Future of Work: Post-Covid Boards

Post-Covid boards was the theme of the British Chamber of Commerce in Japan’s second webinar of its new series, Future of Work: Building Back Better. Held on July 28, the event was supported by the Financial Times Board Director Programme, which helps aspiring and existing board members to accelerate their board careers and develop board-level skills.

The panellists discussed how corporate boards have responded to the challenges of the pandemic and drew on their experience in Japan and globally to offer insights on board operations as the world emerges from Covid-19.

 

Current trends

Diana Wu David, founder of Future Proof Lab, kicked off the session by asking the panellists to consider what is happening on boards now.

Leo Lewis, Asia business editor at the Financial Times, said the finalization of the country’s Stewardship Code (second revised version) in March 2020 has put more pressure on shareholders to hold companies and boards to account. IR departments, he added, are playing a greater role in conveying shareholders’ thoughts to management and boards, while also communicating problems that arise.

Susanne Thorning-Lund, partner in board practice for Odgers Berndtson, identified three issues that boards are focusing on at present: talent management, diversity and ESG.

“Most companies have seen an extraordinary pulling together of people to try to combat this unprecedented crisis,” she said, pointing out that executive teams are tired from the strain of managing the impact of the pandemic on their organizations. More boards are therefore adopting a more proactive talent management and talent acquisition stance, engaging in succession mapping not just of the CEO but also other senior management roles.

Regarding diversity, there is a growing realization globally that people with the same education and background will ask the same questions on boards, so different kinds of people are needed for more comprehensive questioning.

In ESG, she said the pandemic has pushed climate change up on the agenda unlike the period following the global financial crisis when firms shelved their new environmental focus to pursue economic survival.

With most boards continuing to operate at least partly remotely, Anna Dingley, founder of Japan Connect Ltd. and non-executive director of Nihon M&A Center, shared that boards should be constantly reviewing their defences against cyber threats. The strong link between company culture and board culture should also be top of mind as boards transition to the post-Covid period.

 

Board composition

Despite most boards moving to remote operations in 2020, thereby enabling anyone from any part of the world to join them, Thorning-Lund said diversity of board members’ location has changed little in the past 18 months.

“Some of the very big global boards are used to operating in a virtual world and have been doing so for many years,” she said. But most boards will still hold half of their meetings in person because “connectivity is very important.”

As boards are increasingly expected to manage immediate crises as well as the future of their organization, demands on board members have grown recent years, shared Wu David. Covid-19 has exacerbated this, as members need to be capable of responding to even more demanding threats.

Lewis said the trend in Japan in the past five years has been to look to boards for answers when scandal or crisis hits, rather than at the departments or staff responsible. This is leading to board members being selected for their industry-specific expertise, such as cyber or quality control, so they can counter potential problems in these areas.

“Now it is much easier to translate [a crisis or scandal] to something being deficient at board level. If that persists and becomes the standard, it makes big demands on the board in terms of their efforts,” he said. Identifying and developing a skill matrix to build an effective board is one idea for the future, he added.

As the first and only foreign non-executive director on the board at Nihon M&A Center, Dingley recognised the lack of international diversity on Japanese boards, but said language is a huge barrier to change. There are few bilingual people able to carry out their board duties in Japanese and few Japanese firms who could operate their board using interpretation and translation, she said.

Still, Lewis said organizations should not use the “shallow pool” of capable people as an excuse not to diversify their board.

 

Board operations

While board directors have long used WhatsApp to stay in touch between board meetings, the importance of informal communication has heightened during the pandemic, said Thorning-Lund. As directors have not been able to catch up informally in person “over the water cooler,” to gauge with others what they are seeing and hearing, they have resorted more to other channels. Hearing and learning what other boards are focusing on has helped them ask relevant questions of their companies and leaders, she added.

Board members are also spending more time on board work now than they were before the outbreak of Covid-19, according to Dingley. She pointed to an April 2021 McKinsey & Company report showing directors increased their time commitment by 20% from 2019 to 2020, and noted her own experience of joining additional meetings between official ones.

Thorning-Lund said the pandemic combined with the “huge pressures” on boards in the areas of governance and stewardship have made board directors reluctant to sit on many boards. While historically they may have served on four boards, many are now choosing three to allow themselves the flexibility to get engaged to the level required. This limits the talent pool of experienced board members in the global board market.

As part of the response, she said more boards are asking staff and external individuals in their 20s and 30s to be on “shadow boards” to gain exposure to operations and hone their skills. “They are developing talent within their own ranks,” she explained.

Dingley noted that Covid-19 has also prompted both executive teams and board members to consider their future, leading to a growing interest among boards in succession planning.

 

Looking ahead

The panellists agreed that, as the world emerges from the pandemic, boards need to shift from the mass response to Covid-19 to a tailored approach.

“It’s quite clear that there will be companies that emerge [from the pandemic] with an acknowledgement they need to be more ready for the next crisis,” said Lewis. “There are already companies talking in much more proactive terms … but there is also going to be a very big curve of companies that fall short on point of exit.”

Wu David said whoever appears most quickly from the crisis will win, but Thorning-Lund pointed out that generating time to accelerate could be a challenge for boards.

When asked what boards should focus on going forward, the panellists agreed that having good people on the board with diverse skills, backgrounds and experience is key. To achieve this, Thorning-Lund suggested boards be open and transparent about board succession and rotation, and take a year-round approach to delivering it.

In closing, Wu David shared her summary of the discussion: “In the past, boards have focused on stability to achieve sustainability. Now they need to focus on agility to be sustainable.”