Board Intelligence convened fifteen non-executive directors from our customer base in October 2022. Below is a summary of the discussion.
Get rid of quarterly reporting?
In an idea suggested by Paul Polman, who refused to provide quarterly reporting to investors during his time at Unilever, we debated if this could help align investors and businesses around longer-term goals. Although we agreed that a longer-term vision can help align business needs with planet needs, getting rid of quarterly reporting entirely requires a high level of trust from investors and analysts. Realistically, are we likely to find that level of trust in financial markets today? Perhaps we need ways for directors to give and have permission to think long-term. We know too often investors are focussed on setting targets they can see faster ROI on. This fixation on the short-term translates into how they think about a company’s performance – and, in turn, the board’s priorities and measures of success. We need to nurture a culture of long-term value creation at the highest level to ensure both long and short-term goals can filter down into company performance.
How long is too long?
One suggestion made was to introduce 10-year strategic planning as a standard. Some of us felt this was just not realistic - the average tenure for a CEO role is 7.5 years, and CEO turnover is reaching record highs. With each new CEO, not to mention other C-Suite and non-executive appointments, comes new priorities and targets. Does that make 10-year plans nearly impossible, especially in a fast-moving, fast-changing globalised world? What is the board’s role in this? Despite these statistics, research also suggests that the CEOs on the lists of best performers, show "remarkable longevity" in their roles, with the average honoree being in the role for 15 years. Maybe there is something in longer tenures and longer-term targets that can help businesses achieve, and sustain success.
Measuring environmental impact?
One of the favourite ideas of the evening was to create an app that measures the carbon budget tracking of a team in real-time – building on a need to measure environmental impact alongside typical P&L. Building on the tech theme, there was also a suggestion to "ban travel and go metaverse!": Could new technologies replace high-quality face-to-face interactions and reduce an organisation’s carbon footprint? And where will this investment in technology come from?
Where is the S in ESG?
Social metrics are typically trickier to measure, and this brought the discussion around to definitions: although we might want to change KPIs to put increased focus on social value – what does this entail? One suggestion was that the board could design questions in their employee engagement surveys to ask them what they believe is important to society. This way, social metrics are decided individually for each company and personalised to the employees, making employees more likely to want to achieve these targets. For board meetings, the suggested question to bring the conversation around to social metrics was, ‘what have we given back to society?’
A new way of thinking?
Many in the room felt there needed to be a shift in the way boards and stakeholders thought about ‘measures of success (currently geared towards financial metrics), but there was no definite conclusion about what is needed. Some felt that we need better evidence for the ROI on aligning company strategy to get leaders engaged. Does it take regulation or a widespread social movement? Regulation risks ESG becoming a ‘tick box’ system rather than making companies care. Plus with the already stringent ESG regulations, companies may find it difficult to navigate the minefield of red tape and targets. A societal shift, whilst taking a long time to occur, might result in more lasting and meaningful changes in targets and measures that drive ESG performance, creating a world where business leaders want to be a force for good, rather than one where business leaders are forced to be good.