In this episode of the Purpose Inc. podcast, host Michael Young had the opportunity to speak with Anthony Goodman, Managing Director at Russell Reynolds Associates Board & CEO Advisory Partners. Anthony is a specialist in helping boards and CEOs understand and face the technological and demographic challenges that are shaping the world.
Key Takeaway: “Investors want cognitive diversity on the board. This means gender, racial and ethnic diversity because investors believe boards’ decision making will be better the more diverse they are.”
Michael’s discussion with Anthony focuses on the clear role corporate boards play in holding management accountable for their work around corporate purpose, environmental, social and governance (ESG) strategies and targets.
Anthony unpacks the five key findings from Russell Reynolds’ annual study on global corporate governance trends:
- A bigger emphasis on the Environmental and Social aspects of ESG;
- Finding the purpose of a corporation through a stakeholder view of capitalism;
- Better oversight of corporate culture and human capital management;
- Taking a more expansive view of board diversity — previously board diversity has centered around gender, but with an additional push for racial and ethnic diversity as well, more cognitive diversity may be created within a board; and
- A need for companies to prepare for increased activism in the coming years.
Anthony notes that:
Companies should think carefully about what the purpose of the organization is going to be; this should probably be initiated by the CEO, consulting with her/his senior leadership. Anthony cautions that CEOs should be careful not to “get out ahead of her skis” by leaving the board behind with regard to the company’s purpose.
Investors increasingly want to know: that CEOs have shared with the board the positions they are planning to take; how those positions will align with the company’s purpose. For CEOs wanting to be out front on social issues, such as same-sex marriage, gun control, and racial justice, CEO’s need the full backing of the Board.
Anthony discusses the various rating regimes for ESG and sustainability, noting: “There are a lot of different ratings organizations and companies should take the time to read into and understand all of them – and from there, convey their corporate narrative about purpose and ESG to ensure ratings agencies understand what the company, CEO and board are focusing on.
Anthony concludes by saying: Not surprisingly, a good company culture, which can be seen in its human capital and management data, makes a big difference: a poor company culture creates risks, and it destroys shareholder value.
Listen to the full interview with Anthony here: