2022 – The year of boardroom commercial conflict?
The revealing PricewaterhouseCoopers (PWC) 2021 US Annual Directors survey, provides some fascinating insights. From a commercial conflict perspective, it suggests that there may well be more conflict - within, below and even between boardrooms. It looks like Objectivity, Empathy and Creativity may well be required in healthy doses! Here are a few of the key conflict areas:
The ESG factor
ESG (Environmental, Social and Governance) is seen as an increasingly important corporate factor, with Directors increasingly linking it to Strategy (64%), ERM (Enterprise Risk Management) (62%) and Company Performance (54%) respectively.
However, only 25% of Directors say that their boards have a strong grasp of ESG risks. The danger lies in the temptation to employ lots of experts in their fields, who are then not empowered to bring about the necessary changes because the board (and very possibly senior management) don’t, won’t or can’t support their empowerment. Well-intentioned initiatives then wither and die on the vine.
Taking steps to diversify
The survey suggested that Directors recognise the benefits of board diversity with 93% citing the benefit of unique perspectives, 90% acknowledging improved investor relationships and 85% valuing board performance. The downside? Well, 58% think that the driver for diversity is political correctness, with smaller numbers suggesting that it may also result in greater numbers of ‘unneeded’ and/or ‘unqualified’ candidates. It’s hardly surprising then that 45% of Directors cite a lack of qualified candidates as the main obstacle for board diversity – are there too many downsides for good candidates to want to engage? Perhaps the negatives are replicated within the mainstream corporate culture. In any case, the lack of good candidates puts boards in competition (and therefore in conflict) with each other.
Virtual meetings – Efficiency versus Effectiveness
Whilst 52% of Directors found virtual meetings to be ‘efficient’ (not really a surprise), a further 61% said that they had a negative impact on board culture with 43% also suggesting a negative impact on Director engagement. It would be interesting to know if this wisdom is passed on to staff – is the conduct of ‘critical’ negotiations and business discussions actively encouraged to be face to face and what would be the tipping point for using different mediums?
Does the face fit?
Given the turbulence expressed both here and in the report as a whole, perhaps it’s unsurprising that 47% of Directors want to see at least one fellow board member replaced. What it does mean of course, is that commercial conflict exists firmly inside the boardroom as well as outside.
So, it seems that Directors will need to be objective – what is it that we need to achieve? How are we going to do it? What are the upsides/downsides? Do we have a Plan B?
They also need empathy – what are the likely impacts on shareholders and the wider stakeholders? Do we have the right answers for their possible concerns and/or objections?
Lastly, can we dare to be different? How creative can we be with our solutions? – What other options might achieve the same (or even better) outcomes?
This is surely food for thought for all board Directors. If this is your role now or if it is your aspiration for the future, are you living this or recognising these issues already – do you feel you have the answers? If so, it might be wise to first consider if your solutions raise unintended conflict in other areas of the business before you act - conflict has a funny habit of often doing just this.
Sam Macbeth, 26th April 2022
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