A global “mega-cap” company recently asked me to submit a briefing on how the boardroom of the future will look. This is an abridged summary of my report.
Democratization of governance
Your shareholders will nominate and elect your directors by electronic voting directly on your website. They will base their votes on the accomplishments of each director and track record of acting in the best interests of shareholders and the company overall.
Electronic registries and meetings will be the primary basis upon which shareholders select directors to your board. Director competencies will be fully disclosed.
Diversification of boardrooms
Your board will be 40% to 50% women and have far fewer CEOs on it in the next five to seven years. Your directors will be independent experts within their relevant strategic domains, will be quick studies, and will have access to the best learning of the company. They will request an Office of the Board be established. Board tenure will not exceed 9 years.
Reporting to shareholders will be fully integrated and online. Non-financial risks and internal controls will be independently assured. All reporting will be accessible, complete, accurate and independently validated.
Your board will be paperless and directors will have access to any piece of information they need to oversee and advise management. Technology will be used to attract and communicate with international directors. Risk appetite frameworks, established by the board, will translate into clear incentives and constraints using integrated firm-wide information systems.
Executive compensation will be established by shareholder-directors. Professional standards will be imposed on any consultants retained by these directors. All compensation will be fully risk-adjusted and linked to performance. Current models and methods will change significantly.
Office of the Board
An Office of the Board will be established. It will house independent staff and resources, be made available and accountable to the board and will receive funding from the company at the board’s directive.
Regulation of corporate governance
The unprecedented intrusion into the governance of companies will continue until most or all of the above reforms are implemented.
The above changes are significant and will fundamentally change the way directors are selected and how boards control management.