For boards and management, it can be difficult to unleash the power of the organization.
Some of the biggest challenges in a global multinational is the ability to get things done across a matrix organization and finding key individuals who understand how to work within a complex and bureaucratic organization, yet still make decisions, and create alignment to operationalize the decision.
Identifying the individual(s) who understand the politics and companies’ landscape is key. To be effective in these complex organizations you need to develop “soft power skills” to create buy in, support decisions and create ownership to enable a decision to be operationalized.
There is a new category of talent who doesn’t jump out but has the character attributes that get things done across the organization. These are your precious connectors.
To do this you need “Social leaders” who can articulate their initiatives, and how this initiative aligns with the company’s overall goals and long-term vision.
Social Leaders are excellent communicators. They can articulate the problem and more importantly, the solutions they advocate for. They explain the risks and trade-offs of those solutions in an inclusive and empathetic way.
Building consensus is an important capability The Social Leader brings and they are excellent listeners. They consistently seek out key concerns; and then revert with answers and help build support. Their superpower is often cross functional collaboration with different departments to build a bigger coalition.
When we think about how to execute in complex multinationals, where their are matrixes and clear accountability becomes opaque; this is where you look for somebody who has unique capabilities in: “social leadership.”
Social leadership characteristics are someone who is flexible, with a reputation for getting things done, often based on values, ethics and principles of executing what is best for the company. They are very good at influencing others who are resistant to change and are often humble and highly collaborative.
These Social Leaders are skilled at influencing people’s engagement using emotional intelligence. They tend to be effective, and fact driven individuals who present their data with humility and consistently follow up. These are the people who can drive an outcome even when others do not report to them.
Social Leaders will step up and be proactive. These are the kind of people who will take initiative demonstrating their leadership.
They are often power structure savvy and are able to achieve outcomes having done their homework way in advance.
One of their great competencies is they do not dominate conversations. They encourage the group’s ideas and are very respectful listening to everybody.
Social Leaders are data driven and can clarify the arguments with metrics and specifics that support the initiative.
They are skilled at focusing the group on where they are aligned and unaligned, (without targeting individuals). They are excellent at helping people understand the choices, and trade-offs as well as foster an environment for healthy debate.
They understand that people are not going to support a new idea, concept or project unless they have had the chance to be heard and contribute to the decision.
They are great at follow up and being tenacious. Sometimes people are silent. You have to understand what the other resistance is to get those silent people to buy in. If they haven’t had the chance to engage and voice their ideas or concerns, they may not execute, if they haven’t had the chance to truly buy in. The social leader will work to reinforce areas of agreement, and find out what remaining issues they need to overcome. They are very adept at that.
This idea of “social leadership”, and particularly important in large complex companies. In empowering an environment where the future is dynamic, people become risk-averse. Find those Social Leaders. They are the heart and soul of getting things done in large global companies. They are the key unlocks.
They are the people who will be successful. As you look at cultivating your rare talents, seek out these hidden gems. Finding those future top performers/leaders to mentor, support and magnify their potential and impact! They are special and if you consciously search for them, you’ll find these unsung highly valuable talented individuals.
When a boards compensation or governance committee does its annual talent review with management, we tend to focus on the CEO reports. Perhaps a good question to ask management is about the next generation of high potential leaders who wield their soft power as the next generation of “social leaders”.
As we move into the new year, the corporate landscape faces a unique set of challenges and opportunities. This dynamic environment necessitates a proactive and adaptable approach to corporate governance. Several key trends are emerging that will significantly impact how boards and management teams navigate the complexities of the modern business world.
Number one:
Capital availability from traditional banking sources has expanded to include abundant, flexible private equity sources.
Number two:
Large language models (e.g., Gen AI) have entered the board’s zeitgeist, and we are asking management to articulate their vision on its relevance and applicability.
Number three:
ESG and overly “woke” policies are being rebuked by some investors (see the 12/28 New York Post article on NASDAQ). But sustainability remains a corporate commitment.
Number four:
Digital currencies will come back into focus with the promise of regulatory clarity. Few will go to the extreme (MicroStrategy), but your treasury organization may want to investigate.
Number five:
Age policies remain a minority practice. Of the companies that publish their retirement policy, age 75 is increasingly the age shared per the Harvard Review.
Number six:
Activism continues and the majority of boards are savvy enough to now recognize they will need to compromise: see the Elliott/Southwest Airlines, and even more recent agreement of Honeywell to split into two separate companies, aviation and industrial.
Number seven:
United Health Group has alerted boards to their CEOs’ vulnerability and the need to consider physical security as well as cybersecurity
When we examine the aftermath of the terrible murder of UnitedHealth CEO Brian Thompson, there come clear questions this raises for board members to consider.
The Risks:
One of the first questions we may want to ask ourselves is to address the risk or likelihood our CEO may be targeted.
I think that companies which “face the consumer” and where there’s potential consumer harm are at a higher risk.
If your company’s product could possibly harm a consumer or impact them negatively you’re subject to a bigger group of people who could be violent.
Health insurance, airlines, automotive, pharma, and food are examples. There are large pools of people whose life could be impacted very significantly by a real or perceived safety / health failure.
Controversial / gritty industries:
If your company is in the so called “sin industry” group often described as alcohol, tobacco, firearms, gaming, etc. it is conceivable that the nature of these industries may result in a more risky environment.
The business to business industries like chemical, energy, agriculture, industrial, etc. logically should be less of a concern. If your company makes valves that go into other industrial products and you compare it to health insurance, it is easy to see the potential difference in vulnerability of being targeted.
Preparedness:
Boards are all familiar with “key man” insurance and the annual safety preparedness that many companies do to brief their CEO and exec leadership team . Often a 3rd party expert comes in to go through a security briefing. This includes topics like how to respond if you’re caught in a fire in your hotel, how to get to the exit, how to be situationally aware to avoid kidnap, how to behave if you are kidnapped, etc.
Additionally, companies have policies on where / when they have bodyguards. For example, if your CEO and/or ELT is traveling to a dangerous country there is often special airport greeting protocols, bodyguard / escorts, bullet proof cars, etc.
The question of key man insurance is an interesting topic. Do you have a policy with Medevac Do you have kidnap extraction in your policy? Who controls the extraction team selection?
If the worse case scenario happens, have you got a crises management protocol in place? This is analogous to having a dedicated part of your crises management. We are all now increasingly knowledgeable on the NIST protocols for cyber ransomware prevention and escalation process for responding to a cybersecurity breach.
We may want to ask management to refresh and update the overall Enterprise Risk Management scope to include a review of the CEO vulnerability risk.
Empathy and humanization:
We appreciate the importance of our companies brand both externally and internally. We want our customers, investors, and employees to feel and believe in our company’s values and sense of mission. To truly have our brand resonate as authentic and “be real” we are impacted by our CEOs persona. Does our CEO feel transparent, honest, caring, sincere? Or does our CEO feel distant, stiff, robotic, indifferent?
Remember the cringeworthy response of the United Airlines CEO who lawyered up after the negative media attention of a puppy being suffocated in the overhead luggage compartment on a United Airlines flight, and the rough removal of a passenger from a plane. The CEOs perceived lack of empathy was harmful to the brand. Contrast this with the charisma of visible CEOs like JPMs Jamie Dimon, or the incredibly iconic and uniquely authentic Elon Musk.
My suggestion is that boards may want to encourage their CEOs to be mindful of the significance of showing their human side, warmth, vulnerability, humility, and concern.
I’m not suggesting that the tragic murder of UnitedHealthcare CEO Brian Thompson would have been avoided by publicly and empathetically addressing consumer complaints…but I do believe there is a “learnable” insight surrounding this tragedy, that the publics perception of you CEOs approachability may correlate to effectiveness.
Potential Prevention Forensic:
Hindsight possible lessons to consider is the analysis of the warning signs. Have your companies complaint volume intensity and threats have gone up? Have the increased issues correlated to a new specific policy change? If the threats have increased in severity have you upped your research to include boutique specialty firms that monitor the dark web? Have you considered boutique protection firms such as Black Cube? Who on your security team owns this threat assessment? Is it clearly in one organizations ownership or shared among the physical security, cyber security, customer service complaint teams? How does this information come together?
In closing, here is a quick listicle for a future board discussion – whether at your audit, ERM or full board:
1. How vulnerable are we? How have we checked and assessed our threats?
2. How are we updating / refreshing our CEO and ELT preparedness?
3. Is the company perceived as “caring” about issues?
4. Are we properly insuring and protecting our CEO and ELT? (I suggest directly asking our CEO if they have received threats).
Sadly, it seems timely to consider the subject of our CEOs safety and our leadership continuity.
Advisory boards, once primarily a domain of large corporations, have evolved to become a valuable asset for businesses of all sizes. From startups to multinational giants, advisory boards can offer a unique blend of expertise, insights, and strategic guidance. Advisory boards can be an incredible asset for organizations of all sizes, providing strategic guidance, fostering innovation, and facilitating access to valuable networks. However, the composition and role of advisory boards can vary significantly, making it essential to understand their nuances.
From startups seeking strategic insights to multinational corporations aiming to expand their global footprint, advisory boards offer a tailored approach to address specific organizational needs. Public companies often establish advisory boards to address specific challenges, such as entering new markets or navigating regulatory hurdles. For example, British Telecom created an advisory board to guide its entry into Managed Services. SAP formed one to mentor its leadership team and develop a more robust C suite and Board Room access.
Large Public companies often leverage advisory boards to address specific objectives of the customer, such as input for strategy, providing competitive market insights, vertical industry expertise, technology / product guidance and facilitating global expansion. Advisory boards can also be instrumental in understanding and navigating complex regulatory environments, particularly for companies operating in highly regulated sectors.
Startups, on the other hand, may seek advisory boards to help them scale rapidly and navigate the challenges of high growth. These boards can provide invaluable mentoring and are a sounding board for leadership development and for the CEO. For company’s going through hypergrowth, working with experienced entrepreneurs and CEO advisors can be very effective. Early stage company’s often add advisors to help them with product roadmaps, go-to-market introductions, and the metrics/frameworks around their strategies.
In the dynamic world of startups and growth-stage companies, advisory boards can be invaluable in helping organizations scale and navigate rapid growth. These boards often focus on providing guidance around the ideal timing to add processes, identify which metrics matter most at a particular time in the companies stage, avoiding becoming bureaucracies. Clarifying which organizational design is most effective for a company’s size and strategy is another helpful perspective. By tapping into the expertise of seasoned executives via an advisory board, startups can accelerate their growth and accelerate learning curves.
Beyond the traditional corporate advisory boards, there are also specialized advisory boards that cater to specific needs. For instance, sovereign funds often establish advisory boards to gain insights into policy issues and economic trends and get high-level reach/access. Functional advisory boards can focus on areas such as AI, Gen AI, Agentic AI, supply chain, or human resources. Advisory boards may also be organized by vertical industry i.e. if you are targeting to retail, financial services, healthcare, etc. These specialized boards provide targeted expertise and support to organizations addressing specific goals.
The benefits of advisory boards are multifaceted. They can provide strategic guidance, be a CEO sounding board, enhance credibility, foster innovation, and facilitate access to valuable networks. Tapping into the collective wisdom of experienced professionals, organizations can make more informed decisions, mitigate risks, and seize new opportunities.
To maximize the value of an advisory board, it is essential to carefully consider its composition and objectives. The advisory board should be comprised of individuals with specific experiences that align with the organization’s strategic goals. Adding a chair for your advisory board enhances effective communication, engagement and collaboration and drives outcomes from board members.
Key Considerations for Establishing an Advisory Board:
Once the board is formed, it’s crucial to establish clear roles and responsibilities. This includes defining the board’s mission, objectives, and meeting frequency. Regular communication and collaboration between board members and the company. Naming a chair is valuable for ensuring that the advisory board is impactful.
Common Challenges and Best Practices
While advisory boards offer valuable insights and guidance, they differ significantly from Fiduciary Boards in terms of their responsibilities and oversight. In traditional board roles, board members have a legal fiduciary duty.
The advisory board is more of a “working / operational” board, typically helping to augment the CEO / President or Business Unit leader.
For the Advisory Board Members, experience on an advisory board can be valuable preparation for a fiduciary board role. The opportunity to be involved in strategy and support the company’s operations is hugely interesting. Serving on an advisory board can help an individual gain a deep understanding of the company’s strategy, operations, and industry, which will better prepare them for future board work (and may increase your chances of being considered for a board seat for that company).
Advisory boards can be a powerful tool for company’s looking to achieve their next milestone; CEOs may want to consider looking into how to leverage this powerful resource. Done well, advisory boards can be a significant force multiplier!
The startup landscape is rife with innovation, but only a select few ascend to greatness. What sets these apart? When considering what separates good from great startups, and the qualities that distinguish a good founder from a great one, a few critical factors come to mind. These elements are foundational to building not only a successful business but also a lasting one.
Product-Market Fit: The Cornerstone of Success
Great startups often start with an unmet need or a pain point in the market. But that’s only the beginning. The real key lies in rigorous market validation—through deep, continuous customer engagement and feedback. This is what drives a true understanding of the market’s requirements and leads to the holy grail of entrepreneurship: “product-market fit”.
Far too many startups fail to grasp this because they tend to be too technology-centric, rather than customer-centric. Brilliant technologists may identify what they believe to be a need, but if that idea isn’t iterated and refined through ongoing feedback loops, it’s often destined for failure. The startups that succeed understand the need for continuous engagement with their prospects, ranging from 25 to 50 ongoing conversations to gather feedback. This practice ensures that customers have a voice in shaping the solution, fostering a culture of active listening, refinement, and iteration.
While many startups focus on technology, the most successful ones prioritize customer-centricity. By engaging with potential customers early and often, these startups can refine their product offerings based on real-world feedback.
A Clear Vision and Strategy
Great startups have a well-defined vision and strategy. They understand their near-term goals and have a roadmap to achieve them. A long-term goal in a startup is only an illusion. You win by maniacally focusing on solving one clear pain point with a frictionless solution that clearly demonstrates customer delight. This clarity helps guide their decision-making and keeps the team focused.
Another critical factor for success is alignment on your company’s sense of urgency and response time. Some companies operate at a deliberate, methodical pace, while others thrive in a fast-paced, high-velocity environment. Whatever your pace, ensure that your entire team is aligned with it. If your organization moves quickly, don’t dilute that culture by bringing on people who aren’t wired to keep up.
A Culture of Continuous Improvement
Foster a culture of constant learning and adaptation. Start ups that win are the ones that are not afraid to pivot or iterate on their product based on new insights. This agility allows them to stay ahead of the competition and meet evolving customer demands.
Of course, it’s essential to distill these needs into a standardized product rather than creating a multitude of custom versions. Startups that thrive have an overarching determination to deliver clear, measurable value for the customer. They use that vision to nimbly refine their approach based on what prospective customers would actually buy. The best companies use customer feedback to build a core set of product attributes, verified by their engaged community of prospects (co-innovation partners), many of whom evolve into their first customers and ultimately brand advocates.
Strong Leadership and Team Dynamics
Behind every successful startup is a charismatic visionary leader. This individual possesses a unique blend of drive, tenacity, and the ability to inspire their team, create followership and attract the very best people. A strong team, composed of individuals with complementary skills, can overcome challenges and achieve remarkable results.
As for what separates a good founder from a great one? The most important trait is self-awareness: knowing when and how to augment yourself with a strong, complementary team. For example, if you’re a technology innovator, you might need to bring in a customer-centric go-to-market expert, a branding specialist, or a strong manufacturing or financial leader.
It’s crucial to recognize your superpowers, nurture them, and build around your weaknesses. And here’s the tough part: understand from the outset that you’ll regularly outgrow your team. Every 12 to 18 months, you’ll need to rethink your team’s composition and possibly replace up to 25 to 30% of your staff to maintain your growth trajectory. Always aim to bring on the strongest people you can.
Lastly, great CEOs are the visionaries who can explain the company’s value in a way everyone understands. They have tenacity, grit, and discipline to turn that vision into reality. Flexibility is vital—most successful entrepreneurs iterate on their original vision as they adapt to market feedback, new competition, and shifting customer needs. CEOs who are resilient and are able to recover from setback are the ones that win. I tend to look for founders who have been entrepreneurial from a young age, those with a strong work ethic honed from early jobs during school. Drive, tenacity, and grit are invaluable qualities in any great entrepreneur.
The journey from a good startup to a great one is challenging but exhilarating. The guiding principles when building and scaling should be product-market fit and fostering a culture of continuous improvement with an extraordinarily strong team.
We always hope that our judiciary branch is balanced and doesn’t decide to legislate from the bench. We really want our courts to implement the law, not make the law. The recent decision out the Delaware Court of Chancery gives me pause.
In the recent court case a class action suit was brought on behalf of shareholders claiming that TeslaTSLA -3.4% CEO, Elon Musk, was awarded too large a compensation package. The allegation said the board was not independent. There were allegations of too close a collegial set of relationships with other areas where board members were investing in other businesses together. This is nothing new in Silicon Valley. In fact, this is quite standard. The most important and critical fact is that 80% of the shareholders ratified Musk’s comp package. Further, his comp package is 100% performance driven – compensation is only earned where the company’s performance hits financial thresholds that rewards all shareholders.
When the comp package was given the market cap of Tesla was $57.44B. Current market cap is $596.47 B. The case was brought 3 years ago when the market cap was $1.061 T. Clearly shareholders benefited. The shareholders approved the compensation package. The compensation was earned based on performance achieved. There is alignment of interest. It looks like an example of judicial overreach based on a judge’s perception of what is “fair” based on personal views as opposed to the law.
As we look ahead to 2024, several corporate governance trends are likely to continue evolving and will be front and center.
For corporate boards, navigating this uncertain landscape demands a keen eye on not just economic indicators but also emerging trends in the realm of corporate governance.
1. The Political Pendulum and its Economic Sway: 2024 marks a watershed moment in the United States. The presidential election poised to send impact through the economic landscape. Depending on the outcome, boards must prepare for potential shifts in regulatory priorities, trade policies, and fiscal spending. Increased government intervention in areas like climate change and social welfare could significantly impact boardroom discussions around stakeholder engagement and ESG commitments. Conversely, a more deregulatory stance could favor business interests, lower taxes and capital investment incentives. Understanding the potential outcomes and their implications for the company’s industry and markets will be crucial for boards to formulate strategic plans and mitigate risks.
2. Data Privacy Takes Center Stage: The specter of stricter data privacy regulations is no longer a distant threat but an imminent reality. Stringent laws like Europe’s General Data Protection Regulation (GDPR) are setting the global standard. The United States are expected to follow suit. This heightened emphasis on data privacy will necessitate robust data governance frameworks within companies. Transparency and accountability in data use will be paramount to avoid reputational damage and potential legal repercussions. Furthermore, the potential for increased regulation around AI algorithm drift, where AI models deviate from their intended function due to biased data or changing environments, will require boards to actively monitor and audit AI deployments to ensure fairness and prevent discriminatory outcomes. Creating a data policy is a good idea for management and board review.
3. The Great Reshuffling: From Globalization to Reshoring: The tides of globalization are receding, revealing a new emphasis on regionalization and reshoring. The disruption of global supply chains witnessed in recent years, coupled with rising geopolitical tensions, is prompting companies to reconsider their outsourcing strategies. Boards can expect increased pressure to move operations closer to home or diversify suppliers across more friendly regions. This “Nearshoring” or “Homeshoring” trend will necessitate careful evaluation of production costs, talent pools, and logistical hurdles. Companies successfully navigating this shift will not only mitigate supply chain risks but also potentially create new jobs and strengthen local economies. Additionally, the ongoing trade relationship with China will need to continue for most businesses. Addressing concerns over supply chain visibility and human rights issues, will demand new reporting compliance.
4. Activism in the Age of Inflation: The threat of inflation will continue in 2024. In this environment, board activism from shareholders is likely to rise. Investors will demand that boards demonstrate clear strategies for cost-cutting, efficiency improvements, and maximizing shareholder value. Pressure to right-size businesses, divest non-core assets, and optimize operations will increase. Boards must be prepared to engage with shareholders proactively, transparently explain strategic decisions, and deliver convincing evidence of their commitment to long-term value creation. If your company is performing in the lower quartiles vs. peers expect activist attention and unwanted scrutiny.
I believe these trends will shape the corporate landscape of 2024. Boards that adopt a forward-thinking approach, embrace agility, and prioritize a stakeholder-centric mindset will be best equipped to navigate the coming year ahead. By understanding the drivers of these trends, anticipating their impact, and proactively implementing sound governance practices, boards can help their management teams future-proof their companies.
As the world grapples with a multitude of economic and geopolitical challenges, corporate governance has never been more crucial. In 2023, the interplay of rising interest rates, inflation, supply chain disruptions, and global conflicts has created a complex and demanding landscape for businesses. Against this backdrop, corporate governance practices have come under increased scrutiny, with regulators, investors, and stakeholders demanding greater accountability and transparency from companies.
Before the year closes out and everyone shifts their view to 2024, I thought it would be valuable to take a backwards forensic look at some
As companies prepare to go public and draft bylaws, there is an opportunity to put in place a series of provisions that can give newly public companies significant degrees of autonomy from their shareholder base. This is a “golden window” of opportunity when companies can include specific language in their bylaws that are advantageous to the founders/management, which gives the company more maneuverability.
As election season approaches, companies must increasingly think about how they approach the social and political issues that will undoubtedly resurface.
“I think it’s very important that companies reflect on what the core of their business is,” Betsy Atkins, chair of Alphabet’s (GOOG, GOOGL) Google Cloud and board member at Wynn and GoPuff, told Yahoo Finance at the 2023 Milken Global Conference (video above). “Is it building a fantastic product, a fantastic service, or is it about trying to reshape the world? When companies decide that social and political issues are their most important thing, that’s when they get into trouble.”