Governance Challenges for Today's Board of Directors

In a recent McKinsey Quarterly article, William George, a former CEO of Medtronic, and a veteran of ten corporate boards, reflected on common governance pitfalls and how to overcome them. McKinsey Quarterly 1Q 2013

The recommendations offered by Professor George are valuable given his wealth of experience in key roles as a director with leading companies.

I especially appreciate the advice to independent directors to step outside their own spheres of influence to learn more about the business or industry of the company. Of course, this is often easier said than done, given time demands and the speed at which business happens and board decisions must be made, but it invariably will make those directors function more efficiently, and will deepen their commitment to the duty of care expected of all directors.

One area Professor George neglected to mention, but I consider important, is the board’s interaction with outside advisors. Outsiders can be instrumental in prudent board decision-making, especially in pre-IPO or pre-merger deliberations, times of crisis, on compensation matters, and even on succession planning. How directors deal with the advice and strategies presented by these external experts often determines success or failure of the task(s) at hand.

Finally, no review of governance or board performance would be complete without some discussion of the value of including diverse directors in the boardroom. Here, I am referring to ethnic diversity, which continues to be an oft-cited, yet elusive, aspiration for most corporations. Companies, especially those which are consumer-facing, should be guided by the evolving demographic landscape of North America, and indeed the globe, which reveals a preponderance of consumers of color. In addition, our global economy has spawned a new set of corporate expectations. Companies operating internationally should be acutely aware that the totality of their corporate activities are viewed through a new prism—a prism with such facets as human rights, environmental stewardship, fair labor, diversity, inclusion, and sustainability, among other corporate responsibility indicators.

Embracing these new market realities and societal mandates through enlightened corporate policy is both a beacon and a benchmark of responsible companies.

These decisions, rightfully, begin and end with the board. Leading CEOs understand the inter-relationship between the new realities and the advancement of shareholder value, and seek directors who can credibly balance these often competing interests.

(c) 2013.  Adonis E. Hoffman

Everybody's Going Green

"Environmentally-friendly."  "Organically-grown." "Safe for the environment. " "Green."

We all have seen the labels of goods and products claiming to be environmentally correct. It is impossible to engage the consumer marketplace today without encountering these bold statements from marketers and manufacturers about the "green" nature of their wares.  They often lead the commercial messages. Despite the proliferation of green marketing claims that permeate the media, the standard for green products has been a somewhat ambiguous sliding scale for years.

Today, the Federal Trade Commission (FTC) has stepped in to issue a revised set of guidelines for companies making environmental claims.  The revised guidelines are there to make sure the claims are truthful and substantiated, and backed up by legitimate science and tests.  While this might add an extra layer of unwanted regulatory compliance on these companies, the guidelines ultimately help consumers from getting duped by dubious achievements.

Since the advent of the Sustainability Revolution, consumers have shown their preference for environmentally friendly products.  This extends to everything from coffee, fruits and vegetables, to cotton, wool, poultry, paper and petroleum. As a society, we want to be in as close harmony as possible to our environment without spoiling it.  And, it appears, many consumers are willing to pay a little bit more for the "Green".

By laying out the boundaries for what can and cannot be considered environmental friendly, the FTC may have marked the end of those claims that seem to stretch the bounds of credulity.  Oil and gas extraction--environmentally friendly?  Hmmm.

(c) copyright 2012.  Adonis Hoffman.  All rights reserved

Entertainment, Entrepreneurs and Leadership

Popular culture is driven by celebrity.  Multi-billion dollar industries have spawned to feed the public's insatiable appetite for increasing amounts of celebrity news, gossip, reality and lifestyle.  It dawned on me after reading a short piece on 10 Rock Stars Who are Brilliant Business People that it takes a lot of talent and creativity to be a top entertainer, but it takes something more to be a successful business person in the entertainment industry.  Jay-Z, Madonna, and many other stars can lend valuable lessons to corporate executives on business essentials such as branding, marketing and customer relationship management.  Of course, for all of their business success, many entertainers can still learn a lesson or two about leadership and corporate responsibility, as I point out in Doing Good: The New Rules of Corporate Responsibility.  Maybe that is where the business sector can make a lasting contribution well beyond the bottom line.