THOUGHTS ON CORPORATE GOVERNANCE AND BOARDS IN 2022
A little over a year ago I published an article on Corporate Governance 2021. In it, I stressed that boards should be raising capital and in fact named several companies who seemed like no brainers to do that ( I won’t name them again). Many did not and now their equities are 30-50% of where they were. Many boards last year suffered from myopic thinking and believing their own press, many to their owners disadvantage. Hubris I guess. Well that brings us to 2022, a year in which ESG is in the front as it should be. I’ll be focusing on the G here, but not forgetting the E&S because they too add to shareholder value.
Corporate boards will have their hands full this year dealing with lots of uncertainty and volatility. World events are uncertain, Fed policy is uncertain, inflation is uncertain, supply chains are uncertain. Directors need to be good stewards of their company’s capital and resources. Raising capital may become much more difficult. Boards in ’22 will need to ask hard questions of their managements about capital use and investments. ROI will become important and focusing on the long-term health and strength of companies will be paramount!!! Effective independent directors cannot be just yes men, nor should they be just no men either. They will need to ask insightful questions and challenge management assumptions. Things don’t always go in one direction or as planned. Companies and boards will need to be nimble to adjust to the possibility of many changes in the coming year business environment.
Boards in ’22 will also need to focus on human capital and how to manage and incentivize it! It is clear that the winners in ’22 will be the companies that win the human capital race. Those that don’t manage it properly will fall behind and suffer. Human capital is becoming the number one asset of many companies…. and guess what, those assets care about the E&S.
2022 will also see that boards with diverse points of views and backgrounds excel over those that are missing that diversity of thought. Yes, ‘22 will be a tricky year for boards and governance but with diligence and thoughtfulness independent board members can help make it a successful one for their respective companies.
Finally, as an independent board member of several public and private companies, I leave you with this thought: when I serve on a board I treat that position as though it was my family’s business. I think long and hard about decisions and will put in whatever time & effort is needed for that particular company. Being a good board member is not a part-time job, you are a steward for other peoples’ hard earned savings.
Aerospace Sell-Side Investment Banking
2yWell done, Manny. A direct, on-point assessment of board performance and advice for correction. This is quite consistent with my own recent experience with boards.