Wharton@Work

April 2024 | Senior Leadership

Rethinking Board Leadership: New Challenges, New Skills

In the decade since the publication of Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way, the role of director has continued to evolve. No longer relegated to passive monitoring, today’s board members must be true partners in leadership, providing crucial guidance on risk management, leadership succession, and value creation. Plus, there is increasing pressure to take sides on political and social concerns, both in and out of the scope of the business. No matter how directors respond, the new universal proxy card system puts them in the spotlight, as activist investors delve into their contributions and partisanship in an effort to identify and replace those deemed least effective or representative of a particular stance.  It’s not surprising, then, that most directors report that they are spending considerably more time on their board duties than they did just a few years ago.

These pressures coexist with the continued need for boards to contribute strategic direction and oversight, keep up with technological advances and their potential impact on the business, and address the need for diversity and inclusion in the boardroom and the workforce. Wharton management professor emeritus Mike Useem; vice chairman of Korn/Ferry Dennis Carey; and world-renowned business consultant, author, and speaker Ram Charan — the authors of Boards That Lead — have kept up with these developments, and they share the latest thinking on how directors can best make a leadership difference in the Boards That Lead: Corporate Governance That Builds Value program.

Taught with Wharton management professors Emilie Feldman and Harbir Singh, the program advocates a new governance model that calls for increased engagement and shared leadership with senior executives. In addition to participants learning from the distinguished faculty, they have the opportunity to network with one another and engage with a panel of prominent, highly experienced executives and directors who share their insights and discuss specific strategies and approaches.

Kathee Rebernak, CEO of management consultancy Framework LLC, said after attending, “I’ve already applied insights from the program in a recent board meeting I attended, during which we discussed candidates to fill two board positions. We discussed how board members must not only have the right skill sets and areas of expertise; it’s important to understand what kind of board culture you want to cultivate. Wharton’s program underscored how important it is for board members to have an open and collaborative relationship with each other in order for the board as a whole to be an effective leader.”

Navigating New Risks

For a deeper examination of emerging challenges and risks affecting large companies, Wharton offers the Corporate Governance: Essentials for a New Business Era program. Co-directed by Useem and Professor Mary-Hunter (Mae) McDonnell, it helps current and prospective board members better understand what constitutes successful board service in the current environment.

The program includes governance perspective on company and legal issues related to diversity and inclusion, shareholder activism, climate change, global trade, disease epidemics, and social responsibility. For those considering board service, it also examines current opportunities and provides a how-to in positioning oneself as a candidate. Guest speakers, who engage in dialogue and Q&As with program participants, have included former CEOs and chairpersons Janet Foutty (Deloitte) and Bill McNabb (Vanguard).

Understanding Activist Investors

While most of the press about shareholder activism centers on how to deter activist investors, Wharton finance professors Bilge Yilmaz and Kevin Kaiser offer a more nuanced approach. Aimed at directors, senior executives, and investors, the Shareholder Activism: Activating Change for Value Creation program considers the possibilities for both benefit and detriment from this activity. It familiarizes participants with the competing perspectives and develops an understanding of the various tactics available to both shareholder activists and corporations targeted by the activists.

Musharaf Anwar, vice president and portfolio manager of RBC Wealth Management, says the program is “excellent. Professors Kaiser and Yilmaz take you backstage to experience how activist investors pursue corporate boards to create value. In the past, most investors might run away from investing in a company targeted by activist shareholders. However, after taking this program, one can better understand the ways in which you can capitalize on these investment opportunities and create value for your clients.”

Women on Boards

Research by Credit Suisse, Moody’s, McKinsey, and others reveals that companies with more women at the board or top management level have higher returns on equity, higher valuations, and higher payout ratios. That compelling business case is slowly being heard: women held just under 26 percent of U.S. board director seats in 2023 (up from 19 percent in 2014). Add the new Nasdaq rules that listed companies must have at least one woman on their board, and the opportunities for qualified women to serve on boards is expected to skyrocket.

The most recent addition to Wharton’s board programs, Women on Boards: Building Exceptional Leaders, helps prepare women to take advantage of these opportunities, providing an in-depth look at the process of recruiting and selecting directors, among other pressing governance issues. Director Mae McDonnell says, “Diversity of all kinds increases the depth and breadth of discussions and monitoring. When you have people approaching the same question from different perspectives, you're more likely to see the problematic angles of an issue that you wouldn't have otherwise seen. When people share backgrounds and even demographic identities, they tend to coalesce around things that they have in common instead of thinking about things from a more complex vantage.”

The program is taught by Wharton experts on leadership and board governance, including Dean Erika James. In addition to developing a greater understanding of board service and today’s most pressing corporate challenges, it helps participants build their personal brand through strategic use of social media; the right speaking engagements; networking; and putting together a board bio, CV, and LinkedIn profile.

“A good board member can anticipate challenges that could arise,” says McDonnell. “Directors must be able to look for blind spots and help tackle the looming next generation of board issues that companies are going to face: climate change, increased wealth disparity, political instability. In the program we are training leaders to tackle these non-market issues with more diverse profiles and experiences.”