HRs Role in the Boardroom

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With so much conversation in the boardroom emanating from the big social themes of diversity, inclusion, compensation alongside the pressures of talent acquisition, corporate governance needs the expertise of senior human resource officers in a way that the audit committee needed financial expertise under the spectre of Sarbannes – Oxley. And yet, despite the need for its expertise, human resources is widely absent from the boardroom.  Good governance is important and  bad governance can kill a good company.

A Board of Directors main purpose is to ensure the integrity of leadership, monitor financial and ethical compliance, manage risk and to develop strategies that will propel the business and its mission forward. It functions to check-in on the health and profitability of a company, to gain insight on what is happening between the layers of the organization and its people, to discuss pressing matters and to make decisions that impact all.  It is clear, with these all being people management tasks, that HR needs to be present in the boardroom to add meaningful insight to the conversation and yet we’ve seen plenty of boards, especially those of start-ups, pull in whoever is around to sit on a board of directors. The CEO’s friends and family members or investor representatives- people who may have less interest in governance and less relevant expertise- have found themselves in these seats.

With diversity and inclusion being viewed as a business strategy, why isn’t that same diversity and inclusion being practiced in the boardroom? Less women, less individuals of color and less representation from different but vital roles in a company are present, yet studies show that corporations with diverse boards see the value that a diverse perspective and problem-solving skills brought by a more well-rounded board can offer.  BlackRock, the most successful asset management company, believes that diversity and inclusion in the boardroom has contributed to its success in creating long-term value for its shareholders. In their Letter to Investors, they discuss board diversity and share that they have nominated individuals of different genders, ethnic backgrounds and levels of management.  “BlackRock’s commitment to diversity enhances Board involvement in our Company’s multi-faceted longterm strategy and inspires deeper engagement with management, employees and clients around the world.”  New companies in the process of setting up boards, and seasoned companies who are nominating new members would be well-off to consider a diverse board  that breaks the caucasian male stereotype.  Boards are not only looking for who their executives know, but also how they know them and what they know about them.

Jennifer Naylor, Consultant at MottsPoint, provides recommendations for who should be nominated to be on a Board of Directors: 

1) Those involved in strategic planning
2) Those with governance experience
3) Those with expertise in key customers, strategic imperatives and/or enterprise risk profile
4) Courageous individuals who are going to challenge group perspectives and push the group out of its comfort zone to move the needle. The boardroom is not the place to celebrate every success and report out on what has already been done, but it is a place to spend time looking forward and plan for the future

5)Those with a strong networks and access to resources and relationships that can be beneficial to the success of the company
6) Those who have experience with the type of company the board is designed for, who has seen and overcome challenges and can help to advise and navigate difficult waters
7) An HR professional who can provide insight into the day to day and employee relationships and dynamics, and who can help manage the board. Often times, the board depends on the CEO report on human resources, but they are not always the best suited to do this because they do not know the day to day, so board either should consider inviting an HR person to the table, or dig deeper and scratch below the surface to ensure they know really what is going on. 

Board members have reported feeling that they do not talk enough about strategy during board meetings, and rather spend a bulk of time reporting on measures, but these meetings are incredibly important opportunities to have people who are up to date on the ins and outs of business and who are on the ground with employees during the day-to- day.  Does your company have an interesting talent story? What’s the overall strategic plan, and is your talent pool ready? Is talent acquisition part of the company’s risk profile? How is the Board doing on succession planning, leadership pipeline, and compensation? What about board and leadership assessments? These are all reasons why HR should have a seat at the table. The board either should consider inviting an HR person to the table, or dig deeper and scratch below the surface to ensure they know really what is going on, or they may risk poor governance simply by not having the right mix of people in the room. 

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