With challenges including continued upheaval from the pandemic, political and global instability, a changing workforce, new technology, and more, the makeup of the board of directors — and it's ability to shape and influence organizational responses when things go wrong — is more important than ever. And it's crucial to ask: do boards have the right talent at the table, and what it will take to build a better one? 

Show notes

[0:00 ] Drama is best kept out of the boardroom because when you hear about it, it’s probably no small issue

[1:03 ] Meet Aida Sijamic Wahid, a professor who studies board makeup 

[1:30 ] It turns out who sits on a board influences how companies manage flux. So, do boards have the right talent at the table? 

[2:18 ] What exactly does a corporate board do? 

[3:33 ] Aida started studying board dynamics in the wake of the Enron scandal

[3:55 ] How the Enron fallout impacted its board, and why did no one notice? 

[4:46 ] The roll of director homogeny in the scandal 

[5:33 ] What is groupthink and why is it bad?

[6: 09] Aida’s research shows that when you change the variables – such as introducing a woman to the directors table – fraud and accounting mistakes decline

[7:14 ] Diversity improves board effectiveness by increasing perspective diversity

[7:35 ] Digging into different types of diversity – such as diversity of tenure or gender diversity – and the role it plays on board effectiveness 

[8:23 ] Exchanges are now compelling organization to report on board makeup

[8:59 ] What is tokenism and why is it bad for a board? 

[9:27 ] But increased diversification makes tokenism harder as the board becomes more balanced

[10:00 ] Director diversification is improving, if slowly, and there are still stumbling blocks 

[10:29 ] Do we need to prove that diversification is needed to demand more balanced representation?

[11:21 ] What skills did directors need in the early 2000s? 

[11:50 ] And today, they need tech know-how and an understanding of ESG – or environmental, social, governance. 

[13:12 ] ESG is complicated and will have big ramifications on businesses, and not every board feels they’re ready for the ESG revolution 

[13:38 ] And if a board doesn’t have the right talent, it doesn’t necessarily take a crisis to shake stakeholder confidence – just ask Amazon

[14:25 ] Industries that have a diverse talent shortage – like energy – will have a harder time making sure their directors reflect the broader population; and that’s a problem for innovation

[15:08 ] But not all hope is lost. “It's now that these industries are attracting people with different skill sets in different backgrounds because they have no choice but to if they want to evolve and survive.”