Dynamics at Board Level
Many factors are forcing Boards to orient themselves for the long term. Since the 1960s, the governance of Boards has been a driver for the short term – profits for shareholders and high remuneration for executives. Now boards are adopting the new concept of ‘stakeholder involvement’ and balancing needs of all stakeholders – customers, employers, suppliers, communities, society, the planet. Often, lip service is paid to these values, but long-term goals are difficult to achieve. ‘Suspect’ dynamics on Boards may be the culprit here.
The point is that mature, thoughtful boards can align and balance competing interests, but first, they must recognise, not just their role in balancing competing interests, but also those dynamics and powerplays on boards that undermine their good intentions. Short term boards cannot have a long-term focus. If all stakeholders must be included, such as the planet, then new attitudes, skills and values are needed. Stakeholder involvement means boards having oversight of their organisations in relation to diversity, community, climate change and the ethical use of technology. These demands cannot be met when the challenges and pressures are for boards to be short term.
These days, investors vote for companies that safeguard the climate and pay employees properly – two top priorities that boards are challenged to address. Ecosystems, supply chains, employees and suppliers must be sustainable with equal opportunities for everyone. Board strategies should endorse these priorities through taxation policies and proactively influencing positive and responsible consumer behaviour. Despite board tendencies towards inward-looking dynamics, it is possible for boards to align these values.
Why is this debate happening now? For most of the C20th, the Friedman doctrine argued that social responsibility adversely affected a company’s financial performance and that regulation and interference from ‘big government’ would always damage the macro-economy. The doctrine contended that the valuation of a company should be based exclusively on the bottom line. The costs incurred by social responsibility were deemed non-essential. Towards the end of the century, a contrary theory gained ground. James Coleman’s article: Social Capital in the Creation of Human Capital, challenged the dominance of the concept of ‘self-interest’ in economics and introduced the concept of social capital into the measurement of value.
Environmental, Social, and Corporate Governance (ESG) was the result – measuring the sustainability and social impact of the decisions of boards. Pension funds recognised the opportunity to affect the wider social environment by investing their considerable capital in developing affordable housing projects and health facilities. In the 1970s, the worldwide abhorrence of the apartheid regime in South Africa led to one of the most renowned examples of selective disinvestment along ethical lines that led to the system of apartheid to be abandoned. This was a new form of pressure, acting in coalition with environmental groups – using the leveraging power of collective investors to encourage boards and capital markets to incorporate environmental and social challenges into their day-to-day decision-making.
Today, boards committed to stakeholder involvement must focus on the impact of the pandemic and work towards getting society as a whole back to work. Equality and climate change have become boards’ pressing preoccupations. Boards also need foresight in relation to the education of children and young people and in relation to the use of technology. Implementing stakeholder involvement involves a changing philosophy of doing board behaviour. When we work together, we work not only in our own interest but in everybody’s interest.
ESG provides momentum for boards and organisations to consider the three Ps: Prosperities, People, Planet. The responsible role of boards is to balance health, the economy and society. Old-style boardroom behaviour will fail; instead, boards have to be fast, agile, and proactive.
Learn how to develop and deepen this capacity by joining the Tavistock Institute’s certificated modular Dynamics @ Board Level programme. There is no better programme available that provides such a rich, in-depth understanding of boardroom dynamics and how to manage them.
For more information or if you have any questions, please contact Emily Kyte.
You can read about boardroom dynamics in the recently published book: Dynamics at Boardroom Level: a Tavistock Primer for Leaders, Coaches and Consultants, edited by Leslie B Brissett, Mannie Sher and Tazi Lorraine Smith. With contributions from previous programme participants: senior leadership practitioners and board evaluators from the government, international consultancy firms, FTSE 100 and global UN institutions, this book speaks directly to issues of our time.
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