The chief executive is the central figure of most intense discussions these days about the responsibilities and conduct of corporations. It’s the CEOs who signed the Business Roundtable pledges around stakeholder capitalism and racial equity, for example, and CEOs who have been most visible in speaking out about voter rights.
Now one prominent corporate board member, Dambisa Moyo, is making the case that company directors should play a stronger role in such decisions, in reforming corporations more broadly, and in reasserting their importance to society. For starters, the CEO reports to the directors, with 12 of them on the average board. Beyond that, the board’s core job is exercising judgment to navigate difficult questions, guided by a focus on the long-term fortunes of the business.
“Boards will become ever more important in a world of interlocking and clashing cultural values,” writes Moyo in her new book, out this week, How Boards Work. Moyo, an economist, is a board member at 3M, Chevron, and Conde Nast, and previously served on the boards of Barclays, Barrick Gold, Seagate, and SABMiller.
Moyo announces in the introduction to How Boards Work that it “is not a tell-all or a whistle-blowing book,” and disappointingly she sticks to that. It lacks any detailed inside-the-boardroom color or narrative, including from episodes that Moyo herself participated in. Instead, the book—much of which, true to its title, is devoted to explaining the mechanics of what boards actually do—draws on Moyo’s analysis of what makes an effective board from her own extensive experience.
Her agenda with the book starts with mounting a defense of modern capitalism against any anti-corporate spirit. “Strong and successful corporations are in the best interest of society,” Moyo writes. “Indeed, the centrality of corporations to human progress cannot be overstated.” (p. 3)
Her most timely and interesting analysis centers around boards’ roles amid what Moyo sees as a “culture revolution” currently facing businesses, demanding progress on gender and racial equality, sustainability, and other societal issues. Moyo voices concern that giving employees responsibility for company strategy-setting or mishandling issues such as diversity could get in the way of business performance. She cautions against being hasty in addressing societal concerns, and wishes that governments were more effective at addressing them.
But she’s ultimately on board for reforming the way things are done—if for no other reason than because customers, employees, and investors will desert the corporation otherwise. One of Moyo’s recommendations is that corporate boards establish ethics committees, to exercise oversight of matters such as pay equity, gender and racial parity, data privacy, artificial intelligence, and bioengineering. Another is for boards to press management to better track data and measure progress in areas such as staff diversity.
So what do boards actually do? They have three core responsibilities, Moyo explains:
- Boards shape company strategy. They do this in conjunction with its management team, focusing on considerations such as how best allocate capital for the long-term success of the business.
- They select its leaders, including its CEO and other board members.
- Boards safeguard a company’s culture, ethics, and values. These include respect, integrity, honesty, excellence, service, accountability, responsibility, professionalism, teamwork, human rights, and community and environmental impact.
Moyo’s other recommendations for how to upgrade corporate boards:
- Focus on long-term strategy, making long-term risks a regular board agenda item. Consider having the board develop company strategy in parallel to its management and then meet to work through the approaches.
- Recruit CEOs for ethics and values as much as financial performance. Moyo recommends asking candidates, “What’s the worst thing you’ve done to another human being?” to understand their perspective on right and wrong.
- Recruit new board members with geopolitical and technological expertise.
- Appoint a senior director to interface with shareholders.
She believes that boards need to face five critical issues:
- A more siloed world, which disrupts the global supply chain, limits access to global talent, and leads multinationals to adopt more decentralized finances.
- Changes in the investor landscape, including more vocal institutional investors and activists.
- Tech advances, and how much and where to invest in them, and hacking and data privacy.
- A global war for talent, especially in areas such as math, science, and technology.
- Short-term thinking, such as buying back shares rather than investing in research and development.
To be sure…
- Moyo’s grouping of issues such as pay equity, diversity, and environmental impact in a chapter about a “culture revolution” in companies risks conflating issues of basic fairness with fuzzier “employee self-advocacy,” giving inadequate weight to some fundamental moral issues.
- Moyo contrasts a Chinese startup culture of overwork with US efforts for work-life balance and implies the Chinese approach has advantages, cautioning that “increasing societal demands domestically could undermine the competitiveness of US companies globally.”
- Moyo’s is ultimately a tempered view. She argues against haste in addressing societal concerns, and notes the complexity of issues boards are already juggling while reminding readers that corporations “do bring substantial benefits to society.”
- “Especially in times of turmoil, corporate boards have a responsibility as custodians not just of a single organization, but of our economic well-being as a whole.” (p. xiv)
- “Corporate takeovers are, in a manner of speaking, a tug-of-war between two boards.” (p. 52)
- “It is reasonable to ask whether a global corporation is even the structure best suited for succeeding in a de-globalizing world.” (p. 177)
- “Typically, boards focus their attention on risks that are urgent and visible. These include challenges related to geopolitics, reputation, expropriation of assets, and sustained market volatility. But the risks that are most likely to sink companies are longer-term problems that are not within the board’s immediate purview, including technology obsolescence, weakening competitiveness, declining levels of competence, adherence to the wrong strategy, and the impact of regulation.” (p. 209)
The bottom line is that How Boards Work delivers Moyo’s smart analysis of the dynamics facing corporate boards, and the principle levers that they exercise—a worthy read for people looking for an introduction to what corporate directors do from an insider. Her ideas for reform go less far than others, such as a recent proposal to focus board compensation committees on economic inequality. And it’s less certain that her approach fully demystifies the work of a board, as it might if it had inside-the-room color.
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