New technologies like AI and machine learning are transforming the way we do everything from driving cars to delivering goods. And while these technologies will make our lives better, they also have the potential to create challenges for business leaders who don't understand them well enough or don't have time to learn them. 

So how do we prepare our companies and ourselves for this new era?

By ensuring that people with different perspectives are involved in decision-making processes at the very beginning of the innovation cycle—when key decisions about process change and technology adoption are made—we can ensure that these decisions reflect not just what's possible now but what may be possible in ten years' time when these technologies become more commonplace.

Today’s board directors must wrestle with an ever-expanding array of complex, strategic issues.

As you know, today’s business environment is changing at lightning speed. From new technologies and shifting consumer preferences to global economic forces, the board director must be continually proactive in addressing the challenges of operating the business. In addition, increasing shareholder activism has led to a greater expectation on boards to be visionary and strategic in their thinking.

The need for creative thinking becomes even more pressing as boards are expected to have more diverse skills than ever before—skills that are not necessarily related directly with operations or finance but rather with strategy, globalization and innovation. This means that investment decisions cannot rely only on financial projections but must take into account broader stakeholder viewpoints as well.

Those issues are getting more complex

We’re seeing a number of trends that are increasing the complexity and importance of board agendas:

• The number of issues that boards need to discuss is increasing. This includes, for instance, the amount of money being raised by start-ups, or the increase in mergers and acquisitions.
  
• The complexity of those issues is increasing. For example, there are more data sources than ever before; different stakeholders have different opinions on what data matters most; and so on.
  
• The importance of the issues is increasing because they will impact the success (or failure) of your organisation in new ways going forward - whether it's your ability to scale operations or hire top talent.
  
  

Board directors are becoming more diverse, but not fast enough.

Greater diversity on boards is a good thing. The percentage of public companies with female directors has doubled in the last 10 years, but it's still far lower than one would hope—just 19% of board seats are held by women.

But gender is just one dimension of diversity. You also want to make sure that your board has members from different industries and geographies; people who understand the latest technology trends or who have experience in emerging markets; and those with different backgrounds, such as consumers rather than employees or shareholders.

These diverse viewpoints can help companies identify new opportunities, create innovative products and services for customers, improve their supply chains and harness new sources of funding (such as through crowdfunding). In short: Diversity can help companies thrive in an increasingly complex world where competition is fierce​.

Directors and CEOs need a new way to work together.

We believe that the current model of shareholder primacy and corporate governance is broken. It's time for directors and CEOs to change their approach.

New models of working are based on a premise of shared leadership between the board and management. This requires both parties to reframe their thinking about governance, which has much broader implications than simply making room for more discussion at the board level.

Key elements include:

• Greater stakeholder influence over agenda items (e.g., environmental issues)
• Larger budgets devoted to non-financial performance metrics (e.g., employee satisfaction)

Frameworks for collaboration between boards and executive teams.

There are a number of frameworks that have emerged to formalise collaboration between boards and executive teams. The most prominent is the Non-Executive Directors' Report (NED), developed by the UK Corporate Governance Code Committee in 2006. The NED aims to ensure that non-executive directors are involved in strategic decision-making and provide a link between the board and its external stakeholders.

The US Council of Institutional Investors (CII) also developed a framework for shareholder engagement that encourages greater engagement with institutional shareholders through an annual meeting review process. This helps build relationships with investors before proxy voting season begins, so companies can address their concerns before they have any impact on voting results at annual general meetings.

There are many more governance frameworks but ultimately, it is the responsibility of non-executive directors to ensure that communication channels between the board and executive teams are functioning effectively. 

Board Composition is a critical factor in effective stakeholder governance

A board should be made up of directors that have broad experience and understand the role of directors. This is achieved through a number of methods including inviting people to join the board who bring with them different experiences and skills, encouraging intergenerational breadth on the board, ensuring there are relevant stakeholder groups represented in order to achieve diverse insights into how to make strategic decisions based on broader perspectives.

To identify particular stakeholder expertise, boards may wish to consider using an organisation's skills matrix. Having an extensive induction process that includes education on key stakeholders is a critical step (this could include site visits or briefings on the organisation’s impact on the community). Ongoing education on particular stakeholder issues is also essential in enabling boards to better understand and address stakeholder priorities.

Key questions for the board to ask:

· Does the board regularly review the effectiveness of the organisation’s stakeholder governance vision/strategy?

· What independent, external data speaks to the organisation’s relations and stakeholder impact?

· Should the board engage an external party to assess the state of our stakeholder relations?

Boards should focus on the future of their business and industry.

Many companies focus their board agendas on compliance and governance – both of which are important, but boards should spend time exploring the future of their business and industry.

Traditionally, the core responsibilities of corporate boards include governance and risk oversight. However, there are many other things that influence an organisation’s success: stakeholders like shareholders (who own shares), employees (who provide labour or services), customers (who buy goods or services), suppliers or vendors (who sell products to the company) and communities (where businesses operate) are increasingly shaping board agendas through the decisions they are making such as; resignations, purchasing preferences and trade terms.

Direct engagement with customers

Boards also benefit from engaging directly with customers. This form of engagement humanises issues and can remind a board and an organisation of its core purpose. This does not need to happen all the time, but there can be a high return on investment when it does.

Some organisations begin their board meetings with a client story, or a client appearing before the board to share his or her experience with the organisation. This helps keep board members focused on meeting the needs of customers, and reminds them of the organisation's impact.

Customer advocates

In the financial services and energy sectors, customer advocates that report directly to the board or management are increasingly common. Whilst these interactions need not be regular but can provide boards invaluable intel. Advocates who work at the coalface and are often aware of systemic issues that could have significant reputational repercussions long before senior management.

Direct employee-board engagement

A complete picture of workplace culture can be gained through employee surveys, ‘town hall’ meetings, site visits and floor-walks. However, boards should also establish regular and independent opportunities for engagement with employees that enable the employee's own lens on culture, inclusion and safety issues.

It is important for directors to stay informed about the day-to-day operations of an organisation. One effective way to do this is by inviting employees to present and respond to questions about operational issues, projects, and initiatives at board meetings.

The above frameworks and tools are designed to help boards and executive teams work together to develop a shared understanding of the business and its future. They can be used in different ways, from providing a framework for conversations between directors and executives to supporting collaboration between different groups within an organisation. But their purpose is always the same: ensuring that boards and executives work together effectively so that they’re able to tackle today’s complex issues (and tomorrow's) more effectively.