NACD BoardVision - NACD Directorship 2020 Takeaways
This week's edition of NACD BoardVision focuses on NACD Directorship 2020 takeaways. Join Chris Clark, publisher of NACD Directorship, and Dennis T. Whalen, partner in charge and executive director, Audit Committee Institute, KPMG, LLP, as they discuss short-termism, forward-looking measures and other issues.
Christopher Clark: Hi, I'm Christopher Clark, publisher of "NACD Directorship Magazine" and this is "BoardVision." Today's topic is going revolve around NACD's 20/20 Program and I'm joined today by Dennis T. Whalen, partner in charge and Executive Director of "KPMG's Audit Committee Institute." Some of you may not know what the 20/20 Program is. In an essence, it is better preparing directors for the emerging issues over the next 10 years. Dennis, welcome to "BoardVision."
Dennis Whalen: Thanks, Chris.
Christopher Clark: I wanted to ask you a first question. You were a leader in all of the events in 2013 and one of the issues that really bubbled to the surface was the re-thinking of performance metrics. And I'd like to ask you, what were the concerns and what were the projections for short-termism?
Dennis Whalen: Well, the key concern over short-termism isn't that it's a bad thing in of itself, but if it consumes the agenda, if it consumes managements focus and if it consumes the boards focus, then the balance is wrong. Clearly the ability of companies to deliver short-term results is critical to their performance and how they're perceived by the market analysts, investors and the like. What's really important, what resonated in the director 20/20 Programs and the conversations that I had with directors at those and around those programs, was the need to move away from short-termism and to put it into perspective and to put it into balance with other things, particularly focusing on strategy and long term results. It's critical that companies get that balance right because it's with long-term vision and execution against a long-term plan that value is created.
Christopher Clark: Speaking of balance, I want to ask you what I call are front windshield indicators versus rearview indicators. Most normal people call them lagging versus leading indicators and I'd like you to flesh that out for the directors that weren't able to attend our event.
Dennis Whalen: Well, I think it starts with, you know, the adage that what gets measured gets done. When you look at lagging indicators, they tend to be financial measures, they tend to be operational measures, but they're always looking back, but it's easier to look back and measure and have great confidence in the precision of those measurements. What's harder and perhaps outside a comfort zones and maybe even outside the data that's been available historically, is how do you measure things that are forward looking? How do you get measures around innovation? How do you get measures around competitiveness, brand equity, brand value, those kinds of things. And so, the conversation that's shaping, clearly the conversation in the director 20/20 Program was, how do we move from the rearview mirror to looking out the windshield as we're driving our cars or our buses down the road? And that's what's really starting to emerge, particularly as we think about getting towards 20/20. Data analytic and some of those tools that are available now, though arguably, still in the infancy, infancy, will really start maturing and I think that will be a tool that will allow people to measure things that they haven't been able to measure before and it will all link into the long term performance and the long term viability of an organization.
Christopher Clark: Dennis, for the directors who weren't able to participate with us in 2013, what were the 3 or 4 key takeaways that we learned through these comprehensive conversations?
Dennis Whalen: One of the directors had a comment that I thought was really great and kind of sums it all up. And the quote is, "The boards role is to help alleviate the pressure on management for short-term results, by setting the right tone, focusing on the durability of the business model and making sure the company is communicating its long-term focus to investors." So, you know, if there's a homerun here, Chris, I think it's that comment because it really sums up the boards responsibilities and management responsibility in navigating and getting that balance right.
Christopher Clark: Thank you, Dennis, I appreciate it today. On behalf of NACD and "KPMG's Audit Committee Institute," I'm Christopher Clark and this is "BoardVision."
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