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Modern Chair Practices: What makes an effective board chair?

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Modern Chair Practices: What makes an effective board chair?

By Karen Loon, IDP-C and IDN Board Member

Board chairs will continue to play an important role in engaging, enabling, and encouraging their boards and companies.

Effective chairs play a critical role during times of change and uncertainty. 

Whilst the recent pandemic has impacted how boards operate, it has had a significant impact on the role of board chairs, how chairs work, and what makes them effective, according to Stanislav Shekshnia, Senior Affiliate Professor of Entrepreneurship and Family Enterprise at INSEAD and Director of Leading from the Chair Programme and Helen Pitcher OBE, INSEAD Directors Network (‘IDN”) President who recently shared their perspectives on emerging trends in board chairs’ practices in an exclusive webinar for IDN members.

Attendees had the opportunity to get a preview of the key findings from ongoing research on chairs’ practices in Europe across 15 countries, 200 chairs and 300 shareholders, directors and CEOs including during the pandemic.

The research, with some contributions from the IDN[i], will be released by Professor Shekshnia in the upcoming second edition of his book, Leading a Board: Chair Practices Across Europe.  The webinar was facilitated by Liselotte Engstam IDP-C, with support from Hagen Schweinitz IDP-C, both IDN board members.

Over the past few years, the environment in which boards operate in has changed and became more challenging.  Companies are now subject to more public scrutiny, need to be more transparent, accountable and do more reporting.  Boards have been busier than ever, particularly since the start of the pandemic.  

Effective chairs lead their boards through Engaging, Enabling and Encouraging

Professor Shekshnia’s research concluded that effective chairs have continued to lead their boards by providing the 3Es of chair leadership – Engaging, Enabling, and Encouraging their boards, consistent with his prior research.

The role of chairs however has changed during the pandemic.  “What we found (was) that during the pandemic, chairs became more emotionally involved with their boards, (and) they spent more time doing their jobs”, said Professor Shekshnia.

Additionally, leading chairs are innovative in the way they lead their boards.

Finally, board work has become more relevant during the crisis, with only 1.2% of survey participants saying their board is irrelevant.

Leading practices of chairs which have emerged in the past year include:

Engaging

  • Chairs have become more caring – spending more time with each director; having more frequent contact; paying attention to mental and physical health; and having more personalised engagement.
  • Boards are engaging more over long-distance using technology such as Zoom, phone calls, Group chats and polls. Most hope to use face-to-face interactions when possible.

Enabling

  • Changing agenda items – new agenda items include COVID-19; employee, customers’ and suppliers’ health and safety; CEO health and fitness; and boards’ and individual directors’ resilience. Boards are also paying more attention to sustainability, succession planning, employee well-being, and social corporate responsibility.
  • Agenda setting – Leading chairs involve their directors more in setting agendas, using technology to set them. They also adjust agendas more frequently during meetings.
  • New formats – Boards are inviting experts to meetings, creating advisory boards and mixed board-management groups, and bringing in non-voting members to assist boards where there are skill gaps.
  • Innovation in managing board discussions online – Boards are experimenting with different online formats such as “camera on, mike off” mode, groups in Zoom, polling directors during the meeting, undertaking express evaluations at the end of each board meeting, and even turning off directors’ mikes!

Encouraging

  • Greater care and empathy – Leading chairs are supporting their boards, management and organisations with greater care and empathy, with less feedback and more support. They champion board education by acting as a “Chief Learning Officer” with their boards, and immerse themselves into new subjects like COVID.  Popular ideas used in lieu of in-person events include tea parties and drinks before and after virtual board meetings.

Virtual meetings have become a proven instrument for most chairs in Europe and will continue to be used going forward.

In the future, boards are likely to use a mix of virtual and face to face meetings, with big debates such as strategy being saved for face-to-face sessions, more operational questions for virtual meetings, and other more routine information sharing undertaken outside of the board room.  Helen Pitcher further added that more virtual meetings have had a positive impact on the environment, because of reduced travel.

An evolving idea is the changing attitude towards risk management.  Boards now have greater recognition that they need to move from classifying risks to organisational adaptability and resilience.

“Most of the board’s looked at risk in a sort of set standard way.  We identified the most important risks. We tried to come up with (a) strategy to deal with every specific risk. And we monitored the risks ranking them in accordance with their probability … Now most of the boards have (an) understanding that in addition to this, we also need to see how resilient our organisation is; how flexible we are.” – Professor Stanislav Shekshnia.

Boards are likely to focus more on the health and safety of employees, customers, suppliers, board members and the CEO in the future.  Empathy and mentoring are expected to be used more as performance measurement tools, as metrics have become less relevant.

What makes an effective chair?

Being a chair requires the chair to “balance” different attributes.  It is not about having one attribute or another, but about being ambivalent (or plus and minus) at the same time.  The opposite pairs are:

  • Authority and humility
  • Commitment and detachment
  • Incisiveness and patience
  • Helicopter view and company knowledge
  • Hard and soft skills

Professor Shekshnia concluded that the impact of the board chair on board effectiveness has always been significant, however in 2020 became critical because of the high change and uncertainty that we lived through last year.  The board chair’s role and impact will continue to be critical in 2021.

The changing role of the chair – Experiences of chairing boards during the pandemic

Helen Pitcher OBE shared her personal experiences from chairing boards across a range of organisations during the pandemic, noting that the pandemic has had a significant impact on how boards work.

“This is a once in a generational opportunity to change ways of working.  We’ll never again be able to say the way we used to do it, or we tried that, and it didn’t work because we are having to rethink everything that we do, and how we do it”, said Helen.

“Good chairs were already doing a lot of the things that needed to happen and were able to gear up quickly to support their boards and their organisations through the crisis.” – Helen Pitcher OBE. 

Some of the areas that chairs have been focusing on are:

Impacts on the transformational agenda during the pandemic

Shifting goals and outcomes

Health and safety, mental health and well-being, and what our goals and outcomes should be have become more important for boards and their chairs.

For some boards, the pandemic has been an opportunity for them to look at how to build their businesses and move them forward.  However, other organisations have been in crisis; their boards are meeting far more frequently, which demands a lot of the chair’s time.

“All chairs are having to work far, far more in their boards and on their boards, and to keep the communication flow going”, Helen remarked.

On developing relationships, “it’s become even more important for chairs to hold pre-board sessions, post-board sessions with all the board, and indeed with other key stakeholders to see how things are going”.

Finding opportunities for informal interactions, such as “board gin and tonic” events with no business agenda to find out how people are have been helpful.

Communication and messaging

“Being able to continue to communicate, particularly at a time of pandemic and fatigue is really, really important” – Helen Pitcher OBE. 

Chairs and board members should be prepared to have sessions with people across their organisations.  “You can never overcommunicate… having clarity of message and making sure we’re keeping people up to date is absolutely, absolutely crucial” Helen stressed, adding that chairs and board members need to listen even harder in these times.

Transformational change with assurance

Many employees are anxious about the future, for example the impact that new technology will have on them, or about moving offices and what the impact would look like.

“It’s even more critical that the board is supporting the executives to have the right conversations within their organisations, and to have deep conversations, both formal and informal.” – Helen Pitcher OBE.

She recommended that chairs and board members take “time to listen to people to talk about their concerns…. so that as much of the uncertainty as you could possibly take away is taken away”.

The immediate role of the chair in the crisis

  • Supporting executives – Board chairs have a key role to encourage their organisations, acting as a sounding board for executives, and to mentor and coach them, bringing their previous experience to bear.
  • Strategic horizon – Leading boards are also spending a lot of time looking at the future of their organisations, giving their people hope that there is a brighter future for them. “We need to constantly be scanning the horizon to see what we can learn from others.  The board’s learning individually and collectively is very important, because that keeps them fit for purpose for moving forward”.

The strategic role of the chair in the crisis

Boards have a responsibility to ensure that decisions made are sensible for the emergent reputation of their businesses.  How boards and chairs respond during the crisis will be remembered internally and externally going forward.  “Managing that reputation is hugely important, not only because it is morally the right thing to do, but because it’s sound business sense”.

Other strategic areas where chairs play a key role include inclusion and diversity, supporting exhausted executives, and managing executive remuneration.

In concluding, Helen highlighted the important role of chairs to maintain the transformation narrative in the crisis:

“Things are changing, but we will not go back to the old way of being. We will always now focus, even more strongly on to things like risk management, health and safety, how we reward our people – we absolutely owe it to our organisations as boards to do all of that.

We really also need to make sure we are being reflective about what have we learned from this crisis that we can really take forward. 

How can we be more flexible and more agile as a business in order to ensure that all our stakeholders benefit from this, and have the time to think, what is good … and what needs to change.” – Helen Pitcher OBE.

 

IDN’s next webinar on Governance at Family Boards will be held on 8 March 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-per 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

 

[i] IDN collaborates in many ways with ICGC. ICGC shares academic insights with the network, and provides opportunities for joint research. IDN shares experiences at several of ICGCs programs and events, and shares INSEAD insights with their boards and at many events. For the referenced chair practices research, led by Professor Stanislav Shekshnia, IDN President Helen Pitcher OBE has contributed with significant insights to both the topic and network, and IDN Board Member Liselotte Engstam has engaged for two years in the research performing the research on Swedish chair’s and board work, as well as contributed to the Nordic insights and co-authored the forthcoming book by writing one of the chapters.

 

Why every aspiring director should consider a mentor

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IDN’s INsights Director Mentoring Programme pairs aspiring INSEAD alumni directors who are early in their board careers with some of INSEAD’s most senior alumni and influential business leaders.  Here they share the lessons that go both ways.

By Karen Loon IDP-C, IDN Board Member

The IDN INsights Director Mentoring Programme (the “Programme”) is a structured six-month programme offered by the INSEAD Director Network (“IDN”) that is aimed at IDN members who are early in their board careers and are seeking support from a highly experienced mentor based on a specific set of goals.  These goals will be related to their current board roles and/or may be designed to further develop their board career.  The Programme, facilitated by a professional mentor and an experienced board director encompasses one-on-one mentoring by an experienced mentor, peer learning with fellow mentees, as well as optional single mentoring sessions on a specific topic.

Mentor and mentee

Naji Majdalani considers himself extremely fortunate to have been mentored by Sreekumar Puthen Thermedam.

Sreekumar Puthen Thermedam

Non-Executive Director, Mentor, Advisor, IDP-C based in Singapore

 

 

 

 

I decided to become a mentor as I have been fortunate to gain good experience with well-respected organisations and also with some very credible professionals who are industry leaders in their own rights.

One of my ambitions in life always has been to contribute back to society.  I have found that mentoring is a wonderful way to share my knowledge, learning, experience, commitment, drive with professionals and to support in their development. INSEAD is a respectful organisation where both mentors and mentees share their knowledge – in fact, the mentor equally learns and develops his skills also.  Mentoring also forced me to update myself on many aspects of business requirements as a result of the ever-changing dynamics.

When we started our mentoring relationship, Naji sent me his CV and clearly stated his goals. We then had a face-to-face introductory session. I found Naji to be genuine, honest, committed and has a lot of passion and drive to excel.

“Being a mentor has been a wonderful experience and gives me a great feeling of sharing and contribution”.

In our discussion over what we would cover over the 6 months, I clearly understood the challenges and expectations of Naji, and I programmed the session accordingly. Care was taken to ensure there was clear reflection after every session and application of learning. We also spent time sharing each other’s experiences and how we could address specific support to Naji. The normal session was supposed to be for 1 hour, but we invariably far exceeded the timing since our objective was value add with flexibility on timing.

After the initial understanding of the objectives and goals, we addressed a wide range of areas over the 6 months covering a broad range of areas such as types of organisations and how they impacted leadership styles, governance styles and board structures; the future of company boards, and the skills required; CEO success factors and succession; strategy; as well as governance and management best practices in family businesses. In between, we spent time on meditation, pranayama, and yoga to ensure mental calmness and balancing.

Being a mentor has personally helped me in progressing in my life as a part of my continuous learning. It also gave me a feel of joy and satisfaction that I could impart my skills and knowledge to develop next generation leaders.

The only unfortunate part is that we could not meet face to face (other than Zoom) and share a cup of coffee.  Now that the programme has formally ended, I plan to interact with Naji at least once in two months over email or phone till such time when we have an opportunity to meet up in person when time allows.  I have given my commitment to Naji to be available for his support during his journey forward. I am looking forward to continuing my informal interaction with Naji and understand his progress his life.

Naji has been a great mentee and in fact I must say our learning has been mutual. Naji has got a wealth of experience and is a very committed and passionate young professional with a strong will to succeed.

Naji Majdalani

CEO, Wings of Lebanon, MBA’07 based in Beirut

 

 

 

 

I decided to become a mentee as 2020 was a year of reflection and survival for me, and I needed to reach out to individuals with experience and knowledge to bounce off ideas, learn more about the board position and be able to discuss new topics which would give me a new and fresh “mindset”.

Meeting Sreekumar was a true pleasure and a fantastic learning experience. His approach is very subtle, calm yet structured, substantial and generous with personal and professional experience which I believe was the necessary dose of the right ingredients to make him a super mentor.

Sreekumar asked me to prepare my goals and objectives for the INsights programme which I did and shared back. He then laid-out during a pre-start session the plan for the next 3 months with a tentative 6-month plan which we would review as we progressed over time.

Over the 6 months, we spoke about the future of company boards, skills required to be a successful and effective board member, family board setup along with the family council and the necessary structure to make it work. We also looked at best practices for owners/board members within a family business and the relationship with the non-family CEO within the company. Finally, we reviewed scorecards to improve management best practices. During the sessions we always spoke on a personal level and even had a yoga session!

“Sreekumar had great insights from his previous experiences which were very helpful, and I leveraged some of the learnings to get through”.

Being a mentee during this critical period had a positive impact on me personally and professionally as I was able to learn about family boards and try to implement the learnings in my family business, specifically the mechanics and structure of family council, board, etc. and we often spoke about the challenges I faced related to the family setup, culture, and reluctance to change. The learning experience was very enjoyable because Sreekumar made it interesting and fun and it was also something I could relate to in my day-to-day life. It also helped me get through the difficult period when I had to suspend the operations of my airline and let go of 55 employees. Sreekumar had great insights from his previous experiences which were very helpful, and I leveraged some of the learnings to get through.

I consider Sreekumar a friend and a mentor and I will make sure to stay in touch going forward and I hope to meet him in person in the near future to share that cup of coffee!

My advice is to go into the mentoring programme wanting to learn and discover new perspectives. It is also important to take it seriously and be committed to the sessions and the work. Ensuring the mentee and mentor are aligned on the outcome and expectations is crucial to avoid losing steam over the period and having the mentee feel he is working towards a personal target.

 

To find out more about the IDN Insights Director Mentoring Programme, read more here.

 

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 1500 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-per 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.

 

How can IDN’s mentoring programme help your board career

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How can IDN’s INsights 2021 Director Mentoring Programme support your director journey?

By Karen Loon IDP-C, IDN Board Member

Starting out on a board career is not easy, even for the most seasoned C-suite executives.  In fact, many people would argue that being a board director is not an extension of your career, but an entirely new one!

To support our INSEAD Directors’ Network (“IDN”) members, our INsights Director Mentoring Programme (‘the “Programme”) which is now in its third year supports IDN members to achieve their specific goals.

This unique programme encompasses one-on-one mentoring by an experienced mentor, peer learning with fellow mentees, as well as optional single mentoring sessions on a specific topic.

We recently asked Helen Wiseman, IDN Board Member, professional mentor and an experienced board director who facilitates the programme to share more.

Can you share a bit about the Programme?

The INsights Director Mentoring Programme is a structured six-month programme offered by IDN that is aimed at members of the IDN who are early in their board careers and who are seeking support from a highly experienced mentor based on a specific set of goals. These goals will be related to their current board roles and/or may be designed to further develop their board career.

Whilst in an ideal world, mentors and mentees come from the same geography, our mentors and mentees “meet” at a distance in keeping with INSEAD’s global positioning. What is key that the mentee can access mentoring support that will help them achieve their goals for the Programme.

The Programme structure is designed to ensure that mentees get the maximum out of the Programme and are not left to “drift”. The Programme is also in line with best practice mentoring programmes, whilst being delivered remotely.

Our mentors, who are experienced board directors volunteer their time and expertise in a way that maximises the value of their contribution and respects their time.  They have the opportunity to expand their networks and get exposure to a potential talent pool.

The role of the Programme Facilitator is to ensure that the programme is on-track through a series of monthly facilitated group sessions (“INsights Peer Mentee Calls”).

What is the time commitment of the Programme?

The INsights 2021 Mentoring Programme will be offered online.  It comprises:

  • Mentee and mentor applications and onboarding
  • Six monthly INsights Peer Mentee Calls (via Zoom)
  • Programme exit – Personal Development Programme, Survey/Feedback/testimonials
  • Programme follow-up, gather 2021 mentee/mentor referrals – “Pay it forward.”

A unique feature of the Programme is that mentees are part of a cohort of peer mentees who go through the programme together and share their insights and learnings with each other on monthly (facilitated) basis.  Subject to preserving confidentiality of mentees and mentors, the mentees get the benefit of a much wider set of insights compared with one-on-one mentoring.

What are some of the benefits to mentees?

Our mentees from the 2020 Programme have shared that they have benefited immensely from the programme in a broad range of areas including:

  • Opportunity to network with similar minded professionals, enhance personal brand and director style
  • Gaining fresh perspective, new ideas and different ways of thinking
  • Providing feedback on practical challenges in the area of board dynamics
  • Knowledge sharing

One of our mentees has shared that “Normally it takes years to come up the NED learning curve…and a few mistakes along the way. My mentor saved me a year or two easily”.

“Board roles can be lonely: you can’t always turn to the other board members to discuss your ambitions, hopes, challenges and doubts. Who provides you with the necessary diversity in perspective? This IDN programme answers that question, with a mentor, and with a community of peers from all over the world” – IDN 2020 INsights Director Mentoring Programme mentee

Can you share a bit more about the profile of the mentors?  Why should I volunteer as a mentor for the Programme?

We draw upon our pool of highly experienced IDN members to be mentors.  Some of them are willing to be a one-on-one mentor for the programme duration and some are happy to be called upon for single-session mentoring based on their specific expertise or experiences. This ensures that there is a wide pool of mentors and who are able to share a broad range of experiences with mentees.

In addition to broadening their networks, many of our mentors have shared that they have learnt a lot as mentors, and that they have found the experience of supporting the lifelong learning enjoyable.

“I always find the mentoring process incredibly rewarding and enlightening. It’s wonderful to feel that I am contributing to someone’s development and there are myriad opportunities to see my own development needs mirrored in the conversations that we have” – IDN 2020 INsights Director Mentoring Programme mentor

I am interested in the joining Programme as a mentor or mentee.  What are the next steps?

Our application process for the IDN INsights 2021 Director Mentoring Programme will open shortly.  Potential mentees should note that selection is based, inter alia, on clarity of their goals and commitment to completing the programme – including joining monthly Peer Mentee calls.

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 1500 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-per 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.

Why Some Boards Add Value and Some Don’t

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Webinar Summary of Lifelong Learning IDN Webinar

By Karen Loon IDP-C with inputs from Roy Ling GEMBA

How do boards and board directors best equip themselves to deal with the challenges of innovation and disruption, and how do they add value? 

INSEAD Directors’ Network (“IDN”) members Denise Koopmans IDP-C, Roy Ling GEMBA, and Hagen Schweinitz IDP-C shared their diverse views and experiences on these questions in an INSEAD Lifelong Learning session by IDN, sponsored by the INSEAD Alumni Association on 19 January 2021.  The session was chaired by IDN Board Member, Liselotte Engstam IDP-C.

Prior to the session, participants were surveyed and asked to share their views on the effects their boards have on company value. The key findings suggest that the top area which boards have been focusing on in more recent times is value adding strategies.

The panellists shared their candid views and insights, as well as practical feedback on key developments in corporate governance in more recent times.  These included:

  • How boards can be successful at creating value – Successful boards invest sufficient time on board work; maintain a well-rounded team; and have an effective chairperson who runs meetings well, as good leadership sets the tone for the board as a whole and sets the stage for a more value enhancing board.  As Roy Ling shared:

“Boards should maintain a well rounded team with a culture of trust and respect, where directors and management challenge each other with constructive feedback”.

  • Changing dynamics in the way boards work – Boards are becoming increasingly agile and forward looking, working together through many challenges. They are discussing strategy and scenario development more frequently.  More backward-looking topics are being discussed in committees.  Decisions are being made faster, there is more focus on task forces to deal with certain topics, and more open flow of information.
  • Having board diversity – Not just in the areas of gender, age or experience, but diversity of opinion, personalities and capabilities. Directors need to be comfortable with differences of opinion.  A question which was discussed was how good companies are at finding independent directors.  The panellists also shared that whilst specialist skills such as digital, innovation and sustainability are important, directors also need to have other skills such as leadership and being able to operate in a team to be effective in the boardroom.
  • A growing focus on board reviews – With the increasing need to further professionalise boards, leading boards undertake regular self-assessments on board performance on Board composition and dynamics, how boards perform specific board tasks and how boards operate. More advanced organisations focus more interviews and less on questionnaires.  Annual review processes including the use of peer reviews with 360-degree feedback are also becoming more common.  Many also obtain external third party periodic “health checks” to evaluate the feedback process.

Participants highlighted that they believe that the top area of focus of their boards in 2021 will be digital innovation.  The panelists also shared that areas such as talent management, human resources and effective board processes should not be ignored by boards in 2021.  As Denise Koopmans shared:

”Boards have  become more leading, agile and forward looking. They have speedy and resilient decision making processes with ad hoc committees, deep dives and task forces as support. The board agenda is more geared towards strategic challenges and the role of the Chair as facilitator is critical.”

On board processes, many boards remain focused on upholding corporate governance and compliance with regulations.  However, a challenge is that directors who have extensive views on how to reinvent the company and its business model may often not receive adequate attention from the board due to limited board time. One suggestion was that perhaps an ‘Innovation Committee’ should be formed to get more board attention. The innovation committee role is to actively motivate and facilitate management’s ideas and initiatives on innovation and productivity.

Another idea was that a review of the board’s agenda is a good way to measure board effectiveness. If the same items are appearing on the agenda with no resolution, it may be an indication that the board lacks the necessary expertise to deal with the issue.

How can directors keep up to date?

A challenge for most directors is how can they keep up to date as a board member.  In addition to leverages such as the IDN network, recommendations included:

  1. Engaging between board meetings. Not just about spending more time on board strategy, it’s also about being able to connect with management in between meetings and staying current. But how often should they meet? Boards need to experiment to figure this out, but the key is to remember that boards are only as good as the information they have access to.
  2. Engaging with strategy as it is forming. Directors can participate early in the formation of strategy and stress-test it along the way, as opposed to reviewing a strategy that’s been fully thought through by management.
  3. Engaging on the tough questions. It is important to ask uncomfortable questions that extend beyond strategy sessions to a wide range of issues. Every board member does not necessarily need to have industry experience, but you must have the courage in the boardroom to ask the difficult questions.

As Hagen Schweinitz shared:

“Being a board director is now a profession with a lot of obligations. And future board reviews will look at how board members behave, interact and how independent they are.”

COVID-19 has reshaped board strategy

COVID-19 has certainly disrupted and reshaped how boards undertook strategy work in 2020. While many boards are tempted to refocus from long-term growth to short-term survival due to COVID-19, this could be a grave mistake. Instead, boards should capitalize on the COVID-19 opportunity to reposition and pivot their companies to strengthen their positioning and come out ahead. The participants suggested that boards need to be aware of three areas.

  1. Resilience comes through speed. COVID-19 gave rise to many uncertainties and changes. But boards need to guide management processes for fast responses. The point isn’t to have the right answer. The point is to build organisational capability to learn quickly why your answer is wrong and pivot faster than your peers do.
  2. Beware of a gulf between board and management and workers. While it is relatively easy for boards and management to switch to remote working, and they see it as effective and efficient, those in the trenches may not see it as so.
  3. More than ever, a bias to action is essential, which will frequently mean getting comfortable with boardroom disagreement.

Looking ahead

While 2020 has been a year of disruption, 2021 is a year of renewal.  Some areas for board directors to watch out for are:

  1. Always work on your own game as a director – Continuing education remains important.
  2. For people who want to join boards, carefully check if there is a match between your skills and the needs of the company, as well as a good fit and trust. Remain resilient and have sufficient time for your board roles.
  3. Spend even more time on board strategy – Manage through the COVID-19 crisis and into the new normal. Renew board processes to make them more effective and efficient.  Balance trust with challenging discourse.  Consider appointing an ambitious Board Chairman and rethink the annual agenda in 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 1500 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-per 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

Resource list

INSEAD Corporate Governance Centre (“ICGC”) research and articles

A checklist for boards in the new normal (INSEAD Knowledge Post)

Leadership in Risk Management (report)

The market for corporate directors (report)

Innovation & Corporate Renewal also disrupt Boards (report)

IDN Blogposts with related insights 

The evolving role of the board in the Covid-19 environment 

Board Dynamic Capabilities in Disruptive Times 

Can Digital Committees solve board challenges 

Getting your first board position 

Related webinar recordings

The End of Shareholder primacy?

Driving Tech for Good, the role of Company Boards 

Related Podcast Interviews

Create and believe in the Future with INSEAD Strategy Professor Nathan Furr

Experienced Board Chair INSEAD President Helen Pitcher OBE

Interview with Dr. Carole Ackermann, 2020 IDN Award winner

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Interview with Dr. Carole Ackermann, 2020 IDN Award winner

“To be successful as a board member, you really have to love what you’re doing” – Dr. Carole Ackermann

Interview with Dr. Carole Ackermann, IDP 8 2015, Chair, École hôtelière de Lausanne

 

 

 

 

 

 

 

In October 2020, INSEAD Directors Network (IDN) announced the four winners of the 2020 Inaugural IDN Awards for prestigious board positions.

The winners, which were selected from the 230 mandates, shared via the quarterly IDN Board Position Announcements, were selected based on the size and 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’. Four winners were selected, all of whom have an outstanding track record and have demonstrated the highest levels of integrity.

Dr. Carole Ackermann was one of the winners of the not-for-profit category.  We recently had the opportunity to ask Carole about her illustrious board career and her advice for aspiring directors.

You have had a successful career working with a range of different organisations and with exposure to several disciplines.  What made you decide to take on board directorships?

Passion for all kinds of innovation and change, whether technological, organizational, culture or people – that’s driving me. I am a curious person; I like to be challenged and I love to work with people and in teams. As a board member and Sparring Partner for Management, I have the privilege to share my experience in different fields and help companies to embrace today’s world of technical, economic, and social complexity and ambiguity.

What are some of the key topics which your boards are focusing on in 2021?

Even though Covid-19 has changed the way we work together, the board still needs to dig deep into the companies matters, ask the tough questions, and help the CEO and executive board to find the “best” solutions and adequate measures.

Depending on the industry, the focus these days is more on costs, on organizational matters, or on innovation to catch up with new customer’s needs. Certainly, sustainability and digitization are important topics also in 2021.

Issues (Matters) I personally focus on are staying the strategic course with innovation, agility, and customer orientation combined with a strong, people-oriented corporate culture.

What areas do you focus on when you undertake due diligence on potential new board roles?

Currently, I am more than happy with my portfolio and I am not looking for new board assignments.

But looking back it’s the question – what can I contribute and what can I learn – this give and take balance. This, besides the obvious parameters such as the company’s reputation, its culture, its potential, its major challenges, its corporate governance, and finally the industry sector. As in any other job, to be successful as a board member, you really have to love what you’re doing.

But even if you did your due diligence, there is no such thing as the risk-free option. It is always about being attentive and making sure that you stay curious about new developments.

What are the areas which you believe that aspiring directors should focus on when starting their board career?

The first thing is getting to know the company and your new colleagues. Then it’s about listening and understanding what’s going on.

For sure, a new director needs a certain knowledge in the new area – that is important for the company and ideally, this is supported by emotional intelligence, experience and interest in the company and its people.

But rather than focusing on a special subject and trying to change everything from day one, I would use the privilege of being new to listen and watch first as from the best seat in the opera.

 

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 1500 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-per 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.
About INSEAD Corporate Governance Centre.
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

2021 New Year Member Update

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2021 New Year Member Update

by Helen Pitcher OBE, President INSEAD Directors Network

Dear members – I trust that you are all well and are remaining safe in these interesting times.

2020 – A Year in Review

2020 was an extremely challenging, but interesting year for all of us as INSEAD Directors Network (“IDN”).  Our IDN board members have all continued to work hard to support our 1,500 members over the course of the year.  And like all of you, as board directors, IDN have moved our initiatives online and have been working in a more virtual basis.  Nevertheless, we believe that we provided significant value by supporting the lifetime learning of our members through our various initiatives which have run this year.  In addition to supporting initiatives of INSEAD, the INSEAD Alumni Association and the INSEAD Corporate Governance Centre (“ICGC”), our initiatives have included:

  • Webinars – Under the guidance of Liselotte Engstam, IDN ran 15 webinars for members this year, which covered a wide number of topics, from managing during COVID, cyber, digital and sustainability, as well as how to get your first board mandate, which are all very topical interest areas of members.

  • Mentoring programme – We also revamped our mentoring program for new board directors and ran a successful program for 26 pairs of mentors and mentees on a fully virtual basis. Our mentors were experienced directors, many of whom were qualified IDP-Cs. This program was viewed by both mentors and mentees as a success. We will be running this program again in 2021, under the guidance of Helen Wiseman.  We will be seeking mentors and mentees for the programme so please do support this initiative.
  • Ambassadors – Our network of 18 ambassadors under the guidance of Jeff Scott ran several in country initiatives to support our members over the year, many of which were on a virtual basis to allow our members to remain engaged with IDN, and to support their continuing education on a virtual basis. Events were held in geographies including Belgium, Singapore, France, the Americas, and Africa to share knowledge.  Please do connect with your local ambassador to find out more about initiatives in your geography.
  • IDN Inaugural 2020 Awards – Another new initiative we held in 2020, under the guidance of Thomas Seale was to recognise some of the most prestigious mandates which were awarded to IDN members. We awarded four of our IDN members with the Inaugural IDN awards for prestigious board positions. These were people who had been awarded what we have regarded as the most prestigious board positions, which were announced in our quarterly announcements, categorized into profit and not-for-profit categories. This included three female directors.

  • Advertising of board mandates – Under the guidance of Helen Wiseman, we advertised and placed a number of IDN members into international director positions.
  • Blog posts – In 2020, we also enhanced our blog posts where we have been sharing member viewpoints on topics of corporate governance, and providing our members who can’t attend our events, short summaries of discussions at our events. These details are shared via our social media on LinkedIn and Twitter.

Finally, to support our future growth, we have now established a legal entity in Singapore, INSEAD Directors Club Ltd. and have set up banking arrangements under the guidance of our Treasurer, Karen Loon.  This will support our further growth plans in 2021 and beyond.

What can IDN members look out for in 2021?

We expect to further refine and enhance many of the initiatives which we ran for members in 2020.  These include our webinars and our mentoring program, and continuing to support INSEAD and ICGC in Singapore and Fontainebleau, and collaborating more closely with the INSEAD Alumni Association and the National Alumni Associations around the world to support the lifetime learning of all INSEAD alumni.

Areas that we are working on in 2021 include:

  • Partnerships – We are on the lookout to partner with like-minded organizations who are interested in working with us to support our initiatives in corporate governance. If you do know of organisations who may wish to work with us on a global or local basis, please ask them to reach out to Dominic Nixon or Pamela Ravasio.
  • Ambassadors – We are looking to expand the geographical reach of our ambassador network in 2021. Watch out for further details.
  • Thought leadership – Representatives of our board have been working together with INSEAD faculty on various thought leadership articles on board dynamics and trends. Do sign up for our upcoming webinar on 8 February 2021 which will feature Stanislav Shekshnia, INSEAD Professor of Entrepreneurship and Family Business and Director of INSEAD Chair Program, and myself, Helen Pitcher OBE, moderated by Liselotte Engstam where we will discuss Modern Chair Practices.

We look forward to supporting our members on their corporate governance journeys. Please also do share with me or any of our board members feedback on how we can continue to support you as our members in your membership in your governance journey.

 

 

 

 

Helen Pitcher OBE, IDN President

Email – [email protected]

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-per 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.

To find out more about IDN, visit here

To join IDN, visit here

About INSEAD Corporate Governance Centre

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

 

32 board appointments for INSEAD Directors Network members

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32 board appointments for INSEAD Directors Network members

16 December 2020

Members Board & Corporate Governance Positions Announcement Q3 2020

INSEAD’s International Directors Network, IDN is proudly sharing the recent appointments 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 32 new board positions in 20 countries, summing up to 325 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 989 certified IDP-C/ IDBP-C directors, and our International Board Network IDN of INSEAD Alumni of 1,494 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

Doris Albisser – June 2019 & 2020 – SOS Children’s Villages, Austria, International Senate (NED), Member of Audit Committee (Not-for-profit, HQ Austria) & International Senate (NED), Leadership Selection Committee
Abdullah AlMutrif – September 2020 – Board Member at FTG BVI Private, Saudi Arabia
Stefan Buser – July 2020 – Board member, IBC Insurance Broking and Consulting Zürich AG (Private, Switzerland) & Board member, Audit & Risk Committee of Netrics AG (Private Equity owned, Switzerland)
Alexandra De Mello – August 2020 – Board member, Beyond Social Services (Not-for profit, Singapore)
Hamza Didaraly – September 2020 – Chairman, INNOVDEAL Capital (Private, HQ France)
Dominique Eeman – January 2020 – Chairman of the Board – Akkanto Communications Consultancy (Private, HQ Belgium)
Giulia Fitzpatrick – Jul 2020 – Independent Non-executive Director & Vice Chair at Quintet Private Bank (Switzerland) AG (Private,  HQ Luxembourg)
Daniel Frutig– Meier – July 2020, Vice Chairman, Fondation Art-Therapie, Geneva, Switzerland (Not-for-profit, HQ Switzerland)
Ioannis Georgoulas – August 2020 – Non-executive director at FXCM EU ltd, Cyprus (Private, HQ USA New York)
Michael Hilb – July 2020 – Member of the Board of Directors at Sigvaris Holding Ltd. (Private, Switzerland) and  August 2020 – Vice-Chair of the Board of Trustees at the Foundation for Value Creation (NGO, Switzerland)
Nooraya Khan – August 2020 – Non- executive Board Director at Nampak Limited (Listed, HQ South Africa)
Adrian Moors – September 2020 – Non-Executive Director, 96 Capital (Private, HQ South Africa)
Helen Pitcher OBE – Committee member ESG in addition to NED and Chair of Remuneration C&C Group plc (Private, HQ Scotland)
Enrica Rimoldi – March 2020 – Non-Executive Board Director, Chairwoman of the Audit Committee, Remuneration Committee member and Nomination Committee member at UniCredit Bank of Slovenija d.d. (Non-Listed, HQ Slovenia), April 2020 – Independent statutory auditor  at Cordusio SIM SpA (non-listed, HQ Italy)
Mark Shuttleworth – September 2020 – Non-Executive Director, JT Group Limited (Private, HQ Channel Islands)
Natalia Strelkova – July 2020 – Independent board director and Head of HR Committee, BioVitrum (Private, HQ Russia)
Doris Tomanek – September 2020 – Chairwoman of Advisory Board, MOVEEFFECT GmbH (Private, HQ Austria)
Nicolas Trentesaux – June 2020 – Executive Board Member , Roquette Poland (Private, HQ Poland)
Krisja Vermeylen – September 2020 – Board of Directors & Chair of the Remuneration Committee, Diaverum (Private, HQ Sweden)
Helen Wiseman – September 2020 – Board Chair, Elixinol Global Ltd (Listed, HQ Australia)

IDN Members – Board Directors

Armand de Villoutreys – September 2020 – Board member, Groupe Pochet (Private, HQ France)
David Eurin – September 2020 – Board member, West Indian Ocean Cable Company (WIOCC) (Private, HQ Mauritius), shareholder representative for Liquid Telecommunications and member of the Remuneration and Nomination committee
Wu Gang – April 2019 Chairman, Risk Committee, Ashurst LLP (Private, HQ UK)
Zeina Hatem – September 2020 – Non-Executive Board Director at EcoHydra Technologies Ltd  (Private, HQ UK)
Malin Holmberg – July 2020 – Non-Executive Board Member at Storytel plc (Listed, HQ Sweden)
Pascal Ravery – May 2020 – Executive Board Member, JCL Logistics SA (Private, HQ Switzerland)
Regine Slagmulder – July 2020, Non-Executive Director at MDxHealth (Listed, HQ Belgium)
Tom Stephenson– June 2020 – CEO and Board Member – Wittur Group GmbH – Germany

Previous announcements and more information

Previous board position announcements by shared by IDN;
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]

Getting your first board position

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Getting your first board position

By Karen Loon, IDN Board Member and Non-Executive Director

What are the key actions that will increase the likelihood of getting your first board position?

INSEAD Directors Network (“IDN”) members recently had the opportunity to learn more about experiences and insights into the board recruitment process from four experienced IDN members:

in an exclusive webinar for members held on 1 December 2020 which was facilitated by IDN Board Member, Liselotte Engstam based in Sweden with Q&A support from Hagen Schweinitz, a fellow IDN Board Member based in Germany.

Participants heard from the panellists about their experiences getting their first board roles and growing their board portfolios.  They also had the opportunity to also to learn more about how an executive search firm can help directors.  Key advice by the panellists included:

  1. Invest in ongoing board education
  2. Have a clear vision on what roles make more sense to you
  3. Do thorough due diligence
  4. Build your board experience by collecting different facets of experience
  5. Don’t go it alone – find a mentor and a tribe to share and learn from
  6. Build your networks

Invest in ongoing board education

  • Continuous board education is important for all directors, even if you have had board roles as part of your executive career.
  • For international directors, consider both board education in your local market(s) as well as continuous education from programmes such as the INSEAD Directors’ Programme (“IDP”) and subsequently via the INSEAD Directors Network. The IDP programme provides participants with new perspectives including on the values and capabilities which they needed to act as independent directors and allows them gain greater perspective on the role of the board.
  • Keep your governance knowledge up to date but keep it practical and fit for purpose.

 Have a clear vision on what roles make sense to you

  • Do upfront research on what are the geographies, sectors and companies where you can and wish to best contribute. What is your unique selling proposition?  How many boards do you wish to be a director on?
  • Choose your targets by doing your research – what is the story behind the story i.e., what are they really grappling with at the boardroom table?  How might the current composition of the board be playing out?  Form a hypothesis and climb into the mind of the Chair.  What value do you bring both to the scenario and the different thinking styles and experiences of the board?
  • Get clear on your positioning so that people can easily remember you, build a networking plan (see below) based on the above research.
  • Prepare well for your interviews.
  • Collect your war stories for example from your executive, particularly crises requiring a collective with backbone to work through the issues, or influence across authorities – indicators of how you might perform on a board.

Due diligence

Be thorough on your due diligence on potential board roles.  Understand red flags and the culture of the organisation.

Build your board experience by collecting different facets of experience

  • Build your board experience by collecting different facets of experience to broaden your value offering for example industries, types of transactions/corporate actions, different stages in the life cycle etc.
  • Be willing to start on non-profit organisations and advisory boards.

Don’t go it alone – find a mentor and a tribe to share and learn from

  • Don’t go it alone, find a tribe to share experiences with and learn from (for example IDN, your local director association, Women on Boards).
  • Find a personal mentor (for example, a senior board director) who can help a new director to fine tune their communication styles for effective board decision making, taking into consideration personal values and styles. This will help you increase your confidence to look for further roles.  Consider joining IDN’s mentoring programme.

Networking externally and within your boards

  • Make yourself visible and able to be found. Ensure your LinkedIn bio is up to date.
  • Let people know that you want board roles (both your close contacts and more broadly).
  • Consider doing some public speaking at events or associations or industry specific events, writing a column in a publication or starting a business blog to position yourself as an expert worthy of being considered to sit on a board. IDN members may wish to volunteer to contribute to IDN’s regular blogs.
  • If you are not yet on a board, and still in an executive role, see if you can find opportunities to present in front of your current board to get familiar with the board rooms, dynamics, and structure.
  • Seek active endorsement and references from people who have seen you presenting and interacting in a boardroom.
  • Finally, if you are already on a board, don’t forget to focus on building strong personal relationships with your director peers and management.

IDN’s mentoring programme which is available exclusively for IDN members will be accepting applications in early 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 1500 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-per 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.
About INSEAD Corporate Governance Centre.
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

Cognitive Biases on the board & Corporate Climate Change Inertia

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Cognitive Biases on the board & Corporate Climate Change Inertia

By Pamela Ravasio, IDP-C and IDN Board Member

The influence of decision bias is nothing new when scrutinizing corporate governance. For good reason a not insignificant amount of time during INSEAD’s International Directors Programme (IDP) is spent looking into decision biases as well as learning about how to remedy them in the board context.

Further, we all are aware: The consensus that climate change is having already huge consequences not just for the planet but also on corporate operations, risk profiles and profits. And yet: by and large businesses continue to fail to adjust their strategic decision-making processes to become more climate viable. At best they have just barely started on their journey.

Why is that? As we look deeper into the corporate discourse on Climate Change, it becomes evident that one of the silent yet crucial culprits behind the climate change inertia lies in the cognitive biases at play in corporate decision making.

A recap on decision biases: What is it, and what types exist?

There exist a plethora of cognitive biases recognised in psychology and decision making theory. Only a subset however seems to be of practical relevance for the decision process on boards. Some of the most frequently encountered biases in this context are the Anchor Bias, the Loss-Aversion Bias, or Availability Bias – all of which are being looked into during the IDP.

Equally drawing from the IDP: A good part of the Fair Leadership Process is also intended to neutralise such decision biases, or at the very least to make them explicit and challengeable.

Decision Bias and ESG: Cause and Effect

A 2017 California Management Review article found that in the context of corporate decision processes related to Climate Change – notably on boards – four bias types are of particular relevance: Framing Bias, Optimism Bias, Relevance Bias, and Volition Biases.

What are those biases, what do they mean for boards in the context of strategic Climate Change decisions, and what can be done about it?

Bias 1: Framing Bias:

  • Definition: “Framing bias occurs when people make a decision based on the way the information is presented, as opposed to just on the facts themselves. The same facts presented in two different ways can lead to people making different judgments or decisions.” (Source)
  • Board decision impact: Already framing the issue for example as ‘Climate Change’ rather than ‘Global Warming’ or ‘Climate Emergency’ disguises the urgency with which actions are needed, as well as the extremely tight timelines, and concentrated actions and investments needed. Framing is often decisive in identifying how urgent, critical, and bottom line relevant an issue is.
  • What to do about it? Language matters. Choosing wording carefully is a good start. Spelling out underlying assumptions is another good way to get to a more realistic picture of reality.

Bias 2: Optimism Bias:

  • Definition: People tend to overestimate the probability of positive events and underestimate the probability of negative events happening to them in the future. (Source)
  • Board decision impact: An example of the optimism bias in action is the assumption that advances in technology and innovation will allow us to revert Climate Change at a later date. Through such assumptions, responsibility is shifted away from the current context, and leads to inaction in the present.
  • What to do about it: Brutal honesty is necessary – and some significant efforts around spelling out what worst case scenarios could and would look like. Can a company successfully survive a worst case? And how exactly?

Bias 3: Relevance Bias:

  • Definition: Our subjective understanding of how important and critical an issue truly is, based on what we know or think to know. (Source)
  • Board decision impact: An example of this bias in action is that we all know that temperatures will rise between 2 and 5 degrees Celsius still this century. And yet – subjectively those temperature rises seem to be inconsequential. The reason being that as human beings – and as a consequence also in the professional roles we embody – we are already primed to ignore it.
  • What to do about it: Investigate how the information is anchored. For example in the above case, a 2 degrees temperature rise would be perceived through a subjective lens and set of experiences. Next, work on replacing those subjective views through a more objective, data driven but equally tangible (experiential, pictorial) description of the same, with the intent to replace the subjective experiences through those rooted in objective knowledge.

Bias 4: Volition Biases:

  • Definition: Broadly, these are errors in judgement that result from deferring responsibility (‘it is not my problem’), and can come in many forms such as through deference to authority or the ‘others do it as well effect’. (Source)
  • Board decision impact: Being reluctant to act because of an absence of a legal enshrined ‘level playing field’ is one of the most frequently cited versions of a Volition Bias. Another example is when companies finger point other players in their industry, say for not paying a living wage, and in this way justify their own behaviour and inaction.
  • What to do about it: Ask the question “What should the company (the board, the individual) do if the responsibility for change was theirs, and theirs alone?”

Conclusion

Climate Change “is the predominant moral issue of the 21st Century” (James Hansen, NASA climatologist). And yet, a recent survey shows that only 17% of Board of Directors serving on Sustainability committees have sustainability expertise. (Source, page 12).

Hence, while we’re waiting for boards to get their sustainability literacy up to speed and at a level comparable to their financial literacy: taking concrete measures to recognise, and remedy existing cognitive biases and their impact on decisions related to Climate Change action, is an effective, reasonably simple to grasp and implement, low hanging fruit that no doubt bears a considerable harvest.

 

Webinar: Sustainability and Climate in Strategy and Board Agenda

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Webinar: Sustainability and Climate in Strategy and Board Agenda

By Karen Loon, IDN Board Member and Non-Executive Director

With climate challenges increasing, the board has a responsibility to assess the impact and define strategies to handle the risk.  Are we as board members doing enough?  Do we understand how to address the topic?  What are the challenges and opportunities here?

INSEAD Directors Network (“IDN”) members had the opportunity to listen to Lise Kingo, IDP-C, NED and former executive director at UN Compact and Novo Nordisk, Stig P Christensen, IDP-C and NED, and Silvio Dulinsky, Head of Business Engagement Latin America, World Economic Forum held on 18 November 2020 in an exclusive webinar for members which was facilitated by IDN Board Member, Liselotte Engstam based in Sweden with Q&A support from Hagen Schweinitz, a fellow IDN Board Member based in Germany.

Top left – Lise Kingo, Top right – Silvio Dulinsky.  Bottom – Stig P Christensen

In their introductory remarks, the panellists covered three areas:

Responsible business is now a board and senior management agenda however climate and social inequality remains far behind

The Sustainable Development Goals were issued out five years ago.  Whilst there is much broader recognition that responsible business is now a key board and senior management agenda topic, after five years, we are still very far behind in the whole climate area and also social inequality.

Due to the huge gap and climate emergency across the globe, the whole area of climate change has developed and is now one of the most mature areas in relation to how companies can control, manage and set good risk and targets.  In particular, the financial community has put climate risk as a key priority through how they are setting targets.  Another recent initiative is that investors want to know how companies put climate risk costs into their accounts.

Climate will continue to stay on the board and management agenda.  However, companies need to develop more holistic approaches to running their businesses when it comes to ensuring a successful transition to a net-zero economy. There are a number of tools and initiatives in place to support board members in this process, which means there’s no reason for boards not to stat working on a transition strategy.

We are beyond a tipping point in relation to climate.

  1. We are beyond a tipping point – We have no time to waste. Policy-makers and business leaders have to their best to rapidly implement new ways forward, as younger generations are demanding.  Investors are increasingly more supportive of these changes.
  2. Green and digital is core business – There is currently a risk for boards to get stuck on the compliance and risk agenda and not address opportunity agenda. It is often hard for boards to have strong and precise discussions and evaluation of the opportunity side.  Boards should push this agenda beyond climate.  The way forward requires innovation of the regulatory framework which is currently work-in-progress.
  3. Open the windows and doors – Look outside beyond the borders of your company and M&A objectives you are facing with a systems lens on. Create symbiosis between different companies and sectors.
  4. Listen to the crowds – They can’t be on the boards, but they have to be heard by the company.

Tools are available to support boards. A value chain approach should be adopted.

Tools are available to support boards in relation to setting up effective Climate Governance.  Specifically, there are eight climate principles outlined in the World Economic Forum White Paper “How to Set Up Effective Climate Governance on Corporate Boards – Guiding principles and questions”.  These are:

  • Principle 1 – Climate accountability on boards
  • Principle 2 – Command of the subject; boards need the knowledge to debate and stay informed re climate related decisions.
  • Principle 3 – Board structure; the board structure needs to be effective to embed climate in the decision-making processes of the board and senior management.
  • Principle 4 – Material risk and opportunity assessment; management should assess and manage short, medium and long term climate related risks and opportunities.
  • Principle 5 – Strategic integration; management should integrate climate considerations into their strategic and financial planning of the company
  • Principle 6 – Incentivisation
  • Principle 7 – Reporting and disclosure; reporting and disclosure should be undertaken with the same rigour as a financial report.
  • Principle 8 – Exchange; engage peers, regulators, investors and the whole value chain in the process.

All companies, including SMEs are crucial in relation to transforming value chains.  The role of the board is to support the broader value chain changes required.

A challenge is how can we bring on board others who are not yet convinced on the importance of the issue.  The Chair and CEO as well as a critical mass of directors play a critical role to put climate on the agenda of the board to support driving the change.

Top – Liselotte Engstam.  Bottom – Hagen Schweinitz

Following the opening remarks, the panellists and IDN members engaged in lively discussion in relation to topics including:

  • The importance of getting climate on the board agenda.
  • Being proactive on climate before rules becoming mandatory. Global requirements on climate are increasing rapidly.
  • Leadership agenda – Set goals which are not only financial, but also deal with other areas including climate, diversity etc. to drive the change agenda. The importance of the role of the board to drive this.
  • The increasing focus on climate being placed by investors in more recent times.
  • How do boards look at the risks and opportunities in relation to climate?
  • Sustainability reporting including accountability, accounting and valuation considerations.
  • Directors’ fiduciary duties in relation to climate.

As Liselotte Engstam concluded:

“There’s no question that we need to have increased focus from board directors, and it also needs to be more inclusive and holistic, and we are getting much more attention from investors… Don’t just look at this as negative it’s a fantastic time especially now to look at (it as) a source such as an opportunity to rethink and re-set”.

The next exclusive IDN webinar will be on Getting your First Board Mandate which will be held on 1 December 2020 at 1200 – 1300 CET.