During regular periods, a position on a major corporation's board is quite desirable. The compensation is generous—typically exceeding $300,000 annually. The workload is minimal: just attending quarterly gatherings and participating in occasional conference calls for committees. Provided everything runs smoothly, your role involves merely monitoring without getting involved. As governance specialist John Carver stated, "Keep your nose in but hands off."
Who of us gets to live in ordinary times?
Over the last five years, a flock of unpredictable events symbolized by black swans has shaken corporate boards. Here are some examples:
A worldwide pandemic along with lockdown measures that cleared out office spaces and reshaped work practices. A law enforcement incident that ignited a staff revolt. Conflicts that compelled massive financial withdrawals within days. Supply chain breakdowns that resulted in empty store shelves. “Millennial once-in-a-century” weather catastrophes occurring year after year. An American president intent on implementing broad and frequently illogical shifts in policies. And an unyielding surge of technological advancements posing threats across all sectors globally.
In brief, corporate crises have become routine occurrences. When such a crisis strikes, the board typically faces the brunt of the blame. This is precisely why The Wall Street Journal is releasing its inaugural list of the 250 Top Board Directors . They matter.
In their pivotal work "Boards that Lead," Ram Charan, Dennis Carey, and Michael Useem split the responsibilities of the board into three key areas:
1. Lead
The top priority for the board is selecting a new CEO. This task may appear straightforward, yet it comes with significant risks.
Occasionally, it takes the expertise of an accomplished mediator when the present CEO, say, refuses to acknowledge that they should step down or shows little interest in constructive criticism. Consider the challenging situation faced by Tesla Chairman Robyn Denholm, whose renowned CEO was absent from duties early this year, leading to a decline in the company’s performance.
Sometimes, it requires making tough decisions—such as choosing between an internal candidate who has deep knowledge of the organization and an external candidate capable of offering a much-needed new viewpoint. When stakes this high involve billions of dollars, how do you even attempt to weigh one against the other?
And inevitably, it leads to mistakes—consider the board of Kohl’s, a company that is now on its third CEO search in three years and has lost three-quarters of its corporate value in the process.
2. Support
Top-tier boards do more than oversee; they steer—providing their expertise and insight to the management team. This is precisely why ex-CEOs are highly sought after for board positions. Having walked that path before, they bring valuable insights from their experiences.
In recent times, boards have taken on the task of managing an increasingly broad range of stakeholders. Of course, their primary duty remains the fiduciary responsibility towards shareholders. However, they must navigate pressures from various quarters including employees, clients, and the localities where businesses function. Additionally, vocal groups focused on environmental and societal issues add further complexity. The presidency of Donald Trump, marked by opposition to Environmental Social Governance (ESG) principles and Diversity Equity & Inclusion (DEI), has only compounded these challenges. Rather than easing tensions, this situation has merely added another significant voice—evident through the ongoing trend of executives and board members leaving corporate settings for meetings at the White House.
3. Monitor
In the end, it falls upon the board to supervise corporate risks. This assignment is particularly unappreciated since risks are ever-present and continuously changing shape. During the pandemic, hospital boards were tasked with securing protective gear for their vulnerable staff members. Meanwhile, international boards needed to navigate the complexities involved in selling off divisions amid Russia's invasion of Ukraine. For media company boards, they found themselves mediating disputes when mergers faced opposition from presidents unhappy with certain news content. Ultimately, it rests with these same boards to reconcile the extreme dangers posed by advancements in artificial intelligence—whether rushing ahead might endanger crucial data and intellectual assets, or lagging behind could allow competitors to take over market share.
To address these heightened expectations, boards have started using "skill matrices" to determine the qualifications needed for new directors. However, such frameworks frequently lead them to focus on past challenges—recruiting a healthcare specialist right when supply chain issues emerge, searching for an e-commerce professional skilled in SEO at the onset of artificial intelligence advancements, or bringing aboard someone with geopolitical know-how when understanding Washington politics becomes crucial instead.
What makes an excellent board director? It's a special blend of self-assurance and modesty, along with both specialized knowledge and interpersonal abilities. Add to this a never-ending eagerness to learn about innovations coupled with a respectful acknowledgment of established practices. Being brave enough to stand apart when needed but also wise and patient enough to work towards group agreement defines such a role.
Ultimately, the role of an ethical corporate director might be one of the final professions that artificial intelligence could potentially take over. These directors require strong moral integrity and wise decision-making more than deep technical skills or extensive industry experience.
They represent the pinnacle of human involvement.
Alan Murray He serves as the president of The Wall Street Journal Leadership Institute. You can email him at alan.murray@wsj.com .
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