August 2020 | 

Corporate Governance: Navigating New Challenges

Corporate Governance: Navigating New Challenges

Remember when there was a line between business and politics? Companies and their leaders were reserved about political preferences and worked to influence policy quietly, behind closed doors. Employees similarly adhered to that line, keeping their politics private at work.

Today that’s obviously no longer the case. There are significant advantages that stem from a blurred line: The political influence companies wield as a result of unlimited donations to political causes, thanks to the Supreme Court’s 2010 Citizens United decision, has benefited them greatly.

But with those benefits come enhanced responsibility and scrutiny, introducing new complications for firms’ leadership. Wharton management professor Mary-Hunter McDonnell says as companies have become more centrally involved in the political process, they are “frequently implicated in large-scale social movements such as Me Too and Black Lives Matter. Activists see companies as necessary allies, and they are putting pressure on firms to demonstrate movement toward more diversity, not just in terms of individual employees, but also to address some of the unfair allocations of opportunities within organizations. Increasingly, companies must respond to some of these issues.”

McDonnell also points to a cultural shift — employees no longer consider their political beliefs and social goals as private matters. “They want to see the company they work for as aligned with their values, and as a platform to enable them to progress their personal social goals,” she says. That’s also true of investors. Wanting to put their money where their values lie, they’re looking more closely at environmental, social, and governance (ESG) metrics when evaluating companies.

Having the right leadership in place to grapple with these new pressures and enterprise risks, both in the c-suite and the boardroom, is critical. The problem, says McDonnell, is that “historically, these have not been issues that were at the top of the agenda for firms. That means many boards are simply not equipped to think through and manage them.”

That’s a serious problem — one that the new Corporate Governance: Essentials for a New Business Era was designed to address. Held live online over four days, the program addresses the contemporary problems in governance that are top of mind for boards. It brings together a diverse group of experts, plus guest speakers who enhance the practical, real-world approach. They may include veteran board chairs and lead directors, and an executive-search partner experienced in board recruitment and onboarding.

Five Wharton management professors teach in the program, representing a broad scope of interests and research. McDonnell will lead a session based on her study of boards’ responses to social risk through social movements. Witold Henisz, who directs Wharton’s Political Risk Lab, will share the latest findings on ESG metrics. His research, critical for current boards, shows the impact of ESG on the bottom line: Companies that deal better with non-traditional risks deliver superior, sustainable returns.

A federal prosecutor will explain how boards can conduct internal investigations, based on his personal experience with major telecommunications and financial firms. These investigations can be especially challenging when directors are not employed by the company. In particular, participants will gain insights into assessing claims stemming from movements such as Me Too.

Like all Wharton LIVE programs, Corporate Governance: Essentials for a New Business Era addresses executives’ most timely concerns, helping them navigate through today’s rapidly changing environment. Sessions are highly engaging and experiential, with an emphasis on the practical over the theoretical. Small-group work and discussions held in breakout rooms provide ample opportunities for sharing best practices and networking. The program gives seasoned and aspiring directors new knowledge and insights to begin improving board performance and, in turn, companies’ risk management and value.