Rahul K. Bhardwaj is president and CEO of the Institute of Corporate Directors
The role of the corporate director is shifting.
Boards, once chiefly concerned with procedures such as approving financial statements or selecting the chief executive officer, are increasingly looking beyond the boardroom to understand the challenges facing their organizations.
Directors are broadening their interpretation of governance – particularly their duty of care, which calls on them to act prudently and on a reasonably informed basis – in the best interests of the corporation. They are telling us that the pressures confronting Canadian society are not divorced from the challenges facing their organizations. In fact, these discussions now inform the strategic deliberations that, collectively, drive the future of the Canadian economy.
Today, the Institute of Corporate Directors (ICD) released the findings of a Director Lens survey of our members. The survey provides data on how directors feel about Canada's external prospects if NAFTA renegotiations are unsuccessful (confident), their capital spending plans (going up in 2018), their views on regulations (somewhat less enthusiastic) and their position on climate change (firmly on the fence).
What really opened our eyes was to see that directors are focusing on many of the same societal issues that concern most Canadians.
Demographic and health challenges are top-of-mind concerns for Canada's directors. When asked to identify which social issues will have the most impact on their organizations, immigration and our ability to prepare newcomers for life and work in Canada, as well as inclusion of Indigenous peoples in the work force, received the most mentions.
While it's not surprising that business leaders are thinking about human capital in the global competition for talent, the fact that directors are correlating acute social issues to business challenges is a positive trend. Directors also identified the impact of our aging population on health care, public finances and the work force, as well as access to health care and mental-health care as top concerns for boards.
This isn't only good for our society, it's good for business. Our ICD members believe their companies will grow in the coming years and 75 per cent expect staffing levels in their organizations will either stay at current levels, or grow over the next five to 10 years. Directors are telling us that Canadian businesses need healthy, trained and prepared talent.
Directors are also concerned with fairness and equality. Seventy-one per cent of those surveyed stated that their boards have either discussed or developed a strategy related to gender inequality. The same proportion have also discussed or developed a strategy related to racial and cultural diversity within their companies.
At a time when we all need to be more attentive to workplace culture, including harassment and exclusion, Canada's directors, too, seem more mindful of the influential roles they can play to enable positive change.
While many of the results of our survey show that directors are more knowledgeable on broader societal issues and are importing that into Canada's boardrooms, some findings gave us cause for concern.
While directors are focused on ensuring human capital is available to meet their companies' needs, they seem less concerned by the economic pressures faced by that human capital. Almost 60 per cent of respondents stated that they have not factored consumer debt into their strategic planning and a further 52 per cent have not considered how rising income inequality might effect their organizations.
The future of work – and its implications for society – is another area where more boards could engage. While 80 per cent of directors have either discussed or plan to automate current functions within their companies, over half say they have not discussed retraining workers who would be displaced by automation.
Perhaps most surprisingly, most directors surveyed have not factored the implications (or opportunities) of climate change into their strategic conversations. Only 7 per cent of survey respondents say their boards have developed a climate strategy and, remarkably, only half of directors believe that climate change is an important issue facing their board.
Regardless of one's perspective, regulators and legislators around the world are paying more attention to sustainability, and institutional investors are demanding more clarity from their holdings on their sustainability strategies. Clearly, more boards need to connect the dots from climate change to sustainability to strategy.
Corporate governance is not just about creating a set of rules for organizations; it's an attitude toward leadership that is increasingly being shaped by information from the world outside the boardroom. This is a good thing. There's work to do, but more external and societal information applied to board decision-making means more informed decisions. In the longer term, this will lead to better outcomes for companies and for Canada.