Today, The Conference Board’s Environmental, Social & Governance (ESG) Center released a report detailing how business journalists view the role of the corporate director. The insights featured are drawn primarily from a recent roundtable discussion that featured reporters and editors who cover corporate governance.
Insights from the study include but are not limited to the following:
- Purpose vs. profits. Given that major asset management companies and institutional investors are increasingly pressuring their portfolio companies to address a range of social issues, some roundtable participants said they believe companies and their boards have reached a crossroads. They noted that they will increasingly be faced with decisions that require balancing their focus on growing corporate profits while simultaneously working to demonstrate a strong social purpose.
- Concern about directors not having their own support staff. Some in the media who participated in the roundtable expressed concern over directors not having their own staff to help in vetting and supplementing the information that management provides to directors. However, many representing company management and some governance experts object to such an arrangement, contending that it is not the board’s responsibility to perform management’s role; moreover, a separate staff for directors opens the possibility of shadow management.
- Board competency substantially tied to crisis management. Some roundtable participants noted that determining the competency of a board requires that it first be confronted with and respond to a crisis. This notion exemplifies the “firehouse” theory – essentially, that the effectiveness of a firehouse cannot be accurately determined until a fire occurs. In addition, whether the emergency is related to the broader economy, a product recall, or a personal scandal involving an executive, the participants indicated that boards ought to be as prepared as management to deal with the repercussions of such unforeseen disasters.
“We know reporting on corporate governance by the business media has a lasting impact on how shareholders, policymakers, and other important stakeholders see the job of corporate directors,” said Douglas Chia, Senior Fellow and former Executive Director of The Conference Board’s ESG Center. “However, much of their reporting focuses on corporate failures, not successes, and that has an impact of their own understanding of how boards operate.”
“Business journalists see the corporate board as the first line of defense for shareholders who are seeking to maximize the value of their investment while also guaranteeing the social value of the company,” said Gary Larkin, author of the report and a Research Associate at the ESG Center. “The business media can play a governance role by simply performing their job, which can give stakeholders a larger voice with which to exert influence.”
The report is the tenth in a series of analyses that feature insights from boardroom stakeholders about the role and expectations of the corporate director. In addition to highlights from conversations with business journalists and other corporate governance experts, the report includes a hypothetical corporate director’s job description from the media’s point of view; examples of board actions that were, from the perspective of journalists, positive or negative; and, an examination of their views on board composition, engagement with shareholders, and interaction with management.