The starting point for Harry Korine and Michael Hilb’s stimulating challenge to readers to reinterpret the role of the board of directors is to remind us that ‘As recently as 1990, the board of directors generally enjoyed a largely ceremonial existence’. Board membership then (of listed companies, in particular) was seen as a form of recognition rather than a serious obligation to take an active part in organisational leadership.

But, as they go on to say, ‘Contrast that with 2022, when a continuously growing list of topics, from climate change to diversity policy, call for serious board attention, and many different types of organisations, from global giants to start-ups, aspire to a high-performing board. The board of directors was once an afterthought, a relic of historic laws of incorporation; today it is being asked to be all things to all people…’

Reflecting on thirty years of increasing pressure on boards to take on a bigger role, Korine and Hilb conclude that the way boards work has not kept pace with the demands on them. Increased demand meets limited capacity. They say the result too often is boards of directors that stick to the bare minimum necessary to satisfy regulators and stakeholders. This is contrary to the essence of governance—providing long-term leadership that ensures the viability of the organisation.

To demonstrate that boards under an ever-increasing compliance burden are not obliged to retreat to a narrow position of formal authority, Korine and Hilb explore the adaptive responses of three quite different companies. The experience of these companies reflects the necessity facing all boards: to make explicit choices (and the consequent trade-offs) about the type of board work that will steer their companies to a better future.

The case studies are of Hilti, a privately-owned building materials company; Møller-Maersk, a family-controlled, but publicly listed transport logistics company; and Nestlé, a widely held global FMCG company. Although their strategic challenges differ, each has chosen to reinterpret the board’s role as a kind of ‘task force’ for entrepreneurial leadership, and seek to make their corporate governance a source of competitive advantage. This approach Korine and Hilb say ‘…puts directors in the driver’s seat; rather than functioning as a post hoc instance of policy approval and passively reacting to events, the boards of these companies engage proactively with the business and its context. Instead of waiting for stakeholders and circumstances to define its mandate, the board takes advantage of its right to shape it.’

Hilti: driving change while maintaining cultural continuity

After 45 successful years as a private company, Hilti went public in 1986. Only seven years later, however, the company returned to private ownership. While Hilti takes corporate governance very seriously, as a private company it is also able to defy widely accepted and often regulated-for principles of good governance. From the changes the company went through, it learned that effective corporate governance must be based on a strong culture.

Every 15 to 18 months, the Hilti culture is renewed in ‘culture camps’, which involve all 30,000 employees worldwide. Board members are an integral part of this process. Each director attends a two-day culture camp where key themes for the next organisation-wide culture camp are tested and discussed, using feedback from all levels in the company. By its active participation the board demonstrates its commitment to Hilti’s culture journey and that it is also accountable for the results.

Holding one board meeting each year in one of Hilti’s market regions is another way the board is embedded in the fabric of work at Hilti. Members spend two days in one country in the region, accompanying local sales staff on customer visits, attending project meetings, and interacting with local management. This enables board members to tap into local knowledge and see what is happening on the ground.

In case this draws the board too far into the operational realm, the respective roles of board and executive management are clearly defined, as is the role of the majority shareholder (the Hilti Family Trust). The board is expected to be an effective partner, contributing tangible value to the development of the company. It requires a high level of board involvement, but also ensures the board can do the best possible job of ensuring the future of the corporation.

Møller-Maersk: spearheading strategic reinvention

At Danish transport and logistics giant, 117-year-old Møller-Maersk, the board’s role is to ‘inspire management to take the risk of re-invention’. A shift from the board’s traditional rearward focused attention to the progress of existing strategy was in response to the rapid technological and business model changes now common even in traditionally stable industries. Since 2017, the 117-year-old company has refocused from shipping to logistics and supply-chain management.

The Møller-Maersk board devotes considerable time to matters of high importance to the company’s future, challenging the assumptions of executives rather than second-guessing them on operational issues; asking questions, rather than answering them. This is reflected in the way the board drives preparation for its annual strategy meeting. Four months out, the chair—acting as a kind of ‘chief futurist’—develops a list of questions for management. These aim to produce a point of view on what the company’s entire value chain will look like in five years—which segments will grow, how margins will evolve, and where profit pools may emerge. Evidence-driven inquiry on the back of these questions looks to where the company will have a future competitive advantage. Thanks to this preparation, the chair (and board) can leave leadership of the strategy workshop itself—and delivery of the strategy—to the CEO.

Supporting this strategic reinvention process, the board has significantly reduced the time spent poring over quarterly reports and discussing the past. This has also been helped by trusting much of the necessary compliance work to committees, freeing the board to give more attention to redefining success and keeping tabs on the strategic experiments shaping the future of the company.

Nestlé: navigating global stakeholder relationships

Nestlé operates as a consumer goods company, active in 187 markets around the world. When it sought shareholders’ support in 2021 to invest in reducing its carbon emissions, the initiative was seen as a pioneering approach to aligning shareholder and stakeholder interests. However, the comparatively large size of Nestlé’s 14-member board reflects a long-held commitment to having a wide range of perspectives represented. A large board like this runs counter to accepted practice but has helped Nestlé to anticipate consumer and societal trends on one hand and deal with investor activism and stakeholder disagreements on the other. Faced with multiple opinions on everything, it is important for the board to ask the right questions about the outside world, and routinely engage in conversations with stakeholders.

Another feature of the Nestlé board’s approach is to nurture a close working relationship with management. The CEO is a member of the board, and, except for regular in-camera sessions, the entire executive team is present at board meetings. They also join directors for the board’s pre-board meeting dinner, so have plenty of opportunities to draw on the board's wisdom. Similarly, the board is helped to address critical issues openly and directly with the executive team. A strong, lead independent director who interacts with both Chair and CEO ensures that governance and operational boundaries are not blurred.

Reinterpreting governance as a source of competitive advantage

Reflecting on the experience of these three companies, Korine and Hilb conclude that their respective chairs have positioned their boards as instruments of entrepreneurial leadership, moving them to a broader, more proactive role beyond the narrow, mechanical view of corporate governance that amounts to little more than post hoc supervision of management.

The case studies show that organisations in different contexts require different contributions from their boards. Based on in-depth evaluations of the external and internal challenges faced by their organisations, their chairs have defined their boards’ roles not according to a textbook or legal definition, but in line with their organisations’ current and future requirements. They have inspired their fellow directors and executives to reinterpret their respective roles as the needs of their company evolve.

Rather than waiting to be blamed for mistakes, these boards are practical, future-oriented and taking responsibility for strategic direction. Integral to this approach, the boards of each of these large, complex companies aim to be more knowledgeable about operations and more active in collaborating with executive management than is usual. This acknowledges that if a board is to provide credible strategic leadership, it must have deep familiarity with the actual workings of its business.

The case studies also underline the critical role of the board chair. The three chairs have each applied a distinct vision of their board’s role relative to their company’s needs. They have fostered a culture in which open conversations and frank exchanges are the norm. Notwithstanding board and company compliance obligations, each chair has been intentional in deciding what areas to emphasise and in shaping how the board functions. They have shown it is important not to let the heavy and increasing weight of compliance obligations, or commonly accepted definitions of ‘best practice’, obscure possibilities for making distinctive choices to create value.

The three cases studies also suggest additional lessons:

• Not all, and not even most, board members need to be strategists who have spent their careers focused on the future, but each has a part to play.
• An entrepreneurial board is a team built over time, not one brought together for an annual ‘all-star game’.
• In shaping how the board functions, high-performance collaboration between board and management can also be a mark of distinction.
• There is a place for a ‘working board’—one involved in meeting challenges as they occur, acting as a repository of knowledge for executives, an extra hand for particularly sensitive projects, and a relevant face of the company for stakeholders.

To conclude, Korine and Hilb underline the basic premise of their review:

“… strategy needs to be adapted to changing conditions. Governance is no different. What works today, to fit a specific strategy, is unlikely to work as well tomorrow, when opportunities and risks are different.”