Board effectiveness is a fundamental issue at every stage of the business

AAs the corporate governance environment continues to evolve, Nasdaq Governance Solutions is committed to evolving with it. In 2019, Nasdaq acquired the Center for Board Excellence, expanding its suite of solutions and providing organizations with more tools — and people — to help them achieve governance excellence.

Today, the Compliance & Board Advisory team plays a critical role in helping boards and management teams streamline governance and compliance assessment processes, identifying growth opportunities for boards of directors and transforming directors’ comments into strategic action. With years of insight and expertise, they have become an invaluable part of the Nasdaq Governance Solutions business.

We hear from Nicholas Chilton, head of the advisory board in the APAC region at Nasdaq, who talks about his experience.

Tell us about your role on the Nasdaq Governance Solutions Board Engagement Team. What are your goals?

My role is split into two parts, working with boards and management teams to help them improve their effectiveness as a team and individually and curating thoughtful, topical leadership to drive board excellence of directors in Australia and the South Pacific. I think this is a pivotal time in Australia’s corporate governance landscape as it grapples with significant societal and global changes that challenge traditional roles and responsibilities in the boardroom, many of which are directed in other jurisdictions. One of my main goals is to bring to the Australian community the wealth of experience and connections that the Nasdaq has around the world and to promote a dynamic exchange of ideas and perspectives that will help boards of Australian administration to address these emerging challenges. Another objective is to see Nasdaq Governance Solutions recognized as a unique partner for companies in our region, due to our position as the expert and world leader in governance and the ecosystem of governance services and products for companies at all stages of their journey.

What focus do you adopt when advising boards and management teams on governance issues?

Coming from many years in politics, I see many similarities between corporate governance and government, both in good and bad. Just as we see in politics, corporate stakeholders hold leadership for greater accountability and deeper scrutiny of how they respond to key issues, but also strongly criticize actions that appear to be signs of virtue or symbolic. Simply complying with the law or declaring a lofty ten-year plan is no longer enough; now it’s breaking the “pub test”, where a lack of real and substantial action on an issue can have material consequences for a company. At the same time, boards and management teams cannot and should not address all issues and concerns. I believe that effective leaders care deeply about what their business stands for, determining the issues that are truly important to their business and their stakeholders. Good governance is about taking individual and collective action to ensure these priorities are shared and promoted at all levels of the organization, which attracts talent, drives growth and generates revenue.

What governance themes or trends do you think will be emphasized in the future?

Given the turbulence of the past two years, I hesitate to make too many predictions, but some key trends are unlikely to go away. ESG has had a huge year in 2021 as a hot topic of corporate governance in the public forum and proxy season, but there are certainly some in Australian boards who are still deeply skeptical about towards stakeholder capitalism and social responsibility as “woke” ideologies that distract from a company’s primary purpose. While I believe these concerns are well-founded, many stakeholders are finding their voice and ability to create impact on multiple issues (particularly climate change) and, importantly, finding a new sympathetic political environment willing to use this passion for political popularity and willing to pass tougher legislation to demonstrate their action, as their European and American counterparts have shown. It’s a potent combination that could very likely create serious problems for companies that don’t have much to show for meaningful action in the short to medium term on ESG issues, especially those with large stated ambitions. At the same time, growing regional tensions in the Asia-Pacific are likely to put more of a spotlight on supply chain resilience and cybersecurity practices, while the rising cost of living and potential economic downturn will put Boards challenged on executive compensation, salary increases, and flexible/remote work arrangements to accommodate housing affordability issues among younger employees.

Why should companies, at every stage of the company lifecycle, think about board effectiveness?

Board effectiveness is a fundamental issue at every stage of a company, regardless of company value or number of employees, as it translates to how effectively values, vision and strategy are replicated and reinforced at all levels of the business. I think many companies, especially in the Australian context, are reluctant to tie discussions of board effectiveness to material priorities and business results. Effective and dynamic boards are invariably those that cultivate a culture of regular self-assessment, which translates into tangible business results, such as revenue generation, talent retention and acquisition, and the achievement of strategic objectives. As the company grows and matures through different stages, the cumulative effect of good governance practices and board effectiveness becomes apparent throughout the organization.

What is the advice you always share with the directors you work with?

As with all leadership in every industry, sector and context, the most effective directors are servant leaders. They recognize that they are appointed to serve the company and its stakeholders, not themselves, and they take active ownership in building a company they would be proud to work for, whether as an executive or as an intern. They are also willing to share their experience, wisdom and time with others, particularly in mentoring and developing the next generation of director candidates. It means parking your ego at the door, which is not an easy thing to do in the corporate world, and walking into the boardroom with humility and an awareness of a director’s responsibilities and limitations.

Learn more on how the Board Advisory Team brings value to boards and management teams through qualitative and quantitative assessments and corporate governance services.

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