The Expanded 2021 Board Agenda

The extreme and unusual pressures of 2020 have necessitated new areas of focus for directors heading into 2021.

If you ask any board member what the role of a board is, you will generally hear the following areas of focus that almost all boards have in common: strategy, governance, executive compensation, succession planning, ethics, and risk. Of course, many organizations have other areas of focus specific to their situation and industry. At companies where there is a high capital infrastructure investment or businesses competing for funding, capital resource allocation reviews by the board are critical to ensuring that businesses have the necessary tools to thrive. For an acquisitive, high-growth company, M&A will be a key part of the board agenda as acquisitions or lift-outs are a critical component of growth for these firms.

But how agile have boards been in adjusting to the advent of COVID-19? How have board agendas changed as the calls for diversity and social justice have increased? Boards and executive committees have stepped up and met more often, communicated more widely, and added new topics to their regular agendas, including supply chain disruption, innovation, scenario planning, liquidity, climate change, and increased operational and cyber risk. As we set our board agendas for 2021, three of the most important topics that should receive enhanced attention are talent, culture, and ESG (environmental, social, and corporate governance).

Talent Management and Culture

2020 brought major changes to the job market and the workplace. Some of the changes were positive: Many organizations moved to remote work and U.S. hiring managers reported more short-term productivity gains than losses. Employees no longer need to live within commuting distance of their office, allowing for broader geographic options as well as commute cost and time savings.

But at home, employees are juggling childcare, partner job losses, and a lower number of interactions overall with coworkers and loved ones and may be experiencing fatigue and stress. Organizational culture has taken a hit as employees are no longer able to learn things by just listening to conversations around the workspace or through random interactions with coworkers. The essential process of onboarding new employees has always leveraged mentors and shadowing—practices that are extremely challenging in a remote work environment. Social connections are an important part of an employee’s success, and organizations will need to find ways to address this lack of in-person interaction.

Boards should engage in dialogue about long-term policy changes that will enhance productivity as well as focus on the well-being of employees. While obvious for essential businesses, the safety and well-being of all employees is now a top concern for us all. Empathy for employees has never seemed higher, but organizations must take concrete actions to benefit their workforce.

Flexible arrangements and benefits that address the challenges that come with remote work will improve company talent retention and recruitment strategies. However, analysis of a U.S. Bureau of Labor Statistics monthly jobs report discovered that women are leaving work at four times the rate of men: In September alone, 865,000 women left the workforce. If women make the difficult choice to remain out of the workforce for a significant period of time, this will be a setback to the gains made in gender diversity as well as succession planning for many organizations.

Overall, the needs of employees and their families are top-of-mind for management teams, and therefore for boards. Critical aspects of training, mentoring, promotion, and succession are at risk in the current environment and will require thoughtful, extensive action to keep steady.

ESG Matters

Organizations, CEOs, and their boards are continuing to confront social and racial inequity while educating themselves and creating action plans around social justice and the Black Lives Matter movement. Boards are discussing commitments for additional community philanthropy as well as substantive changes to hiring, promotions, purchasing, and equity plans.

The National Association of Corporate Directors (NACD) has held meetings with Fortune 500 board committee chairs to discuss specific steps boards can take, including being clear about expectations for improvements across the entire organization, tying executive compensation to the results of any company-wide plans, and regularly discussing diversity and inclusion at board meetings. Investors’ expectations are growing as they review company responses and monitor business policies and practices through ESG rankings.

In its August Advisory Council Brief, the NACD outlined two frameworks that it recommended to organizations and boards looking to advance diversity and inclusion initiatives. Developed by the Black Corporate Directors Conference, the people, purchasing, and philanthropy framework focuses on three areas: hiring and retaining a diverse workforce, directing purchasing power to minority-owned businesses, and philanthropic outreach. The second framework, the paradigm for parity, seeks to address gender equality by eliminating biases, promoting women from within, and providing women with mentors and sponsors, among other actions.

Whatever framework the board selects, it’s important for organizations to embrace accountability by being vocal about their goals and reporting on progress. Boards should regularly review the data related to all these initiatives to ensure that programs are actually effecting change. Cultural change is difficult and requires constant communication, but effective ESG initiatives will be a necessary component of business success in 2021 and beyond.

During any crisis, short-term changes are expected, and executive teams and boards must refocus on immediate plans to shore up the company. But 2021 will see the board agenda expanding for the long term. The focus on talent, culture, and ESG can create gains that not only impact bottom lines, but also separate the truly empathetic organizations from others. Boards are taking notice.