Building the boardroom of the future

We are in momentous times for governance: as the world faces growing risks due to climate change, unstable economies and societal polarization, organizations are under pressure to remain strong and resilient. In today’s reality of rapid transformation, governance is the way corporations can adapt and be agile and sustainable in the long term. Indeed, according to the OECD, good corporate governance helps to build an environment of trust, transparency and accountability, which is necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies.

As the world continues to change, boards of directors will need to evolve in order to deliver effective governance. Based on my decades-long experience of working with boards and serving as board director, I have identified five elements governance needs to succeed in a dynamic future. In this article, I share how I think we have to build the boardroom of the future across organizations.

Why we need to make conscious changes to governance

Governance can be measured by the quality of decision making at the very top of organizations, countries and systems. When governance is done right, organizations generate more value for shareholders, while contributing more to the planet and society. Good boards of directors can be transformative, positively shaping the future of the organizations and of the communities they serve.

The board of directors has always been responsible for a corporation’s strategic direction, financial performance and risk management, and those responsibilities remain today. But a major shift is underway within organizational governance and boardroom dynamics, largely driven by regulatory changes, empowered investors and social activism.

Board discussions and roles are rapidly expanding their focus beyond financial results to deeper risk oversight, sustainability, purpose and safeguarding reputation. By the end of this decade, board directors will operate in an environment that demands nothing less than fundamental progression in governance, namely balancing financial results and societal issues.

This is being accelerated by sustainability disclosure standards and growing transparency in corporate reporting and ratings, increasing the accountability of boards.

Tomorrow’s board of directors will take a strong stewardship approach, with oversight of organizational purpose and stakeholder value creation. They will be active leaders balancing short-term profits with long-term impacts. So what will it take to create a future-fit boardroom today?

Five ways to shape our boardrooms of the future

1)??? Make them more sustainability-focused

Governance is both an element of and responsible for impacts on the planet and on societies. Tomorrow’s boards need to take a long-term view of their organizations, putting sustainability on equal footing with financial performance and risk assessment in all their decisions. To do this, sustainability has to become part of the organization’s purpose, linked to stakeholder needs and expectations.

2)??? Ensure they are representative, diverse and inclusive

Diversity is a great engine of innovation and creativity, and if embraced deliberately, it can also drive performance. Boards should reflect the communities and world in which they operate, and this means closing existing gaps in aspects such as gender, race, age, background and geography. To do this, we need to be intentional about board composition and enhance board assessments to evaluate which skills, competencies and perspectives are required, with an eye on the future.

3)??? Build in continuous learning

Boards must have insight in order to provide oversight; they need to have knowledge to make informed decisions. In a rapidly changing world, this makes learning vital in the boardroom. Board directors need a deep understanding of a range of topics, from the organization-specific context, strategy and stakeholders to the broader risks and opportunities affecting our world. This requires a robust and ongoing education program, along with time and enthusiasm for board directors to learn.

4)??? Establish a culture that enables reflection and action

Boards today are not moving quickly enough, nor acting boldly enough amid ongoing transformations in the economy, environment and society. Boards need to develop a dynamic that harnesses cognitive diversity and embraces uncertainty so they can move with fast-changing material issues and prevent the organization from falling into irrelevance. By being forward-thinking, proactive and courageous, board directors can challenge current practices and thinking, better navigate uncertainty and complexity, and drive innovation and change.

5)??? Apply systems thinking at the board level

No single organization can solve complex problems alone, and systems thinking has long been understood to be an effective way to consider and address complexity. The remit of tomorrow’s boards will continue to expand: fiduciary responsibility and organizational performance will no longer be sufficient. To be effective, future board directors have to be cognizant of how their work fits into the overall picture or system in the long term and ensure that their solutions contribute to the best possible collective impact.

Board reputation, not just organization reputation, will be increasingly in the spotlight, as the levels of transparency and accountability of boardrooms continue to rise.

The boards of today are rarely future-fit: they have to evolve to remain relevant tomorrow.

To ensure tomorrow’s boards provide the good governance organizations need to thrive, we are all called upon to shape the boardroom of the future by design and not by default.