As we begin to settle in 2019, I thought of penning down certain key areas that need special attention from corporate boards across India. Recent times have shown that involvement of board members in asking the right questions to the executive team is key to avoid any unpleasant surprises. Unlike a few years back, when such responsibilities were limited to executive directors, today, independent directors are just as responsible to the company. Shareholder interest and societal responsibility are equally important as profits.
Four areas where boards need to give special attention are:
Customer data privacy: Due to advancements in technology and the digital way of living, majority of our records and transactions today are online. Due to this, customer data collected by organisations need to be kept safe and secure. Unlike earlier times when physical security was key to customer records, today cybercrime is a big threat to sensitive customer data. Boards need to be aware that any breach of customer data poses a huge risk to a business entity. Not only does it lead to loss of trust, but can also result in penalties and compensations.
Every organisation should have severe security layers to ensure that data is not being breached by anyone for misuse. Besides implementing information technology-based safety measures, organisations should also have policies and training sessions in place to keep their employees updated. Sensitivity to customer data by employees is very important as it will help in keeping a secure system and give early warnings in case of any lapses.
Gender diversity & sensitivity: Last year saw the #MeToo movement help disclose few of the realities of the corporate world in a severe manner. Organisations across the world, had to come face to face with issues that saw many senior leaders losing their jobs and corporations paying compensations to the victims. Gender diversity and sensitivity is an important area for both the board members and senior leadership teams. While corporations have opened up to gender diversity with target recruitment of women, LGBTQ community, etc. the next step is to bring about a culture of sensitivity across the organisation.
A strong message that boards need to continuously give out is that no form of discrimination or harassment will be tolerated at work, however senior any employee may be. Additionally, an open and fearless communication channel needs to be built so that nothing goes unreported, rather, any deviance gets reported at the earliest. Organisations need to work harder to create an equal environment for the workforce and encourage diverse representation across hierarchies and roles.
CEO & ‘Rockstar’ employee indiscretions: In the last few months, we have seen how star CEOs and high-performing employee indiscretions have almost brought down successful companies and in some cases even caused them to shut shop. The recent divorce saga of the founder of the world’s most successful e-commerce player is another example where an individual’s conduct has cast clouds over the organisation. With media having a field day guessing the divorce numbers, stock ownership splits, etc., the e-commerce giant is at the mercy of the founder’s whims and fancies. Similarly, the recent social media rants of the maverick founder of an electric car manufacturer had the company almost fold up with investors, senior employees and directors threatening to disembark.
Boards need to frame strict policies and rules that ensure that any senior employee’s personal indiscretion doesn’t harm the short term or long-term interests of the company. Organisations should sign code of conduct agreements that have a built-in clause for compensating the company in case for any individual indiscretions. As mentioned in one of my earlier posts, today the leader and the organisation is inseparable, and the former’s (mis)conduct often reflects heavily on the corporation. Moving forward, companies should look at creating safeguards where its reputation risk is covered in case of any personal challenges of the leader.
Environmental & community lapses: The automobile controversy that has shaken the world for trying to hide pollution metrics is now known to everybody. In the current scenario, where the need for a sustainable ecosystem is severe, any such lapses cannot be tolerated. Board members need to be vigilant and ask the correct questions to ensure that the corporation in its daily processes is not creating an unsafe or polluting environment. Additionally, every corporate and its members should be responsible towards preserving the interests of the local communities where they do business. Recently, violent protests against water contamination by locals have resulted in deaths, and subsequent closure of plants. Besides the financial loss, the loss of trust is immeasurable in such cases.
No organisation can survive by sheer profiteering as the local eco-system gets harmed. Board members should ensure that implementing sustainable business practices is a key organisational goal. Not only through legal compliance but taking voluntary efforts to building a sustainable community can help corporate brands gain trust in the long run. When local communities trust organisations for their conduct and honesty, it automatically results in higher sales and a goodwill premium.
While executing these steps may disrupt how a traditional board functions, it is the need of the hour. Leadership teams and board members need to adopt major changes to ensure that a culture of fairness, transparency and equality is followed across the organisation. While quarterly profits, growth targets and shareholder performances continue to be a major part of boardroom agendas, companies also need to work harder on creating an institutional moral fiber for the long term good of the organisation and its people.
