"Board diversity and expanding the pool" are among the top issues that companies are being called upon to prioritize, according to a recent memo from the law firm Wachtell, Lipton, Rosen & Katz titled "Board Development and Director Succession Planning in the Age of Shareholder Activism, Engagement and Stewardship."
Sabastian V. Niles, the memo's author and a partner with the firm, advises boards to "advance board diversity in the self-assessment, recruitment, and nomination process, including, but not limited to, diversity in gender, ethnicity, race, age, experience, geographic location, skills and perspectives." Where applicable, he recommends, "increasing the size of the board to accommodate new talent in advance of an incumbent director's departure, including in the case of highly qualified diverse candidates."
The mantle of diversity is taken up as well by investment companies and corporate governance watchdogs as a key marker of best practices.
Vanguard Research, in a recent commentary, cites four principles of good governance, leading with board composition, and including oversight of strategy and risk, executive compensation, and governance structures:
"We believe good governance begins with a great board of directors. Our primary interest is to ensure that the individuals who represent the interests of all shareholders are independent, committed, capable, and appropriately experienced.
"We also believe that diverse groups make better, more informed decisions and that, in turn, can lead to better results. That's why we want to see highly effective boards whose directors bring diverse perspectives to the table. We seek to understand, through disclosure, a board's mix of experience, professional expertise, tenure, and personal characteristics such as gender, race, age, and national origin and how that aligns with the company's strategy. Boards must also continuously evaluate themselves and evolve to align with the long-term needs of the business."
So, how does a board evolve that mix, with emphasis on gender, race, age, and national origin? WomenCorporateDirectors (WCD), along with KPMG LLP's Board Leadership Center, recently tackled this mandate with specific steps companies can take to increase diversity at the board level.
"Directors have it in their hands to change the face of the boardroom," says Susan C. Keating, CEO of WCD. "We can also reach back--to the leaders emerging in the organization--to drive change around diversity and inclusion in our companies and beyond."
"Diversity of thought, background, and experience on boards of directors is essential in this era of change and disruption," adds Susan Angele, senior adviser with the KPMG Board Leadership Center and WCD thought leadership commission chair. "Commissioners contributing to the report come from all over the world and have deep experience with diversity as a critical contributor to a strong board. Their wisdom, insight and practical suggestions are of deep value to directors seeking to enhance the strategic value of their boards."
The commission's report, "Diversity in the Boardroom: Pushing Forward, Reaching Back," provides clear recommendations for directors to consider for their own boardrooms in the form of questions for discussion:
* What are the needs of the company and the expectations of key stakeholders?
* What are the challenges to building a diverse board and what are the tools?
* How does the board maximize the value that different perspectives bring?
* How does a diverse board set the tone and move the needle as a strategic enabler to a strong culture and sustainable long-term growth?
The report makes a number of recommendations that can guide a push toward greater inclusion in the boardroom and executive management, including using company strategy and stakeholder lenses to establish board diversity goals, developing pathways for the board to tap into new, diverse networks of qualified board candidates, exercising inclusive leadership to harness the full collective intelligence of the board, and holding management accountable for inclusive leadership.
For nearly two decades, Directors & Boards has taken a leading role in the effort to move from "male, pale and stale" boardrooms to ones that reflect more precisely at the top the mix of people who work for, are customers of, or live nearby, companies that are striving to achieve gender and ethnic and racial diversity. Our 2019 class of "Directors to Watch" epitomizes that effort and the fresh perspectives these directors bring to their boards.
Director, AutoNation, Inc.
Jacqueline A. Travisano, Ed.D., is the executive vice president for business and finance and chief operating officer of the University of Miami, a private research university serving more than 16,000 students and south Florida's only academic medical center. Travisano serves on the board and as a member of the audit and nominating and governance committees for AutoNation, Inc., America's largest automotive retailer.
Travisano received her doctorate in higher education leadership from Nova Southeastern University, an MBA from Chatham University, a B.S. in business administration from Robert Morris University, and is a certified public accountant. Her many recognitions include being one of "South Florida's Influential Business Women" by the South Florida Business Journal and the recipient of the National Diversity Council's "Glass Ceiling Award."
Travisano's charitable work includes serving as a board member of the United Way of Miami-Dade County, member of the Orange Bowl Committee, chair of the Miami Dolphins Cancer Challenge X, and the Robert Morris University board of visitors.
The balance in a changing landscape: In an environment that continues to evolve, transform, and transmute, it is imperative that boards be nimble, agile and forward-thinking. There continues to be a global acceleration in the disruptors and agitators of traditions and norms across all business sectors. Boards need to be diverse in thought and approach. They need to ensure they have the right balance of talent, skills, and experience to execute decision making at the highest levels and to prepare the corporations they serve for ever-changing landscape and resiliency.
Director, Encompass Health, Hill-Rom Holdings, Inc., Walgreens
Nancy M. Schlichting served for 14 years as CEO of Henry Ford Health System before her retirement in 2017. She is credited with leading the $6 billion health system through a major financial turnaround and for award-winning patient safety, customer service and diversity initiatives.
Schlichting was appointed in 2015 by former President Barack Obama to chair the Commission on Care to develop a 20-year strategic plan for veterans' healthcare. She serves on the boards of Walgreens Boots Alliance, HillRom Holdings, Inc., Encompass Health, Kresge Foundation, Duke University and Michigan State University.
Leadership is the most important element: High-functioning governance is vital to the creation and sustainability of great organizations. I have been privileged to serve on over 80 boards during my career, including a diverse group of nonprofit community organizations, public companies and universities. I have learned that leadership--of each board member and the board as a whole--is the most important element of good governance. Leadership motivates an organization to do the right things, to take appropriate risk to drive needed change, and to inspire and support employees and all stakeholders to create high performance and long-term success.
Elizabeth E. Flynn
Director, Webster Financial Corporation, StanCorp Financial Group, Inc.
Elizabeth E. (Liz) Flynn serves on the boards of Webster Financial Corporation and StanCorp Financial Group, Inc. Across these boards, she serves or has served on the audit, risk, nominating & corporate governance, organization and compensation committees, and currently chairs the audit committee at StanCorp.
Flynn also serves as a trustee of the Convent of the Sacred Heart School in New York City. She previously served as a trustee at Providence College, and at Providence House, a nonprofit entity helping homeless women recently released from prison.
Flynn was formerly a C-suite executive, focused on transforming businesses across numerous financial services companies, including JPMorgan Chase & Company, American International Group, Guy Carpenter & Company, LLC and, most recently, as vice chairman of Marsh, LLC.
Focus on the big picture: Most businesses these days are complex and getting ever more so as technology spurs disruption and innovation, and customer expectations soar. It is critical that boards focus on those things that matter most to the ongoing success of the company. Two of the most important things to oversee include ensuring there is a well-defined, clearly articulated strategy to drive sustainable competitive advantage, and a thorough understanding of current and emerging risks that could threaten the company's future. Consequently, ongoing transparency, dialogue and monitoring of KPIs should be front and center on board agendas.
Director, BMO Financial
Christine Edwards, a nationally recognized authority on financial services and public company governance issues, is a partner of Winston & Strawn LLP and heads the firm's bank regulatory practice.
Previously, Edwards was executive vice president and chief legal officer at Bank One, and spent over 25 years at Morgan Stanley where she rose to the role of executive vice president and chief legal officer. It was there that she achieved the distinction of becoming the first female general counsel on Wall Street.
Edwards is a director of BMO Financial, the eighth-largest North American bank by assets. She chairs the nominating and governance committee, and serves on the compensation and risk committees. As board vice chair...