Life is full of anxieties. We all know that. Some suffer worse anxieties than others. As I often say, anxiety comes and goes. Anxiety cannot be measured but is something that everyone experiences on their own terms.
Corporate boards suffer anxiety. When a group or organization suffers anxiety, the possible damage to an organization can be significant. In some respects the whole of the anxieties can be more than the sum of the parts. As a result, corporate boards, like individuals, have to take affirmative steps to manage their anxieties, respond to them and protect themselves from poor decision-making.
When identifying and measuring issues of concern for corporate boards, there are at least five major and basic worries that every board has to address, no matter what their industry or where they are located. The global economy has now set in motion global anxieties.
I am not talking about issues of concern which are obvious – of course, every board has to focus on the obvious issues like: How will the economy perform? Will Congress address the sequester and bring about meaningful tax reform? We all know about these issues, read about them every day, and listen to our politicians’ bloviate on them during 24-hour news presentations.
Instead, I want to focus on five issues which every company should examine, which may not be so obvious. Or as I like to say do not require a profound grasp of the obvious.
Corporate governance means just that – governance. And corporate boards need to be proactive if they want to carry out their duties and responsibilities.
1. The rise of social media and mobile technology. The story of our economy for the next few years will be written on social media and mobile communications. Today there are more mobile devices connected to the Internet than the world’s population. Nearly 300,000 tweets are sent every minute.
Companies have been slow to recognize this reality and the implications of our Twitter nation. It has been estimated that only five percent of US companies have embraced social media across all of its stakeholders (consumers, managers, employees, board members).
Companies are starting to communicate through social media. Consumers interact with companies through mobile technologies. Government regulators are rapidly starting to focus on corporate policies, practices and issues which occur in the social media space. Companies have to embrace social media and analyze the implications for risks and competitive advantages.
2. Cybersecurity. The government and companies recognize that cybersecurity is now an imperative. Companies need to act to assess the risk of an attack, the cost of an attack, the direct harm to the company, the reputational risk and the need to protect the company from potential economic devastation.
3. Information Management. We are all suffering from information overload. Social media and the internet have made us aware of too much information. It is estimated that information overload costs US businesses nearly $1 trillion each year in reduced worker productivity. The new trend, which is rapidly developing, is how to manage information overload so that companies and individuals access the proper amount of information.
Google is developing new and more effective algorithms for search results. Information filters will become even more important as consumers and citizens are bombarded with information which can cause overload and inefficiency.
Corporate boards suffer from the same phenomena. Too much information means ineffective governance. Key issues are lost in thick and useless reports which only waste time and energy. Corporate boards need to address information efficiency – the new term for corporate governance.
4. Government Enforcement and Regulation. One of the legacies of the Obama Administration will be its commitment to increased government regulation and enforcement. It has been a long time since the government has played such an active role in regulating business and enforcing the laws and regulations. This trend will not end when the Obama Administration leaves in 2016. The American public is comfortable with the current balance between economic freedom and regulation. If anything, it can be argued that the public wants even more enforcement. Companies have to recognize this trend, prepare for it and refrain from delusional desires of deregulation.
5. Creative Compliance. One sure way to put a damper on a corporate board meeting is to invite the Chief Compliance Officer to make a compliance presentation to the board. Traditionally, board members like to focus on the “fun” issues – financial performance, high-level strategy, business expansion plans and market assessments.
When it comes to compliance, board members like to brush those issues to the side. The challenge for compliance professionals is how to make compliance integral to corporate performance. Scary enforcement stories are usually just a teaser for more important discussions and strategies.
How does a compliance officer communicate the importance of compliance, the need for compliance to play a greater role in the business operation, and the importance of board commitment, focus and support? This is the challenge for the profession over the next five years.