Good morning,
“Shadow boards” are on the rise, but don’t be alarmed.
A shadow board is a committee of typically younger employees who come together within a firm to advise the management team on key topics, such as company culture, product marketing, trends in technology, and sustainability efforts. They are not an official board, of course, but their views often supplement those of experienced, much older corporate directors and C-suite leaders.
Shadow boards appear to be catching on right now, possibly because they can support companies at a time when significant shifts—climate change pressures, a growing labor movement, and expectations that companies respond to social issues—make it important for leaders to remain in touch with youth culture. What’s more, these advisory groups give some businesses insight into their customers’ tastes and passions. As such, companies like the Body Shop and Mövenpick Hotels & Resorts have embraced the trend.
The Body Shop was inspired to create its shadow board of advisors, who are all under the age of 30, when it became aware of the gap between the company’s youngest workers and its leadership team and directors, Fortune’s Orianna Rosa Royle recently reported. “We had the realization that, if we’re lacking the voices of young people [on our board], how can we really honestly say, we’re building a business that we can pass down to the next generation?” said Chris Davis, board member and international director of sustainability at the company.
Nick Studer, CEO of Oliver Wyman, a consulting firm within the Marsh McLennan group, also created a shadow board—called the “global leadership team council”—that advises the company’s management team. Studer introduced the idea after taking the helm in 2021, having seen various versions of the structure work for several of his corporate clients, he explains.
He says that the diverse council members, who are all beneath the partner level and therefore generally younger than their mid-thirties, or hold non-consulting roles in the firm, regularly share perspectives that are more helpful to the CEO than those of the senior management team. “They are absolutely more open-minded, more challenging than the executive committee,” he says. While senior executives might be hesitant to raise obvious questions and risk looking uninformed, he adds, “The younger group, they’re just more feisty.”
A pair of management researchers from Switzerland’s IMD business school who studied shadow boards wrote in the Harvard Business Review last year that companies leveraging them can more effectively test projects and products important to younger employees and customers. They’re also better able to create cohesion in multi-generation workspaces. Other corporate board experts tell Fortune that working with shadow boards allows directors and senior management to identify future leaders, while the shadow board members who engage with actual boards gain exposure to the mysterious world of corporate governance. It can be a win-win.
But businesses that have worked with shadow boards say the undertaking requires robust planning. Davis at the Body Shop advises companies to set out clear guidelines for the work that young employees on these committees will be expected to do. Otherwise, he told Fortune, the group could be exploited “as a kind of internally free consultant.”
Leaders and boards also have to take the shadow board seriously and give it real heft by sharing real information and implementing its best recommendations, Studer says. At Oliver Wyman, employees must apply for the role, and those chosen must sign detailed non-disclosure agreements before they start their one-year term, because they’ll soon be viewing and weighing in on all of the same presentations given to the senior management team.
To lead inclusively, Studer insists, you “have to be willing to give up power.”
Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan
Noted
“The board of Renault supported me for a few weeks. Then, at a certain point in time, they shot me in the head.”
—Carlos Ghosn, former Nissan-Renault CEO, recalls the French carmaker’s response to his arrest in Japan four years ago, in a new documentary, Wanted: The Escape of Carlos Ghosn.
On the Agenda
👓: Bloomberg Law reports on new rules and proposals meant to counter the rise of “robot boss” tools—think A.I.-only hiring software and robotic warehouse productivity trackers—by U.S. companies. New York, Washington, California, and New Jersey currently lead the way.
📹: The previously mentioned four-part documentary about Carlos Ghosn’s tenure as CEO of the Nissan-Renault alliance, his arrest in Tokyo, and his subsequent and shocking escape from Japan (see Noted, above), is essential viewing for any corporate director. One of the key characters in this cautionary tale is Nissan’s former chairman, Greg Kelly, an American executive who was also lured to Japan and arrested, then remained jailed long after Ghosn fled.
📖: How often do climate change and sustainability appear on the agenda of a full board meeting? A new survey from the Society for Corporate Governance and carbon accounting company Persefoni suggests not very often. It found that only 18% of boards talk about these issues at every meeting, while others discuss them annually (23%), quarterly (23%), semi-annually (17%), or as needed (16%).
In Brief
—Susan Rice, who served on Netflix’s board for two years before becoming a White House advisor to President Joe Biden in 2021, was reappointed to the board of the streaming giant. (She resigned from her White House role in the spring.) Rice is returning at an interesting time, as strikes by the Writers Guild of America (WGA) and SAG-AFTRA continue.
—After conducting mass layoffs, Alan Joyce, the former CEO of Qantas, is reportedly leaving the Australian airline with a whopping $24 million AUD ($15.3 million USD). One angry senator in that country is calling out the board as being equally responsible for what he calls “the swindle of the century.”
—Speaking of Australia, a new report on board gender diversity there found that more women than men are serving as directors at multiple companies at once, but they don’t earn as much as men (likely because they are not landing chair roles) and their tenures are shorter.
—Should boards have communications committees? Michelle Lyng, CEO of a crisis communication company, makes the “yes” case in Forbes, writing, “With reputation risk at an all-time high thanks to cancel culture from all sides of the aisle, a communication committee, or even a communication sub-committee of a risk committee, is a no-brainer.”
The Long Read
In a new interview with Fast Company, John Foley, the cofounder and former CEO of Peloton, has a lot to say about interior design and how it has been left behind by the digital commerce revolution—which is why he’s optimistic about his newly launched direct-to-consumer rug company. But the history of his once glorious indoor cycling empire, and his dramatic falling out with its investors, is rarely out of sight in this feature piece. “I don’t look back much,” Foley says at one point, but his other comments suggest otherwise.
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