Creating an advisory board: bringing new perspectives to the table.
Author | Gentile, Jessica |
Position | HEIDRICK & STRUGGLES: GOVERNANCE LETTER |
Leading public companies are increasingly creating advisory boards to augment the firepower of their statutory boards.
Unilever created a Sustainable Living Plan Council in 2015 made up of external specialists in corporate responsibility and sustainability, who guide and critique the development of the company's sustainability strategy.
Three years ago, Target announced the formation of a Digital Advisory Council, a panel of technology leaders to help the company accelerate its digital transformation and its omnichannel go-to-market strategies.
And medical device maker St. Jude Medical last year announced its intention to set up a Cyber Security Medical Advisory Board to provide advice on cybersecurity standards for medical devices.
While statutory boards may include a specialist or two in critical emerging areas of business, boards have few dedicated seats thanks to low turnover, required financial expertise, and preference for CEOs and other generalists. That's where advisory boards come in.
In the cases of cybersecurity and digital transformation, the evidence suggests that statutory boards are adding few new members with experience in either area, this despite high-profile security breaches in recent years. As our firm's forthcoming 2017 edition of Board Monitor documents, only about 10% of the 421 new directors appointed last year had any experience at any point in their careers with digital/social media. And the percentage of new appointees with experience in risk (financial or cyber risk) at any point in their careers was only about 6%.
However, Banco Santander has created an eight-member international advisory board that will provide strategic advice on a broad set of issues including innovation, digital transformation, cybersecurity, new technologies and changing customer expectations. Chaired by former U.S. Secretary of the Treasury Larry Summers, the Advisory Board will also offer insights on capital market trends, corporate governance and talent, brand and reputation, and regulation and compliance.
Why an advisory board?
As the example of Santander suggests, advisory boards may be created to supplement the statutory board's knowledge on any issue deemed important to the company's future and provide access to leading experts on those issues. These include disruptive new technologies in the company's industry like blockchain and fintech in financial services, the Internet of things in industrials, driverless cars in automotive, or...
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