Convergence Through Conscientious Governance

“The last several decades have proven that, more than ever, we are all interconnected and interdependent,” said NACD Chair Karen Horn. “We will rise—or fall—together, based on that trust.”

Karen Horn NACD Chair

NACD Board Chair Karen Horn

Horn’s opening speech at the recent 2016 NACD Global Board Leaders’ Summit revealed a compelling case for strong, conscientious corporate governance in light of recent political, economic, and social turbulence.

Horn’s governance experience is extensive and includes serving as a director at Simon Property Group, vice chair of the U.S. Russia Foundation, and vice chair of the National Bureau of Economic Research. She also previously served as chair of the audit committee at Norfolk Southern Corp., lead director and chair of the compensation committee at Eli Lilly & Co., and a director of T. Rowe Price Mutual Funds.

Horn began by thanking outgoing NACD chair Reatha Clark King for “her leadership and her positive influence on our organization’s growth,” and praised the audience for their own strength of leadership in the boardroom. She then turned to the guiding concept behind this Summit’s programming—convergence.

“Convergence is an important theme at a time when our world appears to be tearing itself apart,” Horn said.  She pointed out that hostility seems to be the prevailing sentiment of our time and that frustrations with the current domestic and geopolitical environments are the impetuses for growing division. “I feel we must focus on a wider, longer view—a more broadly encompassing perspective that leads us back toward convergence,” she said.

Horn—who previously served as president of the Federal Reserve Bank of Cleveland and as an economist for the board of governors of the Federal Reserve—made several recommendations meant to address the evolving relationship between society and capitalism, using conscientious governance. (For more information on the roles of capitalism and corporations, view the NACD blog post “Re-Thinking Capitalism: Best-Selling Author Espouses Higher Calling for Boards.”)

Addressing Income Inequality

Directors can take a role in addressing social issues like income inequality, Karen said, adding that income inequality is an example of a challenge that “affects not only our immediate stakeholders, but everyone downstream who will be affected in the long term as well as the short term.”

Horn agrees that free trade is an excellent driver of economic value across the board, but that the path to growth can unintentionally leave some individuals behind. She suggested public, private, and government entities alike should develop programs that lift up those who are taken advantage of or otherwise harmed on the path to greater economic progress. “Looking at an issue like this from the perspective of those who will not benefit, or may even be hurt by it, is the first step toward finding compromises and solutions that will minimize negative fallout,” Horn said about the corporation’s role in growth as a greater good.

One such program that directors could collaborate with policy makers, social leaders, and other stakeholders on is how to address the controversial debate over minimum wage increases. “Everyone has an opinion, and it is clearly a divisive issue,” Horn conceded to the audience. “If we are to find a solution that works, again, we must become familiar with the divergent perspectives.”

The Imperative to Lead

Capitalism is being impacted by “globalism, social and demographic shifts, new technology, increased transparency and resource scarcity,” According to Horn. In the face of these paradigm shifts, directors have the opportunity to converge with stakeholders to build a better path forward for all, and have a unique opportunity to rebuild the public’s trust in the role of corporations.

“People are searching for leaders they can trust, leaders who are smart, confident and strong—who are understanding and compassionate,” Horn said. “This is a role sometimes filled by government, but trust in government is at an all-time low, so the leadership gap needs to be filled. I believe we are some of the leaders who can and should fill that gap.”

Horn’s address closed with a charge to directors that will resound through her term as chair of NACD and beyond.

“Corporate America has an immense amount of talent, and we need to step up before we are stepped over,” she entreated. “There is no question that we have the ability to take this leadership challenge, but only if we act responsibly, transparently, honestly and with careful regard for different perspectives. If we can do that, we can move our culture back toward civil discourse—toward convergence.”

Convergence Through Conscientious Governance

“The last several decades have proven that, more than ever, we are all interconnected and interdependent,” said NACD Chair Karen Horn. “We will rise—or fall—together, based on that trust.”

Karen Horn NACD ChairHorn’s opening speech at the recent 2016 NACD Global Board Leaders’ Summit revealed a compelling case for strong, conscientious corporate governance in light of recent political, economic, and social turbulence.

Horn’s governance experience is extensive and includes serving as a director at Simon Property Group, vice chair of the U.S. Russia Foundation, and vice chair of the National Bureau of Economic Research. She also previously served as chair of the audit committee at Norfolk Southern Corp., lead director and chair of the compensation committee at Eli Lilly & Co., and a director of T. Rowe Price Mutual Funds.

Horn began by thanking outgoing NACD chair Reatha Clark King for “her leadership and her positive influence on our organization’s growth,” and praised the audience for their own strength of leadership in the boardroom. She then turned to the guiding concept behind this Summit’s programming—convergence.

“Convergence is an important theme at a time when our world appears to be tearing itself apart,” Horn said.  She pointed out that hostility seems to be the prevailing sentiment of our time and that frustrations with the current domestic and geopolitical environments are the impetuses for growing division. “I feel we must focus on a wider, longer view—a more broadly encompassing perspective that leads us back toward convergence,” she said.

Horn—who previously served as president of the Federal Reserve Bank of Cleveland and as an economist for the board of governors of the Federal Reserve—made several recommendations meant to address the evolving relationship between society and capitalism, using conscientious governance. (For more information on the roles of capitalism and corporations, view the NACD blog post “Re-Thinking Capitalism: Best-Selling Author Espouses Higher Calling for Boards.”)

Addressing Income Inequality

Directors can take a role in addressing social issues like income inequality, Karen said, adding that income inequality is an example of a challenge that “affects not only our immediate stakeholders, but everyone downstream who will be affected in the long term as well as the short term.”

Horn agrees that free trade is an excellent driver of economic value across the board, but that the path to growth can unintentionally leave some individuals behind. She suggested public, private, and government entities alike should develop programs that lift up those who are taken advantage of or otherwise harmed on the path to greater economic progress. “Looking at an issue like this from the perspective of those who will not benefit, or may even be hurt by it, is the first step toward finding compromises and solutions that will minimize negative fallout,” Horn said about the corporation’s role in growth as a greater good.

One such program that directors could collaborate with policy makers, social leaders, and other stakeholders on is how to address the controversial debate over minimum wage increases. “Everyone has an opinion, and it is clearly a divisive issue,” Horn conceded to the audience. “If we are to find a solution that works, again, we must become familiar with the divergent perspectives.”

The Imperative to Lead

Capitalism is being impacted by “globalism, social and demographic shifts, new technology, increased transparency and resource scarcity,” According to Horn. In the face of these paradigm shifts, directors have the opportunity to converge with stakeholders to build a better path forward for all, and have a unique opportunity to rebuild the public’s trust in the role of corporations.

“People are searching for leaders they can trust, leaders who are smart, confident and strong—who are understanding and compassionate,” Horn said. “This is a role sometimes filled by government, but trust in government is at an all-time low, so the leadership gap needs to be filled. I believe we are some of the leaders who can and should fill that gap.”

Horn’s address closed with a charge to directors that will resound through her term as chair of NACD and beyond.

“Corporate America has an immense amount of talent, and we need to step up before we are stepped over,” she entreated. “There is no question that we have the ability to take this leadership challenge, but only if we act responsibly, transparently, honestly and with careful regard for different perspectives. If we can do that, we can move our culture back toward civil discourse—toward convergence.”

Why We Are ALL Small Business Owners

The business landscape is shifting so rapidly that more employees with “traditional” careers need to be employing the skills that make entrepreneurs and small business owners successful. As the existence of many linear career paths fade into the distance, career planning has become a necessity in today’s job market and needs to be supported throughout the lifespan of a career and into retirement. But how does one develop a career plan in such a dynamic environment?

As employers are starting to scale up and down quickly and work is becoming more project based (vs. role based), the worker now needs to engage in more mindful and proactive career planning. We now find ourselves in a team based fluid matrix model, where the structure is based less on hierarchy and defined roles, and more on the work that needs to be done.  The expectation today is that as a worker, you are responsible for navigating your own career plan.

We all need to operate as our own small business – “Company of Me” – bringing a dynamic, proactive, adaptable approach to work.  Skills and strategies that were once the domain of entrepreneurs and small business owners are now a highly valued part of job search and career strategy, even for employees in established organizations.

These include:

  • Self-Marketing and Promotion
  • Personal Branding & Thought Leadership development
  • Personal Financial Planning and Budgeting
  • Staying relevant and updating skills on a continuous basis
  • Following key industry trends and challenges
  • Being agile and opportunity-focused in the face of change
  • Clearly understanding one’s key strengths and accomplishments
  • Business development and persuasion strategies
  • Multitasking
  • Self- care, prioritization of family, health and work

As you can see, like a successful business owner, the job seeker and career planner needs to be outward and customer focused.  They must find an unmet need in the market or a unique way to deliver a service and know how their unique set of skills & experience can be of value for an employer. In addition, the essential skills vital to effectively work within inter-disciplinary teams and across functional areas is highly valued. These include adaptability, collaboration, client management, integrity, and time and work prioritization.

So how can you develop and implement more of these skills and strategies in your current role or job search? One starting point is to begin increasing your visibility both inside and outside the company. This could include writing an article for the newsletter or company blog or sharing relevant articles on LinkedIn and Twitter. You could also start bolstering your network now and attend regular industry association events.  How about creating your own personal development plan to keep your skills sharp (like taking a part time course or volunteering in an area you are interested in) or starting an accomplishment portfolio?

The future of work is full of uncertainty but taking control and putting yourself in the driver’s seat as CEO Of your “Company of Me” will put you in a position of strength and confidence to ride the shifting landscape of work successfully.

Board Oversight of Cyber Risk in the Wake of the Yahoo Breach

The major cyber breach that Yahoo announced last week has ripple effects not only for the multimedia platform, but for every company. The incident already has caught the attention of a senator who is calling on the U.S. Securities and Exchange Commission (SEC) to investigate how Yahoo disclosed the breach to shareholders and the public.

Background on the Breach

Ashley Marchand Orme

Ashley Marchand Orme

Account data for at least 500 million users was stolen by what Yahoo has called a “state-sponsored actor” in what CNN Money calls one of the largest data breaches ever. Compromised information includes names, email addresses, phone numbers, dates of birth, encrypted passwords, and security questions.

Yahoo has not named a country of origin for the hacker. The company, which Verizon is seeking to acquire, is still one of the busiest online sites, boasting one billion monthly users.

The breach occurred in late 2014, according to Yahoo, but the company just disclosed the incident in a press release dated Sept. 22, 2016. The Financial Times reports that Yahoo CEO Marissa Mayer may have known about the breach as early as July of this year, raising questions as to why it wasn’t disclosed sooner.

Attention From Lawmakers

Sen. Mark R. Warner (D.-VA), a member of the Senate Intelligence and Banking Committees and cofounder of the Senate Cybersecurity Caucus, sent a letter to the SEC yesterday asking the agency to investigate whether Yahoo complied with federal securities law regarding how and when it disclosed the incident.

“Data security increasingly represents an issue of vital importance to management, customers, and shareholders, with major corporate liability, business continuity, and governance implications,” the senator wrote.

Warner—who cofounded the company that became Nextel, a wireless service operator that merged with Verizon—also told the SEC that “since published reports indicate fewer than 100 of approximately 9,000 publicly listed companies have reported a material data breach since 2010, I encourage you to evaluate the adequacy of current SEC thresholds for disclosing events of this nature.”

And Warner isn’t the only lawmaker pushing for increased cyber regulations. Earlier this month, New York Governor Andrew Cuomo (D-NY) announced proposed cybersecurity regulations to increase the responsibility of banks and insurance to protect their information systems and customer information. The regulations, if instated, would apply to companies regulated by the New York Department of Financial Services (NYDFS) and would require them to—among other steps—establish a cybersecurity policy and incident response plan. Companies would also have to notify the NYDFS within 72 hours of any cyber event that is likely to affect operations or nonpublic information.

The Boardroom Response

Any company—whether public, private, or nonprofit—can fall prey to a breach, and even companies with formal cybersecurity plans can find themselves the victims of a breach. Preliminary data from the 2016-2017 NACD Public Company Governance Survey show what corporate directors are already doing to oversee cyber-related risks.

When asked which cybersecurity oversight practices the survey respondents’ boards had performed over the past 12 months—and directors could select multiple answers—the most common responses included:

  • Reviewed the company’s current approach to protecting its most critical data assets (76.6%)
  • Reviewed the technology infrastructure used to protect the company’s most critical data assets (73.6%)
  • Communicated with management about the types of cyber-risk information the board requires (64.4%)
  • Reviewed the company’s response plan in the case of a breach (59.3%).

“Corporate directors should ask management for an accurate and externally validated report on the state of the organization with respect to cyber risk,” said Robert Clyde, a board director for ISACA, which is a global IT and cybersecurity professional association, and White Cloud Security. “They should also ask what framework is being followed for IT governance.”

Aside from high-profile breaches of emails and email providers, Clyde says that breaches related to ransomware are increasing.

“Ransomware encrypts data that can only be decrypted by paying the attacker a fee in Bitcoins.  According to the NACD Cyber-Risk Oversight Handbook and many other organizations, the key control to reduce the risk of attack—including ransomware—is restricting user installation of applications, called ‘whitelisting’ or ‘Trusted App Listing,’” Clyde said. “Yet this highly recommended control is rarely implemented. Boards should ask organizations for their plans to implement this specific control.”

NACD Resources

NACD recently announced a new online cybersecurity learning program for directors. The multi-module course aims to enhance directors’ understanding of cybersecurity, and the difference between the board’s and management’s responsibilities related to cyber risks. Participants in the program, which is the product of partnership between NACD, Ridge Global, and the CERT Division of Carnegie Mellon University’s Software Engineering Institute, will work through a cyber-crisis simulation and take a comprehensive exam. Successful completion of the program will earn the participant a CERT Certificate in Cybersecurity Oversight.

For board-level tools and templates to fortify your oversight practices, visit NACD’s Cyber-Risk Oversight Resource Center.

 

 

Board Oversight of Cyber Risk in the Wake of the Yahoo Breach

The major cyber breach that Yahoo announced last week has ripple effects not only for the multimedia platform, but for every company. The incident already has caught the attention of a senator who is calling on the U.S. Securities and Exchange Commission (SEC) to investigate how Yahoo disclosed the breach to shareholders and the public.

Background on the Breach

Ashley Marchand Orme

Ashley Marchand Orme

Account data for at least 500 million users was stolen by what Yahoo has called a “state-sponsored actor” in what CNN Money calls one of the largest data breaches ever. Compromised information includes names, email addresses, phone numbers, dates of birth, encrypted passwords, and security questions.

Yahoo has not named a country of origin for the hacker. The company, which Verizon is seeking to acquire, is still one of the busiest online sites, boasting one billion monthly users.

The breach occurred in late 2014, according to Yahoo, but the company just disclosed the incident in a press release dated Sept. 22, 2016. The Financial Times reports that Yahoo CEO Marissa Mayer may have known about the breach as early as July of this year, raising questions as to why it wasn’t disclosed sooner.

Attention From Lawmakers

Sen. Mark R. Warner (D.-VA), a member of the Senate Intelligence and Banking Committees and cofounder of the Senate Cybersecurity Caucus, sent a letter to the SEC yesterday asking the agency to investigate whether Yahoo complied with federal securities law regarding how and when it disclosed the incident.

“Data security increasingly represents an issue of vital importance to management, customers, and shareholders, with major corporate liability, business continuity, and governance implications,” the senator wrote.

Warner—who cofounded the company that became Nextel, a wireless service operator that merged with Verizon—also told the SEC that “since published reports indicate fewer than 100 of approximately 9,000 publicly listed companies have reported a material data breach since 2010, I encourage you to evaluate the adequacy of current SEC thresholds for disclosing events of this nature.”

And Warner isn’t the only lawmaker pushing for increased cyber regulations. Earlier this month, New York Governor Andrew Cuomo (D-NY) announced proposed cybersecurity regulations to increase the responsibility of banks and insurance to protect their information systems and customer information. The regulations, if instated, would apply to companies regulated by the New York Department of Financial Services (NYDFS) and would require them to—among other steps—establish a cybersecurity policy and incident response plan. Companies would also have to notify the NYDFS within 72 hours of any cyber event that is likely to affect operations or nonpublic information.

The Boardroom Response

Any company—whether public, private, or nonprofit—can fall prey to a breach, and even companies with formal cybersecurity plans can find themselves the victims of a breach. Preliminary data from the 2016-2017 NACD Public Company Governance Survey show what corporate directors are already doing to oversee cyber-related risks.

When asked which cybersecurity oversight practices the survey respondents’ boards had performed over the past 12 months—and directors could select multiple answers—the most common responses included:

  • Reviewed the company’s current approach to protecting its most critical data assets (76.6%)
  • Reviewed the technology infrastructure used to protect the company’s most critical data assets (73.6%)
  • Communicated with management about the types of cyber-risk information the board requires (64.4%)
  • Reviewed the company’s response plan in the case of a breach (59.3%).

“Corporate directors should ask management for an accurate and externally validated report on the state of the organization with respect to cyber risk,” said Robert Clyde, a board director for ISACA, which is a global IT and cybersecurity professional association, and White Cloud Security. “They should also ask what framework is being followed for IT governance.”

Aside from high-profile breaches of emails and email providers, Clyde says that breaches related to ransomware are increasing.

“Ransomware encrypts data that can only be decrypted by paying the attacker a fee in Bitcoins.  According to the NACD Cyber-Risk Oversight Handbook and many other organizations, the key control to reduce the risk of attack—including ransomware—is restricting user installation of applications, called ‘whitelisting’ or ‘Trusted App Listing,’” Clyde said. “Yet this highly recommended control is rarely implemented. Boards should ask organizations for their plans to implement this specific control.”

NACD Resources

NACD recently announced a new online cybersecurity learning program for directors. The multi-module course aims to enhance directors’ understanding of cybersecurity, and the difference between the board’s and management’s responsibilities related to cyber risks. Participants in the program, which is the product of partnership between NACD, Ridge Global, and the CERT Division of Carnegie Mellon University’s Software Engineering Institute, will work through a cyber-crisis simulation and take a comprehensive exam. Successful completion of the program will earn the participant a CERT Certificate in Cybersecurity Oversight.

For board-level tools and templates to fortify your oversight practices, visit NACD’s Cyber-Risk Oversight Resource Center.

 

 

Re-Thinking Capitalism: Best-Selling Author Espouses Higher Calling for Boards

“Society needs financial wealth … but it matters how you make the money,” said Rajendra Sisodia, co-founder and co-chair of Conscious Capitalism Inc., and director of the Container Store Group. “Businesses not only create, they can destroy financial wealth, as well.”

Raj Sisodia NACD Summit

Sisodia, a marketing professor at Babson University whose published books include Conscious Capitalism and Firms of Endearment, delivered a keynote address on capitalism’s transformative power Tuesday at NACD’s Global Board Leaders’ Summit. The four-day summit convened more than 1,300 attendees—the world’s largest gathering of corporate directors—in Washington, D.C. from Sept. 17-20.

Roots of Capitalism

One of the most significant conclusions of Scottish moral philosopher Adam Smith’s seminal 1776 book, An Inquiry Into the Nature and Causes of the Wealth of Nations (often referred to as The Wealth of Nations), was that places rooted in freedom tend to be more prosperous. Smith’s work became a foundational text on how capitalist markets work.

“That same year—an extraordinary historic coincident in some ways—the United States was born as a country, but more importantly, an idea. [It was] the only country born out of a set of ideas,” Sisodia said. “The ideas all revolved around liberty and freedom.” Entire segments of the American population, however, were not initially given access to that freedom—including African-Americans, native populations, and women—but the nation has extended freedoms steadily over the course of its nearly 250-year history.

“What is capitalism? Political and economic freedom,” Sisodia proclaimed. It’s rooted in the idea that free markets—or economic growth driven by individuals, rather than a centrally planned economy directed by the government or a political system—help people collectively elevate their material living conditions and boost prosperity, he said.

Poverty and Capitalism

A misperception about capitalism, Sisodia said, is that it exploits people of lower income brackets, locking them into poverty. Research, though, suggests that as capitalist markets have expanded, poverty rates have declined.

Data from the World Bank show that rates of extreme poverty have decreased considerably over the past three decades. More than half of people in the developing world lived on less than $1.25 per day in 1981, compared with 21 percent living on that amount per day in 2010.

Sisodia credited that decrease to prosperity derived from capitalism, saying that the key challenge for lifting the rest of the world out of poverty is not the unequal distribution of income, but the unequal distribution of freedom.

How the World Is Changing

“What will it take for companies to flourish in the future—and not just flourish for the purpose of making a lot of money, but actually be agents of flourishing in society?” Sisodia asked. The simple answer, he continued, is that you must be in harmony with the fact that people have changed over time to become, among other things, more:

  • There are now more mobile devices on Earth than there are people. The internet and use of social media have further connected the world. Facebook now claims 1.6 billion users.
  • The rate of serious violent crimes in U.S. public schools has dropped significantly to about one-third of what it was in 1994. Europe, Sisodia said, had experienced 1,200 wars in 600 years, but since 1945, inter-state wars on the continent have disappeared.
  • Sisodia described the so-called Flynn Effect, which suggests that there has been a consistent increase in IQ scores from 1930 to the present.
  • Embracing of “feminine” values. “I think the great story of this century is … the end of the suppression of the feminine [side of humanity],” Sisodia said. Women now earn more college degrees than men in the United States, and as a result, the expectation is that women will rise in positions of leadership—particularly in white-collar work settings. That will naturally mean that so-called feminine values, which he described as including cooperation, empathy, and compassion, will gain more traction in society.

Tenets of Conscious Capitalism

Accepting that the world is changing, Sisodia advised that businesses embrace the four tenets of conscious capitalism. That means to act with:

  • A higher purpose, or more specifically, a purpose beyond generating profits. Sisodia’s website provides a further explanation by quoting University of Virginia Darden School of Business professor and Conscious Capitalism, Inc. trustee, Ed Freeman: “We need red blood cells to live (the same way a business needs profits to live), but the purpose of life is more than to make red blood cells (the same way the purpose of business is more than simply to generate profits).”
  • A stakeholder orientation. Conscious businesses exist not only to maximize ROI for shareholders, but also seek to enhance value for all stakeholders, leading to a more resilient business.
  • Conscious leadership that demonstrates care for purpose and people; and
  • Conscious culture built on trust, care, and transparency—not rooted in fear and stress (the risk of having a heart attack is 20% higher on Mondays for men, 15% for women, and most research blames the stress of returning to work for these statistics).

Boards: Stewards of Well-Being

Sisodia offered several considerations aimed at helping boards—and companies—become more conscious overseers:

  • The primary duty of the board is to the corporation—which has its own significant role in society—rather than shareholders.
  • Understand and shape the company’s higher purpose. Ask your board to reflect on why the company would be missed if it were to disappear tomorrow.
  • Consciously seek to create value for all stakeholders.
  • Appoint strong leaders with a capacity for love and care. It is not healthy to appoint leaders who are analytically smart but lack empathy and other forms of emotional intelligence.
  • Build a culture of “full-spectrum” consciousness, meaning that you are not only concerned with service to people and a higher purpose, but also efficiency, effectiveness, and success.
  • Ensure youth and feminine perspectives are heeded when making business decisions.

Humanity is more aware of its challenges and problems than ever before, Sisodia said in closing, and the individual and collective capacity to respond to those challenges has never been higher. “We have to create the organizational forms and philosophies and build business on [the ideals of] purpose and caring. … [A]ll of those answers that we need to our crises are out there inside somebody. We just have to figure out how to liberate that.”

Re-Thinking Capitalism: Best-Selling Author Espouses Higher Calling for Boards

“Society needs financial wealth … but it matters how you make the money,” said Rajendra Sisodia, co-founder and co-chair of Conscious Capitalism Inc., and director of the Container Store Group. “Businesses not only create, they can destroy financial wealth, as well.”

Raj Sisodia NACD Summit

Sisodia, a marketing professor at Babson University whose published books include Conscious Capitalism and Firms of Endearment, delivered a keynote address on capitalism’s transformative power Tuesday at NACD’s Global Board Leaders’ Summit. The four-day summit convened more than 1,300 attendees—the world’s largest gathering of corporate directors—in Washington, D.C. from Sept. 17-20.

Roots of Capitalism

One of the most significant conclusions of Scottish moral philosopher Adam Smith’s seminal 1776 book, An Inquiry Into the Nature and Causes of the Wealth of Nations (often referred to as The Wealth of Nations), was that places rooted in freedom tend to be more prosperous. Smith’s work became a foundational text on how capitalist markets work.

“That same year—an extraordinary historic coincident in some ways—the United States was born as a country, but more importantly, an idea. [It was] the only country born out of a set of ideas,” Sisodia said. “The ideas all revolved around liberty and freedom.” Entire segments of the American population, however, were not initially given access to that freedom—including African-Americans, native populations, and women—but the nation has extended freedoms steadily over the course of its nearly 250-year history.

“What is capitalism? Political and economic freedom,” Sisodia proclaimed. It’s rooted in the idea that free markets—or economic growth driven by individuals, rather than a centrally planned economy directed by the government or a political system—help people collectively elevate their material living conditions and boost prosperity, he said.

Poverty and Capitalism

A misperception about capitalism, Sisodia said, is that it exploits people of lower income brackets, locking them into poverty. Research, though, suggests that as capitalist markets have expanded, poverty rates have declined.

Data from the World Bank show that rates of extreme poverty have decreased considerably over the past three decades. More than half of people in the developing world lived on less than $1.25 per day in 1981, compared with 21 percent living on that amount per day in 2010.

Sisodia credited that decrease to prosperity derived from capitalism, saying that the key challenge for lifting the rest of the world out of poverty is not the unequal distribution of income, but the unequal distribution of freedom.

How the World Is Changing

“What will it take for companies to flourish in the future—and not just flourish for the purpose of making a lot of money, but actually be agents of flourishing in society?” Sisodia asked. The simple answer, he continued, is that you must be in harmony with the fact that people have changed over time to become, among other things, more:

  • There are now more mobile devices on Earth than there are people. The internet and use of social media have further connected the world. Facebook now claims 1.6 billion users.
  • The rate of serious violent crimes in U.S. public schools has dropped significantly to about one-third of what it was in 1994. Europe, Sisodia said, had experienced 1,200 wars in 600 years, but since 1945, inter-state wars on the continent have disappeared.
  • Sisodia described the so-called Flynn Effect, which suggests that there has been a consistent increase in IQ scores from 1930 to the present.
  • Embracing of “feminine” values. “I think the great story of this century is … the end of the suppression of the feminine [side of humanity],” Sisodia said. Women now earn more college degrees than men in the United States, and as a result, the expectation is that women will rise in positions of leadership—particularly in white-collar work settings. That will naturally mean that so-called feminine values, which he described as including cooperation, empathy, and compassion, will gain more traction in society.

Tenets of Conscious Capitalism

Accepting that the world is changing, Sisodia advised that businesses embrace the four tenets of conscious capitalism. That means to act with:

  • A higher purpose, or more specifically, a purpose beyond generating profits. Sisodia’s website provides a further explanation by quoting University of Virginia Darden School of Business professor and Conscious Capitalism, Inc. trustee, Ed Freeman: “We need red blood cells to live (the same way a business needs profits to live), but the purpose of life is more than to make red blood cells (the same way the purpose of business is more than simply to generate profits).”
  • A stakeholder orientation. Conscious businesses exist not only to maximize ROI for shareholders, but also seek to enhance value for all stakeholders, leading to a more resilient business.
  • Conscious leadership that demonstrates care for purpose and people; and
  • Conscious culture built on trust, care, and transparency—not rooted in fear and stress (the risk of having a heart attack is 20% higher on Mondays for men, 15% for women, and most research blames the stress of returning to work for these statistics).

Boards: Stewards of Well-Being

Sisodia offered several considerations aimed at helping boards—and companies—become more conscious overseers:

  • The primary duty of the board is to the corporation—which has its own significant role in society—rather than shareholders.
  • Understand and shape the company’s higher purpose. Ask your board to reflect on why the company would be missed if it were to disappear tomorrow.
  • Consciously seek to create value for all stakeholders.
  • Appoint strong leaders with a capacity for love and care. It is not healthy to appoint leaders who are analytically smart but lack empathy and other forms of emotional intelligence.
  • Build a culture of “full-spectrum” consciousness, meaning that you are not only concerned with service to people and a higher purpose, but also efficiency, effectiveness, and success.
  • Ensure youth and feminine perspectives are heeded when making business decisions.

Humanity is more aware of its challenges and problems than ever before, Sisodia said in closing, and the individual and collective capacity to respond to those challenges has never been higher. “We have to create the organizational forms and philosophies and build business on [the ideals of] purpose and caring. … [A]ll of those answers that we need to our crises are out there inside somebody. We just have to figure out how to liberate that.”

What the Changing Geopolitical Landscape Means for Your Company

Ian Bremmer, founder and president of Eurasia Group, is often described as a guru of political risk—a type of risk that’s becoming more important for companies to consider. In his keynote address at the 2016 NACD Global Board Leaders’ Summit, he advised that, although companies have traditionally focused on financial returns, they will need to be primarily concerned about the security of their investments going forward—and investments stand to be radically impacted by geopolitical disruption. Bremmer noted that the impact of significant global changes is much greater than the outcome of the upcoming U.S. elections.

Ian Bremmer at NACD Summit

He also pointed out two global developments that companies need to keep top of mind:

1. The increased fragmentation of geopolitical power: Over the past half century, American businesses conflated Americanization with globalization. That line of thinking is failing to hold up, and Americanization of global markets has halted. The United States can no longer set and control the rules of global diplomacy and market place and will be increasingly reluctant to police global tensions. The United States’ transatlantic partnerships are weakening, and the European common market is under threat. These conditions have created an economic power vacuum that China is primed to step up and lead.

A champion of state-owned enterprise and the yuan, China has economic interests that are not aligned with those of the United States. This creates problems for U.S. businesses seeking to conduct business abroad. “Political hedging leads to economic hedging,” Bremmer said. “Corporations that are seen as being aligned with one country will be challenged to commercially succeed in others.” Uber’s failure in China is just one example.

2. The erosion of key social contracts: In recent years, there have been breakdowns in the implicit social contracts between governments and citizens and between companies and consumers. Rising populist anger is challenging the legitimacy of governments and threatening longstanding commitments to free trade. On the economic front, developed countries are spurring economic growth through innovative applications of technology—but these advancements are displacing millions of workers. As a result, Bremmer foresees a rise in nationalistic parties that will challenge the status quo and threaten international commerce, following similar strategies as the Brexit movement the U.K.

But where governments fail to adapt, other parties can step in to make amends—and companies are well positioned to be part of the solution. Bremmer offered the example of AT&T, which faced the possibility of needing to lay off a portion of its workforce because their work no longer supported the company’s future growth. But AT&T also knew that because of the transformations in the telecommunications industry in recent years, these workers would be hard pressed to find employment at another firm. Instead, the company decided to retrain these workers so they could support AT&T’s future trajectory. “If a corporation is the first to say it understands the social contract is breaking down and offers a solution, it will serve them well,” Bremmer said.

What the Changing Geopolitical Landscape Means for Your Company

Ian Bremmer, founder and president of Eurasia Group, is often described as a guru of political risk—a type of risk that’s becoming more important for companies to consider. In his keynote address at the 2016 NACD Global Board Leaders’ Summit, he advised that, although companies have traditionally focused on financial returns, they will need to be primarily concerned about the security of their investments going forward—and investments stand to be radically impacted by geopolitical disruption. Bremmer noted that the impact of significant global changes is much greater than the outcome of the upcoming U.S. elections.

Ian Bremmer at NACD Summit

He also pointed out two global developments that companies need to keep top of mind:

1. The increased fragmentation of geopolitical power: Over the past half century, American businesses conflated Americanization with globalization. That line of thinking is failing to hold up, and Americanization of global markets has halted. The United States can no longer set and control the rules of global diplomacy and market place and will be increasingly reluctant to police global tensions. The United States’ transatlantic partnerships are weakening, and the European common market is under threat. These conditions have created an economic power vacuum that China is primed to step up and lead.

A champion of state-owned enterprise and the yuan, China has economic interests that are not aligned with those of the United States. This creates problems for U.S. businesses seeking to conduct business abroad. “Political hedging leads to economic hedging,” Bremmer said. “Corporations that are seen as being aligned with one country will be challenged to commercially succeed in others.” Uber’s failure in China is just one example.

2. The erosion of key social contracts: In recent years, there have been breakdowns in the implicit social contracts between governments and citizens and between companies and consumers. Rising populist anger is challenging the legitimacy of governments and threatening longstanding commitments to free trade. On the economic front, developed countries are spurring economic growth through innovative applications of technology—but these advancements are displacing millions of workers. As a result, Bremmer foresees a rise in nationalistic parties that will challenge the status quo and threaten international commerce, following similar strategies as the Brexit movement the U.K.

But where governments fail to adapt, other parties can step in to make amends—and companies are well positioned to be part of the solution. Bremmer offered the example of AT&T, which faced the possibility of needing to lay off a portion of its workforce because their work no longer supported the company’s future growth. But AT&T also knew that because of the transformations in the telecommunications industry in recent years, these workers would be hard pressed to find employment at another firm. Instead, the company decided to retrain these workers so they could support AT&T’s future trajectory. “If a corporation is the first to say it understands the social contract is breaking down and offers a solution, it will serve them well,” Bremmer said.

Economics, Uncertainty, and the 2016 Election

At a mainstage panel during NACD’s 2016 Global Board Leaders’ Summit on September 19, directors, economists, and former regulators discussed the potential regulatory, economic, and geopolitical implications of the coming election and reflected on how corporate directors and executive teams should adjust to greater levels of ambiguity. One of the panelists, Nicholas M. (Nick) Donofrio, director of Advanced Micro Devices Inc., BNY Mellon Corp., Delphi Automotive PLC, Liberty Mutual Co., the MITRE Corp., and NACD, and the former head of innovation at IBM, characterized today’s external environment as “lumpier and more abrupt than even a few years ago,” forcing companies and their boards to be always on alert and to act quickly in response to change.

NACD Summit Election Panel

The panelists offered a range of projections to help corporate directors assess the business impact of the upcoming elections. They emphasized that aside from a new occupant of the White House, the elections also have the potential to drive significant changes in Congress, major regulatory agencies, and the judicial system. The discussion centered on four major questions of importance for companies and the boards that oversee them.

  1. How likely is a major reform of the tax code?

Reform of the corporate tax code is long overdue, said former U.S. Senator Olympia J. Snowe, director of Aetna, Inc. and the Bipartisan Policy Center. For years, companies have learned to accept the “permanent temporary tax code,” and the resulting policy uncertainty has made investment and capital allocation decisions more challenging. Snowe suggested that even if House and/or Senate control switches from one party to another, it is unlikely that Democratic and Republican congressional leaders will be able to transcend their fundamental differences about taxation and break the current gridlock. Most likely, she believes, the incoming president will use the power of the pen to tweak the current tax code through executive orders.

  1. Should we expect continued regulatory activism?

Troy A. Paredes, director of Electronifie and former Commissioner of the U.S. Securities & Exchange Commission (SEC), shared his concern that “the tidal wave of regulations” seen in the past few years won’t slow down, and it will force companies to commit more time and resources to compliance. “Elections are always major inflection points,” he said, that either sustain or reset the policy priorities of the SEC and other key regulatory bodies such as the Commodity Futures Trading Commission, Federal Trade Commission, and Federal Communications Commission. Meanwhile, Paredes urged directors to be alert as to whether Mary Jo White, the current chair of the SEC, will have enough time in her remaining tenure to finish rule-making on key corporate governance matters covered in Dodd-Frank.

  1. Will our political system address skill shortages in the labor market?

Nick Donofrio offered a mixed view of how the country is addressing the looming crisis in the labor market where current skill sets do not align with the future industry needs. “Our political institutions are too polarized to take meaningful action,” he said. However, it’s crucial that the United States build a digitally competent and productive labor force that can be employed to deliver high-tech manufacturing. “We cannot afford to only create [financial] value in this country, but we must also [manufacture] value here. That means returning much more research and development and production to American soil.” In the absence of government investment, he’s optimistic that the private sector will step up to address this critical challenge and find innovative ways to reskill displaced workers.

  1. How will the United States make itself more competitive globally?

Harry Broadman, a seasoned economist and the CEO and managing partner of Proa Global Partners LLC, reminded the audience that the United States faced a similar set of challenges to its global competitiveness in the 1980s when Japan was projected to become the world’s economic leader. A major difference today may be the backlash against free trade, which could jeopardize the adoption of the Trans-Pacific Partnership and threaten the underpinnings of the European Union. Broadman underlined that it will be critical for U.S. policymakers to remove barriers to foreign investments from high-growth emerging market companies that will contribute to quality job growth. This new generation of enterprises is important to the future of global business, which will no longer be dominated by firms headquartered in the West.

He and other panelists also spoke extensively about the importance of major investments in public infrastructure. America’s crumbling highways, bridges, ports, and technology infrastructure significantly impede further productivity growth, which Broadman believes is the country’s major Achilles’ heel.