In today’s fast-paced business landscape, corporate boards are facing unprecedented challenges, with an evolving risk profile and a significantly heavier workload. The demands of board service have increased as directors must navigate through a myriad of factors including increased regulation, expanding risk oversight, a complex business environment, geopolitical dynamics, and social considerations. Issues like diversity, equity, and inclusion (DEI) and sustainability have also become integral parts of the board’s responsibilities. Furthermore, the 24/7 news cycle and social media put corporate leaders under constant scrutiny, requiring them to respond promptly to unfolding developments.
From a legal perspective, the risks facing boards have reached new heights. Recent case law in Delaware has raised concerns in various areas such as bylaw provisions, executive compensation, the use of special committees, stockholder agreements, and de-SPAC transactions. Stockholder plaintiffs are challenging director decision-making through derivative lawsuits, achieving notable successes. Given this landscape, boards must find ways to effectively navigate these mounting pressures.
Many boards have shifted from the traditional quarterly meeting schedule to more frequent meetings with packed agendas. However, this change may further burden directors. Some boards are now evaluating directors’ additional commitments during the nomination process to ensure they can effectively serve on the board. It is crucial for boards to assess their routines and commitments critically to determine necessary changes that can streamline their workload and enhance decision-making processes.
### Rethinking Board Meeting Logistics
One key aspect for boards to consider is the optimization of board meeting logistics. Improving “pre-read” materials can enhance directors’ understanding of critical matters. Utilizing executive summaries and concise key takeaways in presentations can help directors focus on essential decision points. Additionally, reducing the volume of board materials while maintaining relevance through the use of appendices can streamline the information presented to the board.
In an effort to manage increasing meeting frequency, boards can explore the option of virtual meetings for certain routine committee gatherings. While in-person meetings are crucial for fostering engagement and discussion among directors, virtual meetings may be more efficient for specific agendas. Boards should carefully evaluate the necessity of in-person meetings based on the nature of agenda items and expected interactions among attendees.
Another consideration is the reconfiguration of meeting agendas. Boards should assess whether the allocation of time for routine matters at the beginning of meetings is hindering discussions on strategically important topics. By prioritizing high-impact items and potentially including management presentations in pre-read materials, boards can optimize meeting efficiency.
Additionally, leveraging board social events strategically can enhance director interactions and relationships. Board dinners and social gatherings can serve as opportunities for one-on-one mentoring between directors or for involving management members not typically present in formal board meetings.
### Optimizing Committee Work
Committees play a vital role in accomplishing board tasks efficiently. Boards can enhance committee effectiveness by ensuring that committees do not duplicate efforts and by minimizing redundancy in full board discussions. Reviewing committee charters for overlaps and redistributing duties can streamline workflow and maximize committee contributions to the overall board’s work.
To further enhance board efficacy, boards may consider establishing additional committees. While this approach can distribute workload more evenly, practical challenges may arise if there is a lack of directors with the requisite capacity and skill set to serve on additional committees. Ad hoc committees can be a flexible solution to address specific issues without imposing ongoing obligations on the board.
### Establishing Mentorships
For inexperienced directors, mentorship programs can be invaluable in helping them acclimate to boardroom dynamics. Pairing new directors with seasoned board members in formal or informal mentorship arrangements can aid in the onboarding process and facilitate learning about board responsibilities. Mentorships not only benefit individual directors but also contribute to more productive board discussions by providing a platform for raising questions and discussing issues outside formal meetings.
Mentorships are particularly beneficial for boards with high turnover or directors lacking prior public company board experience. By leveraging mentorship opportunities, boards can optimize meeting time spent on agenda items and improve overall board performance.
### Reconsidering Board Resources
Boards should reassess both internal and external resources available to them. Engaging directors with specialized knowledge in areas like climate, technology, and cybersecurity can be instrumental in leveraging expertise for the board’s benefit. While boards typically rely on management-provided information, seeking input from external advisors and experts can enhance decision-making processes and mitigate risks.
External experts are especially valuable when boards encounter emerging issues or topics outside their expertise. Directors may rely on expert advice in good faith, as protected by state laws like those in Delaware. Incorporating external insights can enhance board discussions and ensure informed decision-making on complex matters.
### Rethinking Director Commitments
Individual directors play a pivotal role in the effective functioning of the board. Evaluating each director’s time commitments allows nominating and governance committees to assess whether directors have the capacity to fulfill their roles effectively. Factors such as company circumstances, industry regulations, and emerging challenges can influence the time commitment expected from directors.
In situations like leadership transitions, strategic shifts, M&A activities, cybersecurity incidents, or ESG considerations, directors may need to dedicate more time to board service. Boards should anticipate potential circumstances that could require increased board attention and ensure directors are prepared to meet these demands.
As the demands on boards continue to intensify, reevaluating board practices and director commitments is crucial for enhancing board performance and fulfilling responsibilities effectively. By optimizing meeting logistics, leveraging committee work, establishing mentorships, reassessing resources, and considering director capacities, boards can navigate high-pressure environments and drive strategic decision-making with agility and efficiency.
