Boardrooms around the world are going through an extraordinary transition. There is a greater understanding of the power and responsibility of boards, and they no longer operate in a black box. The message from investors now is: We’re watching you!
The Shareholder Spring, as the recent period of shareholder activism has been dubbed, shows that investors, stakeholders, regulatory bodies, governments, and the general public are taking a greater interest in what goes on behind closed corporate doors. Ignoring this new call for transparency is futile, and will lead to accusations of being out of touch—tone-deaf in a soundproof room.
This year brought a rude awakening for boards. HP, Yahoo, News Corp., Facebook, Goldman Sachs, MF Global, AstraZeneca, Barclays, Olympus, RIMM, Kodak, and many others were in the headlines for all the wrong reasons. Boards were criticized by investors and other stakeholders on a wide range of issues, including their composition, competence, diversity, voting control, and dual stock structures. No sector is immune, no director untouchable.
Gone are the days of the rubber-stamp board. The lesson is clear: Organizations suffer greatly when independent board members don’t ask hard questions, and refuse to hold executives accountable for not just the profit margins but also the ethics of the company. A complacent board jeopardizes a company’s future.
Boards need to change, and serving on a board needs to be considered a job, not an annuity. As board members we are treated very well. We are sent manicured board papers in advance of board meetings. We are collected at the airport, transported to meetings, treated to lovely meals, and given slick and painstakingly prepared presentations. If we are not careful, we can become too comfortable, complacent, and we won’t have a fingertip feel for the organization.