Director Survey: Boards Lack Visibility into Culture

Director Survey: Boards Lack Visibility into Culture

The National Association of Corporate Directors’ 2017-2018 Public Company Governance Survey, which came out this week, identifies several issues that directors say are matters of concern for them, as well as what they are not getting enough information about from management and want to spend more time discussing in board meetings. Among these issues are cybersecurity threats, which only 37 percent of respondents said they felt confident that their company was prepared to defend against; and business strategy, with 71 percent saying their boards needed to improve their understanding of and contribution to management’s strategic decisions.

The third item on the list is corporate culture, which directors say they are hearing plenty about from upper management, but are not getting enough insight into what culture actually looks like further down the org chart, as Vincent Ryan notes at CFO:

Eighty-seven percent of directors said they had a good understanding of their companies’ tone at the top, but only 35% of directors said they had a good understanding of “the mood in the middle,” and just 18% of them indicated they had a good grasp of the health of the culture at lower levels of the organization.

While directors generally were confident that management could “sustain a healthy corporate culture during a period of performance challenges,” 92% of directors said they relied totally on reporting from the CEO about the health of organizational culture. According to the survey, it was rare for a director to get a direct take on corporate culture from functions such as internal audit (39%), compliance and ethics (30% ), and enterprise risk management (20%)[.]

These takeaways are largely consistent with our own latest research at CEB, now Gartner. One reason why boards are talking more about culture because shareholders are: our Investor Talent Monitor (which CEB Corporate Leadership Council members can check out here) shows that questions about talent topics, including company culture, are coming up more often on CEO calls with investors. Another reason why culture is on boards’ radar is that so many recent scandals have revolved around allegations of toxic company cultures: Boards today need a better view of culture because its impact on the bottom line has never been more apparent.

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Apple’s First Diversity VP to Depart at Year’s End

Apple’s First Diversity VP to Depart at Year’s End

Denise Young Smith, who was chosen to serve as Apple’s first vice president of diversity and inclusion in May after three years as its worldwide head of HR, is leaving the company at the end of the year, TechCrunch’s Megan Rose Dickey reported on Thursday:

Taking over as VP of inclusion and diversity will be Christie Smith, who spent 17 years as a principal at Deloitte. In her career, Smith has focused on talent management, organizational design, inclusion, diversity and people solutions. At Apple, she’ll report to Apple VP for People Deirdre O’Brien, the company announced internally today.

This succession will involve a change in the chain of command, as Young Smith currently reports directly to CEO Tim Cook. It is unusual for a head of diversity to report directly to the CEO: According to our 2016 D&I Benchmarking Report at CEB, now Gartner (which CEB Diversity & Inclusion Leadership Council members can read here), only about 3 percent of heads of D&I report directly to the CEO, with the largest percentage of these leaders (38 percent) reporting to the CHRO. Before Young Smith’s role was created, Apple’s diversity and inclusion efforts were headed by Jeffrey Siminoff, who held a director role and reported to then-head of HR Young Smith.

A longtime executive who joined Apple in 1997, Young Smith courted controversy last month with comments she made at the One Young World Summit in Bogotá, Colombia, in which she said that “there can be 12 white blue-eyed blonde men in a room and they are going to be diverse too because they’re going to bring a different life experience and life perspective to the conversation.” This was not the cause of her departure, however, as a source tells Dickey that Young Smith had been talking to Cook about next steps in her career since last year and the company had been in the process of seeking her successor for several months.

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Major Companies, CHROs Call on Congress to Protect DACA Beneficiaries

Major Companies, CHROs Call on Congress to Protect DACA Beneficiaries

Over 100 human resource leaders have expressed their support for undocumented workers and made a call to action in light of the Trump administration’s announcement that will phase out the Deferred Action for Childhood Arrivals (DACA) program that grants temporary work permits and protection from deportation to younger undocumented immigrants who arrived in the US as children. Recently, according to Erin Mulvaney at the National Law Journal, chief human resource officers from companies such as Target, HP, and 21st Century Fox signed and sent a letter to Congress late last month calling for a legislative solution to preserve DACA and expressing concern over the intensity of political rhetoric on immigration:

“We are concerned that the rhetoric around immigration issues often obscures the truth about how foreign-born workers of all skill levels benefit their companies, American workers, American communities, and the American economy,” according to the letter, organized by the HR Policy Association. “Further, while we believe the existing immigration laws need to be responsibly enforced, we are concerned that discouraging these workers’ participation in the U.S. workforce through stricter policies would reduce productivity, intensify the ongoing workforce crisis, and disadvantage American businesses and their U.S. employees operating in the global economy.”

Last month also saw the launch of the Coalition for the American Dream, a group of employers dedicated to lobbying for the rights of these workers, which includes major power players such as Amazon, Apple, Facebook, Google, IBM, and Microsoft. The coalition is also urging Congress to take action to protect the DACA program’s participants, often referred to as “Dreamers”:

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Board Buddies Should Come From Outside the Board Too

Board Buddies Should Come From Outside the Board Too

A the Wall Street Journal last month, Joann Lublin examined an emerging trend of boards using a buddy system that pairs new members with more experienced mentors to help them “figure out the boardroom’s cultural norms, power brokers—and even the right place to sit.” Companies using this technique include Cisco, Foot Locker, Nasdaq, and Applied Materials, and a 2016 survey by the National Association of Corporate Directors found that 33 out of 296 US Companies with orientation programs for new directors were assigning senior members to mentor them.

This buddy system, corporate governance experts told Lublin, was “virtually unheard of” five years ago but is growing increasingly common, with one expert predicting it could be in use at 50 Fortune 500 companies by 2020.

This may be in response to recent reports on board struggles, including a survey last year finding that many directors had negative perceptions of their boards. Some of the shortcomings identified in the survey include boards not bringing in relevant talent and directors not giving each other honest feedback. Based on our research at CEB, now Gartner, we have argued that the head of HR is perfectly positioned to step in and support the board with its current talent challenges.

Dissecting the goal of the buddy system, which is to acclimate new board members, we find further reason to advocate for heads of HR to increase their involvement with the integration of new board members. In their role, CHROs are responsible for talent and culture, critical areas for a new board member who needs to become familiar with an organization quickly. And this is not going unnoticed by organizations, as nearly 30 percent of CHROs tell us they are more responsible for onboarding board members now than they were three years ago. (CEB Corporate Leadership Council members can see the full results of our 2017 CHRO survey here.)

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How the New Work Environment Is Shaping the Role of the CHRO

How the New Work Environment Is Shaping the Role of the CHRO

On the final day of the CEB’s ReimagineHR summit in Washington, DC, last Friday, dozens of heads of HR and other HR executives gathered to discuss the future of the Chief HR Officer role. A panel of heads of HR, including Julie Gravallese of the MITRE Corporation, Arielle Meloul-Wechsler of Air Canada, and Pascale Meyran of Michael Kors, made their best predictions about the ways in which their jobs will change and the new challenges that will face CHROs in the coming years. Here are some of the highlights from that discussion:

CHROs Are Being Called Upon to Protect Their Organizations’ Reputations

The proliferation of social media allows crises of any magnitude to impact the brand of an organization. In addition to the external damage this can cause, employees become frustrated if they feel their organization is not defending them. Heads of HR will have to enable their employees to be brand ambassadors, promoting the reputation of the organization with a heavy social media presence. In an era when corporate scandals can develop quickly and generate misinformation, employees need to be equipped with quick facts with which to defend the organization on any platform.

The Magnitude and Frequency of Change Will Be a Continuous Challenge

With entire industries being disrupted on a daily basis, employees will need to show tremendous stamina and resilience to manage change in the long term. Heads of HR need the emotional intelligence to recognize when change becomes overwhelming and which employees are unable to keep up. Continuous change can scare employees who see an uncertain future in the news every day, and heads of HR will be expected to listen and show empathy. It is important to be transparent with employees and tell them that change is expected, even if the final nature of that change is still unknown.

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How HR Can Strengthen Corporate Governance in a Time of Constant Change

How HR Can Strengthen Corporate Governance in a Time of Constant Change

At the CEB ReimagineHR summit in Washington, DC, on Wednesday, dozens of heads of HR and other HR leaders participated in a discussion with a panel of experts on the changing nature of corporate governance and its impact on HR executives. The panelists included Holly Gregory, partner and co-chair at Sidley Austin, LLP; Dan Kaplan, managing partner at Heidrick & Struggles; and Lori Zyskowski, partner at Gibson, Dunn, & Crutcher LLP.

The panelists brought a wide range of experience in advising heads of HR, CEOs, and boards of directors, as well as developing corporate governance in-house and advising externally on both good governance and governance crisis situations. The panelists shared some of the common concerns that are keeping board members and CEOs awake at night. Here are some of the key points from Wednesday’s discussion:

Boards Face Anxiety Over the Issues They Don’t Know Exist

In a challenging environment of disruption, expanded scrutiny, and higher expectations from society, boards need to ask the question, “What don’t we know?” Hidden patterns of employee misconduct, a body of claims around harassment, or compliance issues all represent a failure of corporate governance.

Heads of HR help boards by creating an information system that methodically elevates issues to the board. CHROs have their fingers on the pulse of the company and are involved in employee misconduct, issues with supervisors, harassment claims, etc. It is critical that these issues be surfaced, and CHROs that are not getting traction with their organization’s general counsel when these issues arise need to show courage in escalating them to the CEO or the remuneration or audit committees on the board.

The Speed at Which Governance Crises Emerge Has Accelerated

Boards don’t have as much time to respond to problems as they used to. In an era of viral media, an organization’s customers, investors, and competitors often find out about crises before the Board does. With no time to plan a reaction, it is critical that boards have the information they need and that the organization is able to respond rapidly. That means heads of HR need to develop teams that can quickly pivot and adjust the way things operate in the company.

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Growing Cyberthreats Give HR an Opportunity to Add Value

Growing Cyberthreats Give HR an Opportunity to Add Value

A series of massive data breaches at major companies, including the recent theft of over 140 million Americans’ personal data from Equifax, has put questions of cybersecurity at the front of every CEO’s mind. At the Wall Street Journal last week, Vanessa Fuhrmans noted that the threat of losing their jobs or even seeing their business destroyed was pushing more chief executives to give cybersecurity their personal attention.

Their motivations are twofold: First, the frequency of data breaches is increasing at an alarming rate, and second, CEOs are increasingly getting blamed for them. After last month’s crisis, Equifax’s board moved quickly (though some argue not quickly enough) to remove Richard Smith from the CEO role he had held for 12 years. Yahoo CEO Marissa Mayer, for example, had her bonus for 2016 rescinded as punishment for a 2014 security breach that compromised hundreds of millions of user accounts and to which an internal investigation found her management team had not responded properly.

The bottom line, Fuhrmans hears from various chief executives, is that they can no longer afford to pass the cybersecurity buck to the IT department and hope to escape unscathed if their company’s data is eventually compromised. That means developing good cybersecurity habits themselves (given how much information is publicly available about them, CEOs are attractive targets for phishing scams), learning more about how their organizations’ security systems work, and taking on a more direct oversight role.

Here’s an area where CEOs could be leveraging their relationship with the HR department to be more proactive about solving the problem. Rather than investing more in firewalls to prevent external breaches, many organizations should also be looking inward, as employee errors account for nearly 60 percent of privacy failures. There’s a big role for HR in helping employees avoid the errors and bad habits that make cyber attacks more likely to succeed.

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