Prioritizing the Board’s 2022 Agenda

by John Rodi

Boards are at a pivotal moment and must thoughtfully plan their agendas for the coming year.

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As the country grapples with ongoing COVID-19 concerns and companies navigate the related restrictions and uncertainties, corporate resilience — strategic, organizational and operational — is proving to be the great differentiator of the pandemic era.

The ability to quickly adapt to dramatic disruptions and dislocations has defined the survivors and thrivers. Boards are at a pivotal moment and must thoughtfully plan their agendas for the coming year. Drawing on our research, insights, and interactions with directors and business leaders, we highlight issues for boards to consider. Key among them is deepening the board’s engagement in strategy — envisioning the future and overseeing human capital management (HCM) as companies seek to attract and retain talent.

Given the volatile business environment — remote workforces, employee activism, digital transformation, supply chain concerns and changing customer behaviors and expectations — it's important to take time to reassess the board’s engagement in strategy and review how culture, values and strategy are aligned. The board’s fiduciary role remains oversight, but the engagement in strategic discussions that investors expect increasingly calls for a collaborative mindset. How can the board help management think through the implications of pressing strategic questions and decisions? Is management helping to set the context, providing meaningful information to the board to prepare directors for those critical conversations and maximizing the board’s contribution?

Leverage the board’s lens. Often sitting on multiple boards, directors may bring a broader perspective than management because of their access to other sources of information. Their knowledge and experience can provide valuable insight and competitive advantage to a company.

Encourage management to revisit its strategic planning processes to determine if the existing processes are adequate considering the speed and impact of megatrends as well as the risks and potential disruptions on the horizon. Directors should challenge the validity of key assumptions on which the company’s strategy and business model are based and ensure it is it an iterative process—with milestones and opportunities to recalibrate and bring in perspectives from throughout the organization.

Developing a vivid picture of the future is never an easy undertaking, and it’s particularly challenging today, given the level of uncertainty and transformational changes underway. Risks related to climate, human capital and supply chain should be front and center. Reviewing where the industry and competition are headed and what the business might look like in 2, 5, or 10 years are important conversations to have.

The events of 2020–2021 highlighted the strategic importance of HCM, including employee and supply chain health and safety issues critical to the company’s performance and reputation. Institutional investors have been increasingly vocal about the importance of strategy and calling for more board oversight and enhanced disclosure of HCM-related metrics. In August 2020, the SEC adopted a new principles-based disclosure rule requiring companies to describe their human capital resources to the extent such disclosures would be material to an understanding of their business. Boards should understand the company’s HCM disclosures in the 2021 10-K — including management’s processes for developing metrics and controls ensuring data quality — and help ensure that the disclosures demonstrate the company’s commitment to critical human resources issues.

Looking forward, we can expect continued scrutiny of how companies are adjusting their talent development strategies. The challenge of finding and retaining people amid a labor-constrained market has created a war for talent. The board should understand the talent strategy and its alignment with the company’s broader strategy and forecasted needs for the short and long term. Which roles are mission critical, What are the challenges in keeping those roles filled with engaged employees? Does the talent strategy reflect a commitment to diversity, equity, and inclusion at all levels? As employees —increasingly choose employers based on alignment with their own values and talent pools become globally diverse, is the company positioned to attract, develop and retain top talent at all levels?

The right CEO is pivotal for driving culture and strategy, navigating risk and creating long-term value for the enterprise. The board should ensure that the company is prepared for a CEO change, whether planned or unplanned, on an interim or permanent basis. CEO succession planning is a dynamic and ongoing process, and the board should be continually developing a pipeline of potential C-suite candidates. Succession planning should start the day a new CEO is named.

Oversight of these risks and opportunities is a significant challenge, involving the full board and multiple board committees. Resilience is not only the ability to bounce back when something goes wrong but also the ability to stand back up with viable strategic options for staying competitive and on the offense.

John Rodi is Leader of the KPMG Board Leadership Center.