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WATSON Views

Organizations Deserve Diverse Boards

October 25, 2023

Posted in: WATSON Views

 

By now, we’ve all seen plenty of evidence that diverse, inclusive boardrooms are good for organizations. So why aren’t Canadian boards measuring their own diversity? 

Earlier this year, Innovation, Science and Economic Development Canada (ISED) released their 2022 annual report on the Diversity of Boards of Directors and Senior Management of Federal Distributing Corporations.  One of the striking observations from the report was that 1 in 5 boards don’t consider the level of representation of designated groups on their board. When asked why, two of the most common responses were: “It prevents the selection of the most qualified candidates” and “It is not in the best interest of the corporation or shareholders”.  

Corporate Canada, we can do better.  

There is a large and continually growing body of evidence showing diversity correlates with improved outcomes, including higher stock returns, decreased turnover, increased reputation, and higher innovation levels. We’ve seen it ourselves, repeatedly, across the 500+ boards and thousands of directors we’ve worked with across Canada. A diverse and inclusive boardroom generates positive friction and encourages directors to challenge assumptions, leading to healthier discussions that consider a broader range of perspectives and solutions. The result:  better outcomes and more resilient organizations.  

Boards today are tackling increasingly high-stakes issues and material decisions on behalf of their stakeholders to shape a stronger future for their organizations. Those organizations deserve the advantages that come from a diverse and inclusive board. 

So let’s do better because our boards will be better for it. We know implementing the changes that support diversity and inclusion remains a common challenge for many boards, but don’t let that become a barrier to improvement.  Consider this  practical advice from our own experience helping boards navigate these changes: 

  1. Invest in education. Directors often have differing opinions on what diversity means and looks like in practice. Creating a shared understanding can clarify assumptions and bring perspectives much closer together, creating better alignment on the path forward.    
  2. Use the organization’s existing context. Boards today need to consider a greater breadth of stakeholders than ever before. When considering the board’s own diversity, a helpful place to start is the organization’s stakeholder groups. The composition of an organization’s workforce, for example, offers a meaningful point of reference on the diversity of perspectives that need to be considered in the board’s discussions and decision-making processes. A board’s approach to diversity shouldn’t be one-size-fits-all; leveraging the context that the organization operates in will create a better business case for improving the diversity of its directors. 
  3. Make it a policy. Of the boards that disclosed they do consider the level of representation on their board (about two-thirds, according to the same 2022 ISED report), only 1 in 3 have adopted a written policy on the identification and nomination of designated groups. Why does having a policy matter? It signifies a plan from the board to take action. More importantly, not having one raises legitimate questions about the board’s level of commitment and alignment on how it intends to improve. 
  4. Don’t shy away from tough conversations. With a plan to improve diversity outcomes, it is inevitable that difficult conversations impacting existing directors will need to happen. It’s common for boards to rely on term renewal limits to drive composition changes, and while these mechanisms may help evolve composition over time, the reality is that board composition should reflect the needs of the organization as it is now, irrespective of term limits. That means tough conversations may need to happen today to help the organization thrive in the future. But hey, that’s what the board is there for, right? 
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Introducing Kayleigh Donahue and Jessica Katul

Posted in: WATSON Views

Get to know Jessica Katul (left) and Kayleigh Donahue (right), two of the newer members of our team. They both bring a wealth of experience and expertise, and we are thrilled to have them on board!

Jessica Katul

Jessica Katul joined WATSON as a Consultant in September. Jess has over a decade of experience in policy, law, and governance, working with boards and leaders from professional associations, government agencies, for-profit and non-profit organizations alike.

At WATSON, Jess leverages her legal background and experience working with boards, committees and senior management teams in complex governance structures on a broad range of projects including board and director evaluations and developing governance frameworks

Jess lives in Oakville with her husband and five children. When she’s not working, you can find her cooking, exercising, spending time in the sun, or curled up with a book.

 

Kayleigh Donahue

Kayleigh Donahue joined WATSON as an Associate in September. An economist drawn to new challenges, Kayleigh has broad corporate and public sector experience, from provincial finance departments to start-ups.

At WATSON, Kayleigh supports the delivery of a diverse range of governance advisory projects including CEO evaluations, governance diagnostics, board and director evaluations, and board education.

Outside of her work, Kayleigh loves reading, doing yoga, dancing, learning new recipes, and going on family walks in North Vancouver with her husband, son, and fluffy white husky.

 

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Best of the Best: Key Takeaways from the Annual Corporate Governance Best Practices Survey

September 27, 2023

Posted in: WATSON Speaks, WATSON Views

Recently, WATSON collaborated with Compensation Governance Partners (CGP) and Governance Professionals of Canada (GPC) on the 10th Annual Corporate Governance Best Practices Survey. We heard from governance professionals at over 40 Canadian organizations across multiple industries and sectors who gave us insight into the current corporate governance landscape.

On Tuesday, September 26, WATSON Partner Manijeh Colabella and CGP’s Christopher Chen held a webinar highlighting many of the key trends coming out of the survey.  In case you didn’t have a chance to make it to the webinar, we rounded up a few of the key takeaways and considerations your board can make to grow and improve your approach to governance.

Continue to focus on ESG, DEI, and Emerging Technologies

  • Review board structures and practices to ensure there is effective oversight of these areas, always keeping your purpose and strategy in mind.
  • What gets measured gets done. Work with management to develop robust metrics in these areas, and ensure the board receives regular reporting.
  • Weave these important topics into your board education plan. Don’t have a board education plan? This is your sign to build one.

Focus on CEO and Talent Succession

  • Does your board have a CEO succession plan in place? We were surprised to see how many boards don’t. This is a critical role, so if you don’t have a thoughtful plan in place, you should make this a priority.
  • Look for opportunities to connect with management beyond the CEO. It helps foster a greater sense of trust and helps the board gain insight into some aspects of organizational resilience.

Align with Management on Risk and Mitigation Efforts

  • Discuss risk regularly – not just once a year – and incorporate some element of risk reporting into CEO reports.
  • Conduct tabletop exercises around known risks (including scenario planning) and brainstorm future potential risks to the organization.

Overall, the survey results indicate that Canadian boards are applying a high degree of focus and care to their governance, but there’s always room to grow. If you could use some guidance in applying the best practices that are best for your board, WATSON is here to help.

Curious about the full Corporate Governance Best Practices Survey results? GPC members receive a full copy of the report. Learn more about becoming a GPC member and the benefits associated here.

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What Makes an Effective Director?

Posted in: WATSON Views

Do a quick Google search of board effectiveness and you will find plenty of great resources. But research “what makes an effective director” and you may find yourself more lost than when you started. While there is a lot written about the role and duties of directors i.e., what directors do, there is little practical guidance available about how to show up in the boardroom and have immediate impact. If you want to maximize your contribution to the role, you need to know what that looks like in practice.

We’re in boardrooms every day working with directors across provinces, sectors, and industries.  And while every organization and board is unique, there are several universal traits of effective directors we’ve observed that will serve you well in any boardroom.

Effective directors:

  • Listen and build. Governance is a team sport. Effective directors see a conversation as a group activity. They actively listen and process what was said before them and build on previous contributions, adding a unique perspective or consideration. While they prepare their contributions and questions in advance, they flex and adapt their thinking in the moment based on what was said in order to get to a better outcome together.
  • Know how to ask hard questions. Effective directors have the courage to ask tough questions, but also have the distinct ability to frame their questions in a clear and respectful way. They use framing, tone, and body language to put tough issues on the table without triggering defensiveness.
  • Put in the work. No level of intelligence, experience, or business wisdom exempts a director from putting hard work into their role. Effective directors read and consider the board materials in advance, brainstorm strategic questions and, seek out research and information to broaden their views on key strategic topics. They contribute to the board’s work at, and between meetings, and do what they say they will do.
  • Contribute broadly. While some directors bring a breadth of relevant experience and others bring deep expertise in a few areas, all effective directors engage and contribute broadly. While they may defer to more experienced directors on certain topics, they educate themselves and share their perspective on a range of topics, recognizing that they are not there as an expert advisor, but as a trusted contributor who brings a unique perspective.
  • See around corners. Directors are at the table to apply their skills, experience, and perspective to raise things others might not see. They must anticipate unintended consequences or risks, see emerging trends that might impact decisions, and envision a clear future for the organization. Effective directors do this by applying their experience to the board’s context and educating themselves on emerging trends and issues relevant to the organization and industry.
  • Embrace feedback and learning. The most effective directors value feedback and ongoing learning. They are open, self-aware, and reflective. They give and receive feedback with humility and consideration. They strive to be a better director and take an intentional approach to their learning and development.
  • Value and contribute to the board’s culture. Effective directors recognize that a board cannot have maximum impact without strong and healthy team dynamics. They engage actively to build a positive board culture and effective group dynamic. They build trusted relationships with their fellow directors and management.
  • Respect the line. Even when discussing their favourite topic, effective directors understand their oversight role and don’t dive into operations. When others approach the grey line between governance and operations, they help to refocus the board’s level of contribution.
  • Strive for continual improvement. While they celebrate successes, effective directors also push to do things better. They don’t equate the way things are done with the best way, but they also don’t push change for the sake of change. They adopt a lens of continual improvement, focused on strengthening what works well and finding high impact areas for improvement.
  • Have the courage to do what is right. It goes without saying that effective directors demonstrate high integrity and ethics. They are alert to subtle messages and signs of trouble, and are diligent in asking questions and seeking information to ensure the organization, its leaders, and the board are behaving in an ethical and responsible manner. They have the courage to speak up and call attention to important issues.

Before you head into your next board meeting, ask yourself: How are my fellow directors and I showing up for our board and organization? If you’re unsure or think your board could use some guidance, reach out. WATSON is always here to help.

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