Ensuring that a board has sufficient range of experience (in every sense) increases the chances that all corporate governance challenges will be addressed effectively. This has been the long-held belief of newly elected chair of the ILA Board Composition Committee Raymond Schadeck.
Diversity is not a nice to-have piece of window-dressing done to make the company look good. It is a vital tool to help the organisation consider every risk and opportunity. Also, diversity should be multidimensional, in terms of gender, geographical origin, age, professional experience...
Better over the long term
“It is my long held deep conviction that any working group of people with a diverse background and competencies is much more efficient over the long term,” said Raymond. “More homogeneous groups might be more effective in finding short term solutions, but this comes with the risk of neglecting long-term consequences, particularly regarding sustainable development,” he added.
For example, a board composed of men aged over 60 with a background in audit, financial and legal will naturally gravitate towards their comfort zone of exercising control over the executive team. This groupthink, born of close cultural affinity, can lead to boards neglecting their other important duties.
More focus on strategy and challenging/supporting management
“It has been proven empirically that many boards spend most of their time on control functions, and insufficient resources on the other two key functions: strategy and challenging/supporting management. This is despite increasing numbers of directors knowing they need to put more focus on long- and short-term adjustments to action plans, in order to stay in line with increasingly rapid changes of the business environment,” Raymond said. Diversity of voices on the board naturally helps to reconfigure standard ways of thinking and talking.
While being a strong advocate of ensuring gender balance, Raymond is concerned that the full range of diversity must also be reflected if boards are to maximise their effectiveness. He said considerations such as these were key to the naming of the Board Composition Committee, as the word “diversity” can be a somewhat loaded term.
“No doubt younger people - who have grown up with the ICT revolution - have a greater instinctive feel than older generations for how digitalisation will change the world over the coming decades,” he said. This is just one example of why people in the middle of their careers should be encouraged to consider taking directorship mandates. Similarly, people with backgrounds outside the West have a greater understanding of how the rest of the world perceives the changing tides of globalisation.
Raymond also strongly believes that we need to change perceptions that for women to succeed in business they need to appropriate traits typically ascribed to men, such as courage, strength, independence, leadership and assertiveness. “Given recent changes in society and the business environment, to remain attractive on the market businesses must radically change their operating models. This includes adopting ‘feminine’ traits, such as higher levels of sensitivity, caring, cooperativeness, empathy, affection, and devotion. Such instincts are a prerequisite of long term success, and hence why more women are required on boards without them having to adjust their personalities.”
Advocacy, education and more
While being clear how he sees the challenges, Raymond is wary about the chair being overly prescriptive of how the committee should address this question. “We have an agenda-setting role to lobby our members, the wider corporate governance community and business decision makers of the need to make changes,” he said.
Alongside this, he sees the importance of supporting education and training, including tools such as mentoring. It is a question of giving skills, insight and confidence to people who might not otherwise consider joining a board. Raymond is also an advocate of the use of advisory committees, as it is in most cases not efficient and effective to ensure all competencies are represented on the board itself.