Lessons From NACD Summit 2023
Challenges that are facing boards today—such as uncertainty in the geopolitical and economic environments, the emergence of mass adoption of artificial intelligence, increased cybersecurity risks, and continual changes in the workforce—were highlighted at the country’s largest gathering of directors at NACD Summit on Oct. 8–Oct. 11, 2023, in National Harbor, Maryland.
NACD brings together experts and directors at this annual conference to educate directors about how to best navigate the challenges facing them and help prepare boards for the unexpected challenges in the future. Over the course of four days at NACD Summit 2023, speakers pushed nearly 1,500 in-person and virtual attendees to think about new approaches and ways of thinking about their roles as directors in a world of crisis. Among the many pieces of knowledge shared, here are some top lessons for directors from Summit 2023.
1. Understand the Risks Facing Your Company
In addition to the eruption of conflict in Israel that began on Oct. 7, 2023, the Russia-Ukraine war persists after a year and a half. Tensions with China continue to simmer, particularly over Taiwan, as the Chinese economy seems to be weakening. Ian Bremmer, president and founder of the Eurasia Group, GZERO Media; global politics expert; and best-selling author, had this advice for corporate boards: “You need to prioritize your filter. You need to not focus on the extraneous, you need to understand which of those geopolitical tensions actually have meaningful impact for you…. In terms of ongoing monitoring, laser focus on which are the pieces that are going to affect your company, your sector, your country exposures, your regulatory environment.”
In terms of technology and cyber risks, Matt Devost, CEO and cofounder of OODA and former executive vice president, strategy and operations of Tulco Holdings, recommended watching and considering the impacts of artificial intelligence, autonomous technologies, the Internet of Things, the metaverse, quantum computing, blockchain and digital currencies, synthetic biology, and cognitive infrastructure.
“I always like to joke in cybersecurity that the ultimate endpoint is not the desktop or the mobile phone; the ultimate endpoint is the user at the other end,” Devost said. “We have a huge issue right now in regard to cognitive resiliency and our dependence on social media apps and the potential influence of the social media apps and the fact that they’re controlled by third parties that maybe we can’t necessarily trust.”
In addition to presenting competitive opportunities and risks, the above innovations all have security and privacy implications as they expose more avenues to malicious actors—avenues that have the potential to reveal highly sensitive personal information such as biometric data or even enable the manipulation of how certain groups perceive the world.
One area that is an emerging risk in today’s environment is a company’s reputation.
“We failed to predict that trust could be a target, just like information systems, and that there are entities out there that want you to diminish trust in our institutions,” Devost said, reflecting on a paper on “information terrorism” that he cowrote more than two decades ago.
No matter the type of risk, the concept of facing risks head on and not ignoring them is crucial.
Devost advised that directors should be “making sure we're confronting the gray rhinos when you are told about risks, or you're given clear risk mitigation strategies that you actually go out and mitigate them,” citing the book that coined the term, The Gray Rhino by Michele Wucker. “The gray rhinos being the alternative to the black swans, black swans being risks we can't predict, gray rhinos being the risks that we are faced with that we just don't confront. It's the rhinos [gearing up] getting ready to charge,” he said.
2. Be a Continuous Innovator
Mauricio Gutierrez, CEO of NRG Energy and a director of Chipotle Mexican Grill, helped his company transform from the largest fossil fuel generator in the country into a business that is paving the way for an electric future. To do this, Gutierrez said, the company asked itself, How do we change the way people use energy?
“For most companies, reducing carbon emissions is just changing energy supply…,” Gutierrez said. “For us, it was reimagining the business completely.”
To innovate how the company created value, Gutierrez said that NRG refocused on the customer, shut down plants, and changed the way the company produces electricity. It took having a clear vision and dialogue with all stakeholders about where leaders saw the company going, Gutierrez said.
“You are going to make very difficult decisions that impact all the stakeholders. The more open and transparent you are about where you are taking the company and why, it just goes a very long way in these types of transformations,” he said.
The concept of continual innovation also was a focus of NACD CEO and President Peter Gleason’s opening remarks at Summit.
“To be effective today, directors need the courage to embrace change—fully. This means learning and building new skills continually. It means staying on top of trends and new innovations,” said Gleason.
Not only should boards be innovative with their company’s vision and operations, but they should also be innovative regarding how the board itself operates.
To foster innovation from the boardroom, boards may also need to revisit their relationship with management. Jon McNeill, CEO and cofounder of DVx Ventures and a director on the boards of General Motors Co. (GM), lululemon athletica, and Asurion and former president of Tesla, has found that talent engagement has changed on several boards on which he has served.
McNeill, who has also founded and sold six companies, noted that over the last five years, he has seen a shift away from “show and tell” slide decks from management to the board toward “ask sessions,” where the board engages more—and more deeply—on certain strategic issues.
Additionally, he has witnessed a stronger board-CEO relationship wherein a CEO might receive more direct communication with board members.
For example, at GM, between board meetings various members of the board interact with CEO Mary Barra and her team. To guide innovation, board members—especially those with subject-matter expertise—may wish or need to interact with employees below the C-suite.
“We are challenging plans. We are being a sounding board, but all under the guidance of Mary and with her permission,” McNeill said.
3. Improve Company and Board Culture
Oscar Munoz, former CEO and executive chair of United Airlines and current director of Archer Aviation, CBRE Group, and Salesforce, was the cochair of this year’s NACD Blue Ribbon Commission, which recently released a report on board culture titled Culture as the Foundation: Building a High-Performance Board. Fittingly, earlier this year, Munoz released a book about his time at United, turning around the company and its culture.
Munoz described to the NACD Summit audience how he embarked upon changing the corporate culture while he served as president of United and connected how the lesson of improving corporate culture can also be applied to boards.
The airline industry is one that is logistically challenging and requires thorough policies, procedures, and rules to ensure that flights operate safely and on time, Munoz said. In 2017, in the apparent spirit of these policies and procedures, a United passenger was dragged off a plane after refusing to deboard when asked to give up his seat.
“We have many of those rules. I wouldn’t have known the extent of the confusion that it caused some people had I not gone out to listen…,” Munoz said. “That concept of policies and procedures getting in the way of doing the right thing for another human being was the exact backdrop of that horrible event with that dragging and beating of a customer that we all saw in videos. And that’s exactly what it leads to, which is why it’s so important to listen to those folks and create the right infrastructure to build your culture.”
For boards, creating an effective culture is as important as having a healthy corporate culture.
According to Munoz, at the board level, directors also need to build their culture to better govern in this age of permacrisis. Highlighting the findings in this year’s Blue Ribbon Commission report about improving board culture, Munoz said, “We ask our management for all of that—succession planning, hiring, performance review, DEI, inclusion, employee surveys, all that. But do we do that for ourselves?”
The lesson to be learned is this: To help the management team through ongoing crises—such as the ones boards and companies are facing today—strengthening culture by uniting around common values and approaches in the boardroom is the board’s responsibility to ensure their company’s future success.
Photo credit: Paul Morse