The American Experiment.

• Author: Rock, Robert H.
• Position: LETTER FROM THE CHAIRMAN

The American national anthem is the only one that begins with a question: "Oh, say can you see ...?" Other anthems are more assertive and less enquiring. For example, "La Marseillaise" is a call to arms, without any questions asked. The American anthem also ends with a question: "Oh say does that star-spangled banner yet wave?"

Since its founding, America has been an experiment, which by its very nature poses a question. Today, that question asks whether America can maintain its political, moral and economic leadership. Boards of directors have a significant role to play in answering this question. They are increasingly taking positions on critical ESG issues, notably climate change, social justice, and equity and inclusion.

Boards are going well beyond mere virtue signaling. To get out in front of these issues, they are leaning in and getting "front-footed" by taking proactive positions and making meaningful commitments, as BlackRock's Larry Fink suggests. To animate and advance corporate initiatives toward sustainability and social responsibility, boards are incorporating ESG metrics into bonus plans using measures and standards such as greenhouse gas emissions, pay equity ratios and diversity indices.

However, ESG metrics are largely inward looking, gauging whether a company is being responsible for sustainable growth and for the fair and equitable provision of opportunities and rewards. There should also be metrics that are outward facing, assessing the company's ability to grow and innovate, including its capability to develop new expertise and adopt new technologies. Directors should inquire about whether the company is open to new ways of doing business, which often would require significant changes in its business model. Is the company on the cusp of massive changes stemming from tectonic market shifts, competitive onslaughts and disruptive technologies? Does the company foster the necessary agility, resilience and creativity to meet these changes in market dynamics and technological advancements? How ready is the company for its future?

To get answers to these questions, directors should start out asking "What's new?" inquiring about groundbreaking technologies, innovative products and processes, next-generation creations, new ways to go to market, productivity breakthroughs and reimagined businesses. In particular, directors should be inquiring about the size, focus and potential impact of the company's R&D budget, challenging...