To view Martin Roll’s slides, visit here.

IDN’s next webinar on Governance of Social Impact Ventures will be held on 11 June 2021.

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights with our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year, we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service, and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

 

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance

Board best practices in an era of hybrid corporate governance

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Board best practices in an era of hybrid corporate governance

What are the current board best practices across different governance situations, different ownership forms and jurisdictions, and different industries and maturity of companies?

By Karen Loon and Pamela Ravasio, IDN Board Members

On 26 April 2021, over 100 INSEAD Directors Network (“IDN”) members had the opportunity to share their international experiences of best practices of hybrid corporate governance in a webinar facilitated by Liselotte Engstam IDP-C and IDN board member.

What were some of the current corporate governance best practices which our global members have observed?

 

The increasing importance of ESG and sustainability

Sustainability and ESG are increasingly hot topics in the boardroom.  It was highlighted that organisations that have so far embraced and succeeded in making good progress in ESG and sustainability have a track record of being more purpose driven.  For organisations with a different history and have not been predominantly purpose driven from their inception, it is much harder, and they have to ‘learn’ or even reinvent themselves to make significant progress in this area.

This is a challenge that not only businesses face. Even many NGOs and not-for-profits who have so far fared well focusing on single issues (for example, animal rights and veganism), have to update their ‘raison d’etre’. Adjusting to a world where not single, but complex and multi-dimensions ESG and sustainability challenges need addressing is something novel for many of them.

It can hence be said that, for organisations, the process towards embracing and embedding ESG and sustainability needs to be viewed as part of change management and culture change exercises, as it will have significant implications on new business, reporting, disclosure and future success, none of which can easily be templated.

Associated with this, some believe that ESG and sustainability discussions at the board level are taking place at a relatively high level (30,000 feet level) and have concerns that there may be a disconnect between board discussions and what is happening at the ground level.  It has been pointed out that best practice board members are visiting facilities or possibly even have independent conversations with on-the-ground members of their network to ensure they understand what sustainability means at the working level, and to feel the organisation’s temperature.

Luckily it becomes also increasingly common for ESG dashboards to be used within organisations. Such tools, assuming that appropriate and relevant metrics are being used, allow for a quick change of altitude and effective deep dives if and where required.

The evolving role of the board and the chair

In an environment where regulators, the investment community, and stakeholders are focused on the purpose and strategy of companies and board performance, directors need to become increasingly curious and ensure that they have the right lenses on the future of their organisations.

In a hybrid corporate governance environment, the role of the chair is essential to invigorate open discussions, create safe spaces and ensure that the board has sufficient time to reflect.  The chair also needs to ensure that he/she doesn’t “broadcast” and that boards operating virtually do not compromise on the quality of debate, become too tunnel-visioned and functional, and have short-sighted discussions.

Board meetings are getting shorter; however, there may need to be more discussions on important topics such as innovation, some of which may need to be away from the board room.

Finally, with an increase in the number of start-up boards, boards and their directors are focusing on best practices in pulling together start-up boards, finding the right directors, and professionalising them.

Board composition – Bringing new perspectives into the board room

With new pressures on companies and their directors requiring them to bring new perspectives into the board room, most boards have been looking at how they can find the right talent.  Expectations on nominating committees to increase the value that they add to their organisations are rising.

In line with increasing recognition that not all expertise needs to be on the board, many companies have established advisory boards to advise management, which allows for talent gaps to be filled more quickly and supplement internal resources.  Some are including people with innovation, digital and ESG expertise on these boards.

Boards are also looking for directors to bring more contrarian views.  Examples include having younger voices in the boardroom, obtaining employee points of view (to understand well-being and resilience) and inviting customers to speak to boards.  The composition of the board needs should take into consideration the need for generational and other diverse views, as well as experience.  Others are looking for expertise beyond their borders. For example, some of the leading practices concerning digital are from Asia (specifically China) and Africa.

Improving board effectiveness

In line with the need for boards to be more agile, more established boards are doing evaluations and gap analyses, which are essential given the speed of change and the need to quickly assess whether boards need new talent.  These are formal and informal, take place more frequently, and look at what to start, stop and continue, moving beyond a checklist approach.

Over the past 18 months, most boards have become more digitally savvy. However, some highlighted that having one or two board members with digital experience doesn’t translate to the whole board collaborating well using technology.  It is taking time for most boards to learn how to best use technology in the boardroom, with some needing to accelerate their progress in this area.  One tool that some boards are exploring is the use of electronic signatures.

 

IDN’s next webinar on Successful Family Business Boards – Best Practice Discussions will be held on Monday, 17 May 2021.

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights also to our LinkedIn and Twitter followers. We highlight our member through quarterly sharing of their new board appointments, and once a year we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

 

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance

 

Board Diversity – Implications and Discussion

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Board Diversity – Implications and Discussion

A number of studies have demonstrated that greater diversity in the boardroom and organisations will improve business outcomes. However, despite efforts, progress in increasing board diversity has been slow. 

By Karen Loon IDP-C and IDN Board Member

With the growing focus by stakeholders on more board and organisational diversity, is it time for us to #ChooseToChallenge and do things differently?  What is holding progress back, what is the role of boards in moving the dial, and what can we do differently?

IDN members participated in a webinar in March 2021 where they shared their perspectives on board diversity.  Liselotte Engstam IDP-C and IDN Board Member, facilitated the session.

Setting the Scene

Karen Loon IDP-C and IDN Board Member, gave an overview and shared her perspectives on increasing board diversity, highlighting that it is a wicked problem that is not easily resolved.

Although discussion on increasing the diversity of boards started with a focus on gender, it has now broadened beyond demographics to diversity of thought and experience, and its impact on innovation.  Further, stakeholders’ expectations, particularly investors, due to the increased focus on sustainability.

As a result, various governments, regulators and advocacy groups have released regulations and guidelines to support increasing the pipeline of available diverse candidates for boards. These include implementing quotas or targets and encouraging boards to have more targeted and independent board renewal processes.

Whilst the number of women on boards globally has increased to 16.9% in 2018, up 1.9% from 2016, there is still some way to go, and progress has been slow and inconsistent.

Understanding the different viewpoints on why having board diversity is important requires one to understand various organisational and personal motivators.  Some focus on the business case for diversity, whereas others concentrate on the social case (the “right thing to do”).

Much of the academic and business research to date has centred on the business case for greater board diversity. In particular, it has sought to demonstrate a correlation between board diversity (principally gender) and greater financial performance. This includes a broad range of areas, including financial position/performance, public disclosure, socially responsible behaviours, firm decisions, philanthropy, reputation, and innovation.[1].   In 2020, a study in Australia by Curtin University took this a step further and found a causal link between greater numbers of women on boards and in leadership and better financial performance.

Other recent research has explored areas including:

One question Karen raised is if the business case for greater board diversity is clear:  Why don’t we see boards increase their diversity more quickly?  Could there be other “elephants in the room” at play holding change back?  And could it be time to look at things differently, recognising that board work is both logical/technical and illogical/emotional?

On board dynamics, she noted that a board is a team, but it is only as good as the collective of the board and what they bring to it, both conscious and unconscious.  Further, board work is emotional, as discussed in IDN’s webinar, Fit for Generations: How to Create & Lead a Family Business Board.

Another angle is: Should we view increasing board diversity as part of a broader organisation or cultural change initiative, as Professor Michael Jarrett suggested in his March 2021 INSEAD Knowledge article?

And if this is the case: Should boards themselves be more reflective to understand why there may be ambivalence for change and assess what needs to be done.  Is there a greater opportunity to share views on boardroom dynamics and the unsaid in a safe space?

Member perspectives

IDN members had the opportunity to share their views on what board members can do to increase board diversity.  Key highlights included:

  • Importance of the role of the chair – The role of the chair in the boardroom at the start to ensure all voices are heard is paramount as he/she sets the tone for acceptance of the importance of board diversity and the boardroom culture. Having a culture of being open to listening to different perspectives and having processes that draw these out includes inviting everyone’s opinion, respecting different viewpoints, ensuring no one dominates the discussion, and being very open-minded and respectful.
  • Role of the nominating committee – The role of the nominating committee to support board renewal is essential. Nominating committees have a responsibility to ensure that the list of candidates they start with is representative.
  • Valuing diversity of perspectives, thought and contributions – Diversity should not be viewed as a box ticking exercise. True diversity is diversity of perspectives, thought and contributions in the boardroom, in addition to demographic diversity.  Having more international board directors can support this.  It is equally important for boards to ensure that there is diversity in their organisations, not just the boardroom and to ensure that it is pushed down.
  • How can we move the dial? – Some participants were supportive of quotas and having the “power of three” as they felt it improved the quality of boardroom discussions. Whilst there has been a lot of awareness-building on the importance of board diversity, more can be done.

 

To find out more, read our IDN member views:

 

[1] For example, refer to the overviews of recent research by Kagzi and Guha (2018) at https://www.emerald.com/insight/content/doi/10.1108/JSMA-01-2017-0002/full/html, and Salma and Qian (2021) at https://www.journalofbusiness.us/index.php/site/article/view/182.

 

INSEAD Directors Network (“IDN”) – An INSEAD Global Club of International Board Directors

Our Mission is to foster excellent Corporate Governance through networking, communication and self-improvement. IDN has 1,500 members from 80 countries, all Alumni from different INSEAD graduations as MBA, EMBA, GEMBA, and IDP-C. We meet in live IDN webinars and meet-ups arranged by our IDN Ambassadors based in 25 countries. Our IDN website holds valuable corporate governance knowledge in our IDN blog, and we share insights also to our LinkedIn and Twitter  followers. We highlight our member through quarterly sharing of their new board appointments, and once a year we give out IDN Awards to prominent board accomplishments. We provide a peer-to-peer mentoring and board vacancy service and we come together two times per year at the INSEAD Directors Forum arranged by ICGC. We also engage with ICGC on joint research.

 

INSEAD Corporate Governance Centre (“ICGC”)

Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance