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4 areas of expertise every company needs on its board right now

October 7, 2022, 12:01 PM UTC
A business woman uses computer in front of a server
Cybersecurity is a rising concern for boards.
Gettty Images

Disney, McDonald’s, and GM appointed new board members this week for reasons that aren’t difficult to parse. GM, for instance, wants to outsell Tesla in the electric vehicle category by 2025; its newest director, Jon McNeill, is a former Tesla executive.

The unique mix of talent and expertise that make up the ideal board is of course going to vary greatly from company to company. But during wildly uncertain times, and given the growing expectations of modern boards, there seem to be a few subject matter experts who belong at virtually every table these days. At least, that’s what I’ve gleaned from recent conversations.

One was with Paul Knopp, CEO of KPMG U.S., who shared the consulting company’s latest CEO Outlook report. In the survey of 400 leaders at large U.S. companies, KPMG found that 91% of CEOs expect a recession within a year. As a result, 59% percent of CEOs think they might pause ESG pursuits. But Knopp believes those breaks will be short-lived now that more CEOs have fully invested in sustainability and corporate citizenship. Boards should have ESG expertise in the room, he says, because corporate stakeholders will continue to pressure boards about ESG matters, regardless of economic conditions.

Cybersecurity is another area where boards may need to close the talent gap, Knopp says. Citing geopolitical uncertainty, 81% of surveyed CEOs say they see a high risk for cyber attacks ahead. Yet 44% of CEOs say their organizations aren’t ready to deal with that threat.

Knopp also advises boards to seek director candidates with M&A experience, noting that 56% of leaders surveyed say they have an appetite for M&A. These board candidates should have experience leading significant acquisitions, predicting pain points, and helping boards navigate the arduous integration process.

Last month, I spoke with Michael Birshan, who co-leads McKinsey’s strategy and corporate finance practice, about his research on traits that give companies an edge. He says that as the borders between industries blur, boards need directors who understand sectors adjacent to their own. Health care boards need tech experts, for example. “Having nobody who understands the industry is obviously terrible,” he says. But it’s also unwise to have directors who only understand the traditional version of the industry—not where it’s going.

Executives from adjacent sectors, who have already experienced the same sorts of transitions a company is facing, bring valuable information and a readiness to act, he underlines. That’s particularly additive in a murky market when boards too often take a cautious, wait-and-see approach.


Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan

Word of Advice

“We know that the path to growth leads through the Latino community—the business case is strong, the supply and talent case is strong—but we remain a blind spot for corporate America. It's time they get on board. Boards without Latinos are incomplete.”

—Esther Aguilera, CEO of the Latino Corporate Directors Association, speaking last month at the L’Attitude conference.

On the Agenda

👓 Read: ​Nearly half of all directors (48%) want to replace at least one member on their board, according to PwC’s latest Corporate Directors Survey. And 19% of directors say their board is too reluctant to challenge management, up from 12% last year.  

🎧 Listen: The One Minute Governance podcast by Matt Fullbrook, executive in residence at the University of Toronto’s Rotman School of Management, is just long enough to plant big ideas. In this episode, he explains why corporate governance is broken.

📖 Bookmark: On Tuesday, the networking and recruiting site Mogul (known for its "Build Better Boards" campaign) will release its annual report about diversity trends in Fortune 500 boardrooms. One preview stat: 22 companies on this year’s Fortune 500 have no ethnic diversity, up from 15 last year.

Onboard/Offboard

Disney added former Meta executive Carolyn Everson to its board of directors as part of a deal with activist investor Dan Loeb. Kareem Daniel, chair of media and entertainment distribution at Disney, is joining McDonald’s board as its fourth new director this year. As mentioned above, Jonathon McNeill, CEO of DVx Ventures and a former executive at Tesla and Lyft, joined GM’s board. Lulu Cheng Meservey, a director at Activision Blizzard, is stepping down from that board to join the video game developer’s management team as corporate affairs and chief communications officer. Cambridge Bancorp tapped Andy Zelleke, Harvard Business School senior lecturer, as a director. 

In Brief

- Fortune combined its U.S. and global rankings of the world’s most powerful women into one list, meaning fewer spots and a more competitive cohort.

- Credit Suisse researchers believe the Inflation Reduction Act could lead to $800 billion in climate change spending and make the U.S. the world’s top energy supplier.

- Market declines mean banks could lose hundreds of millions of dollars if Elon Musk’s Twitter deal closes.  

- The legendary hedge fund manager Ray Dalio is leaving Bridgewater after naming two successors as co-CEOs.

- Shell’s CEO transition is a masterclass in smooth succession planning, writes Laurie Cure, CEO of consulting company Innovative Connections, in a Fortune commentary.

Editor’s pick

My colleague Emma Hinchliffe’s vivid profile of a little-known powerhouse, Melanie Perkins, the CEO and cofounder of Canva, graces our magazine cover this month. Perkins, 35, and her husband and cofounder, Cliff Obrecht, have built the visual communications software company into a business worth at least $26 billion. Yet Perkins sees the Sydney-based Canva taking on Adobe and replacing Google Docs, Hinchliffe reports. You won’t doubt it’s possible once you read about Perkin’s determination.

Here’s a snippet from the story:

Perkins heard every no in the book—more than 100 total. No, VCs weren’t comfortable backing cofounders who were romantically involved. No, they didn’t want to do an overseas deal. No, they definitely didn’t want to do a deal in Australia, a country with no startup ecosystem.

Investors also balked at the couple’s lack of technical expertise. They had both attended the University of Western Australia, studying in the school’s arts and commerce program—hardly the Stanford pedigrees traditionally favored by VCs.

The founders got a lifeline from an unlikely place: extreme water sports. They learned about a gathering of VCs and founders in Maui. The catch? The confab was for kitesurfing enthusiasts.”

Read the rest here, and glide into your weekend. 

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