FutureBoards is challenging traditional corporate governance models.
Thecorporate world, like most other fields, is full of a certain kind of jargon, which meaning to outsiders can be arbitrary at best, nonsensical at worst. Open any business publication such as Forbes or the Harvard Business Review and hardly an article will feature without words and phrases such as ‘ disruption’, ‘best practice’ and ‘think outside the box’.
To many, ‘ corporate governance’ is such a phrase. Contrary to state governance, corporate governance is concerned with the way businesses are run, and as such, is often practiced behind closed doors, away from the scrutiny of the public eye. As a result, for a long time, the general public knew very little – and perhaps cared very little – about how businesses were run. Today, however, that is no longer the case.
“Companies are facing a very different reality today,” says Turid Elisabeth Solvang, Founder and CEO of FutureBoards, a collaborative platform which aims to drive the evolution of corporate governance by providing physical and digital arenas for networking and exchange of ideas and experience. The company recently hosted ‘Future Fit Boards’ in Singapore, a roundtable discussion about gender diversity on boards.
“There is more focus on corporate governance and the public has new expectations to business conduct, responsiveness and responsibility. Board members, though insignificant in number, make very significant decisions on behalf of companies, and these decisions affect not only the companies and their employees and customers, but also society around them. So, more people should care about corporate governance, about who are sitting on those boards, and what they contribute.” A new era in corporate governance
According to Ms. Solvang, there are many reasons why both the business community and the general public are paying more attention to corporate governance. “The debate about corporate governance has been on-going for a long time, and was accelerated and put to the fore by the financial crisis in 2008. People started to question what was happening in the boardrooms of certain companies, questioning the decisions they were making,” Ms. Solvang explains. “Then there is digitalisation, which is driving transparency. So not only are people more informed and can make informed decisions, they can also spread information wider and more quickly. Take, for example, the highly publicised examples of what can happen when corporate governance goes wrong – such as Volkswagen’s dieselgate or the recent corruption scandals in Brazil. Good corporate governance can help ensure that your company is sustainable, contributes to a sustainable environment, and survives over time, whereas bad or sloppy corporate governance can put you out of business.”
A dynamic concept
Not surprisingly, there is no single rule or set of guidelines that determines how companies should conduct themselves. Different countries, institutions, associations and companies all rely on different measures, which range from official regulations to mere guidelines to help board members develop and implement best practices. One of the standards that have had significant impact on the international business community over the past couple of decades is the King Report on Corporate Governance in South Africa. Its latest edition, the The King IV Report, was published in November 2016.
“The new King report signals a basic shift in corporate governance towards a more stakeholder-inclusive approach, where companies are seen, and see themselves, as responsible contributors to the greater society. A concrete example is the departure in reporting from ‘comply or explain’ – the principle on which most countries’ corporate governance codes are based – to a new ‘ apply and explain’ approach. Rather than the ‘ticking boxes or listing exceptions’ exercise that many companies base their corporate governance reporting on, we should define and apply principles of corporate governance of relevance for our company, and then hold ourselves accountable and report against that standard. This will make reporting more integrated, more meaningful, and more useful for the company,” says Ms. Solvang.
Investors also have a role to play in pushing for better corporate governance, explains Ms. Solvang: “Institutional investors especially, such as pension funds, with enormous amounts of money, are in the market for long-term returns, so when they are assessing investments, they need to consider which criteria can best ensure long-term stability and sustainability in those companies. Investors can hugely influence corporate governance and which way the board is steering a company. For example, if investments funds decide to pull their investment out because the company acts contradictory to specific values, it can gravely impact on the company in question.” Women on boards: To regulate or not
When it comes to corporate governance, few topics are as hotly debated as the question about gender diversity on boards. At the recent ‘Future Fit Boards’ event, experienced board members, business leaders, advocates and academics came together to help companies improve the gender balance on corporate boards in Singapore, where, in spite of some progress, the pace of change has been slow. Whereas Norway introduced a 40 percent quota more than a decade ago, Singapore currently has 9.7 percent women board directors.
Many countries have since taken this example on board: According to a report from Corporate Women Directors International, 22 economies globally have introduced gender quota legislation or mandates, but they have chosen different approaches. Following a relatively successful UK initiative, Singapore has opted for targets over quotas.
The Diversity Action Committee (DAC) recently called on the market to adopt a three-tier target of 20 percent women on the boards of the 100 largest listed companies in the city state by 2020, followed by 25 percent in 2025 and 30 percent in 2030 for all STXlisted companies. The call was echoed by Minister for Culture, Community and Youth, Grace Fu, who is pushing for the Monetary Authority of Singapore to adopt a target of at least 20 percent women on boards by 2020.
The suggestion has been met with criticism, which was also the case when Norway introduced its targets, recalls Ms. Solvang: “When quotas were first announced in Norway, business leaders and owners responded with shock. In fact, Norway also started with targets, but the targets weren’t met. Some people are saying that 20 percent is not achievable by 2020, while others argue that it is absolutely possible. What is quite certain is that it is not going to happen by itself. There needs to be some action. In Norway, we regulated. And today, the law is generally uncontroversial.”
“The argument in Singapore, as it was in Norway, is that government should not interfere in the running of businesses. But specifically with the issue of women on boards, it is again a wider societal issue, because it is about making use of the investment society has made in the education of women. It is about making use of the talent pool,” she explains. “In fact, research indicates that companies with women on their boards do better, though it may also be that these companies are generally more progressive and dynamic. But chicken or egg aside – we could do worse than emulating the practices of progressive and dynamic companies,” says Ms. Solvang.
Upper Left, Ms Turid Solvang, CEO of FutureBoards addresses the seventh Governance Week in Singapore in 2016. Above: Women are increasingly taking the lead of organisations