Conversations with board chairs around the world provide a roadmap for how to address emerging demands from climate to digital.
NEW YORK, NY, 07 September 2022—Board chairs have seen their roles rapidly expand in recent years, triggered by growing demand from a wide range of stakeholders for greater transparency and accountability. A new Deloitte Global report, released today, explores five key forces transforming the role and what it takes to be successful in this new environment.
The report, “Board effectiveness and the chair of the future: Five fundamental forces that define the modern chair’s role,” shares insights from more than 300 board chairs representing major listed companies and significant private firms around the world. Those interviewed discussed their current reality and their aspirations, and provided advice on how chairs can pivot during periods of challenge and upheaval triggered by current issues such as climate change, digital transformation, and addressing the implications of the COVID-19 pandemic.
“Board chairs are central to the success of their organizations. While serving effectively in this role has always been demanding, the role of today’s board chair has grown to be all-encompassing,” says Sharon Thorne, Deloitte Global Board Chair. “Successful chairs of the future will increasingly need the resilience and foresight to lead their organizations through periods of temporary upheaval while also ensuring that leadership stays focused on long-term business objectives.”
The report identified the following forces that are helping to shape the role of the board chair of the future:
Even before the COVID-19 pandemic, chairs and boards were used to an increasing frequency of crises. However, those interviewed said their organizations are now operating in a continuous state of crisis management, requiring them to put in place processes to make the company more agile. When speaking to global chairs, Deloitte Global found that organizations that took decisive measures to reconfigure their business models and accelerate digital transformation were able to navigate disruption most effectively. They were also able to drive business continuity, agility, and resilience more easily throughout the pandemic.
Chairs said that in order for chairs to continue to be set up for success in leading their organizations, they need to operationalize learnings gained from crisis mode. This includes ensuring they continue to understand their companies’ activities at a deeper level, and thinking through worst-case scenarios to increase agility and resilience, as well as prioritizing the mental health of the workforce.
Chairs serve as a guiding hand for management and a sounding board for the CEO, and Deloitte Global’s report found that the depth and breadth of their involvement has never been greater. These leaders noted that having a high level of trust between the chair and CEO remains essential to a successful relationship, and ultimately the success of the company.
The qualitative research suggests that as traditional chair roles evolve, chairs can encourage new thinking and help foster innovation. Many chairs interviewed believe it is their job to help management be bolder and faster in how they assess risks and rethink operating models. That starts by holding management accountable for performance and taking a personal stake in the organization’s reputation. When decision-making junctures arise, the chair should be willing to ask tough questions of the CEO and senior management. They should also scan the horizon for strategic risks and opportunities together with the non-executives of the board, to help determine the best path forward.
Businesses are increasingly being perceived as having a greater responsibility to the communities in which they operate, and Deloitte Global’s report reveals that chairs are more and more receptive to this reality. Just as businesses have placed a greater focus on environmental, social, and governance (ESG), the role of the chair has also transformed to have a greater focus on transparency and accountability to a wide range of stakeholders from employees to customers and to society at large.
The interviews suggested that as this responsibility deepens in the years to come, chairs should work harder to continue bringing societal concerns to the board. This also means driving stakeholder engagement, fully integrating ESG into business strategy, and finding the right balance between profitability and sustainability to drive beneficial outcomes for the organization and for the world.
Similarly, in speaking with global chairs, Deloitte Global learned that boards are recognizing climate change as posing serious operational, regulatory, and reputational challenges to their businesses. They believe that meeting this massive challenge ultimately requires close collaboration between the board and management team.
The chair of one large global organization said, “If we as business leaders don’t recognize the impact of climate change and put it on companies’ agendas, we will not have a sustainable business.”
To drive lasting change, chairs need to be prepared to keep management honest about their progress against climate goals a key factor now that stakeholders expect honest and open communication about organizational goals. The chair should also find compelling ways to ensure climate change is at the heart of overall business strategy, and ensure that stakeholders are fully bought in to the process from the start as stakeholder alignment is crucial in making tangible progress in this area.
“It’s an iterative, dynamic process,” another chair explained. “The board has been actively involved with management in assessing the risks and opportunities around climate change, in developing the policies for the near term and long term, and in setting the targets.”
The chairs interviewed also revealed that finding operational balance with the board is another key aspect to succeed in the post-pandemic world. Many defined this as being able to run the board more nimbly and with more flexibility, preserving the agility and connectedness from the COVID-19 pandemic, while also safeguarding the fundamentals of providing valuable corporate stewardship.
For more information, please visit: https://www2.deloitte.com/chairofthefuture
For the executive summary of the report, please visit: https://www2.deloitte.com/chairofthefuturesummary
As part of Deloitte’s commitment to supporting the next generation of business leaders, the Deloitte Global Boardroom Program has brought together in this report the findings from “Chair of the future” research conducted in 16 countries and regions. This report collectively reflects the insights of more than 300 board chairs of some of the largest companies in the world, listed and private entities, as well as a number of large family businesses. The research was gathered via interviews, roundtable discussions, and surveys over the past few years.