In this edition of Author Talks, McKinsey’s Astrid Sandoval chats with global economist and board member of several large global organizations, Dambisa Moyo, about her new book, How Boards Work: And How They Can Work Better in a Chaotic World (Basic Books, 2021). Moyo offers a primer on the role that boards play and the growing challenges they face to meet greater social and cultural demands. An edited excerpt of the conversation follows.
Dambisa Moyo on how boards can work better
Why this book and why now?
I joined my first board just over ten years ago, and the truth is in many ways, I did not embody the conventional board member. I was 39 years old and relatively young compared to the average board age. I’m Black. I’m from Africa, and I’m a woman. The other aspect, which was really crucial, is I didn’t come from the C-suite. Very often, boards are looking for people who have had tremendous experience as CEOs or CFOs of large, global, and complex organizations. In that respect, the chairmen of the different companies of whose boards I joined were really taking a chance on me.
Since then, I have had a decade of incredible experiences. I have had the trauma of a CEO chairman dying while in the office. I’ve had a company get taken over for $100 billion in 2016, the largest transaction of that year. I’ve had activists in a stock where I was on the board, which can be incredibly disruptive. I’ve had to fire a number of CEOs, very often, though not all the time, but very often for ethical infringements. And I’ve also had a situation where we’ve had a stock price go from nearly $60 down to $7 and generate a lot of concern that the company wouldn’t survive. Thankfully, I can assure you that the company is still around.
So it’s been a wild ride for ten years. I’ve learned a tremendous amount and been very grateful for the opportunity. But it has really refined my thinking about how complex organizations are and how we need everyone at the table—government, corporations, and civil society—in order to solve some of the biggest challenges that the world faces today.
What problem were you trying to solve with this book?
I was trying to solve two problems. The first problem is a macro problem on what the role of corporations is and should be in the 21st century. The book talks about the challenges that boards and corporations face in trying to recalibrate and reassert the importance of corporations at a time when there are greater demands on what the board and the corporate mandate actually are.
The second problem I address in this book is the lack of information on what exactly the board does. And this was true, and became very clear to me in conversations with students in MBA classes, employees at the companies where I serve on the board, and also, more generally, with friends and family. There was a negative narrative about boards being described as a group of people who just played golf and drank fine wines. I wanted to be very clear on not only what the mandate is, but also to explain why it’s so difficult and challenging to do a lot of things that people think should be easy and straightforward, such as firing a CEO or implementing some of the big ESG [environmental, social, and governance] agenda questions that are very pervasive these days.
What surprised you most about writing this book—in the research, writing, or response?
The really surprising thing for me was trying to articulate the trade-offs that board members and corporations face on a day-to-day basis. There is definitely a sense out there in speaking to people that boards and corporations are not aligned with societal needs and that boards have a relatively easy job in terms of dictating what the responsibilities of the company should be. Trying to bring people along to help them understand this is actually a very complicated, very difficult job, which is fraught with mistakes and a lot at risk, was an area that was quite surprising.
Winning in all environments
Even before the pandemic, we have been living in what feels like a more chaotic world. How has that affected boards?
It is absolutely true that a world of more digitization and greater pressure from social demands is making it much more challenging for boards to think about their mandates and how to navigate corporations through these challenged periods. However, and I think COVID-19 is a great example of this, the best corporations are managing their businesses, and by that I mean in terms of foundational aspects of having good controls, strong balance sheets, and well-run operations in terms of people, operational staff, et cetera. Those aspects, when they are bedded down, will work regardless of the broader economic environment.
It is absolutely true that a world of more digitization and greater pressure from social demands is making it much more challenging for boards.
One of my CEOs often uses the term “winning in all environments,” and I like that because we don’t know what challenges—whether they’re economic, macroeconomic, a pandemic, or geopolitical—may emerge. But our responsibility as a board, and as senior business leaders, is to make sure that we have not only risk-mitigated in the way companies run, but also are constantly making sure that regardless of what gets thrown at us, the companies can continue to operate.
How important is it to have a diversity of perspectives in the boardroom, particularly during a crisis?
It is clear that it’s not just about racial diversity or gender diversity but also the broader lens of diversity. Having people with different perspectives—whether it’s from geopolitical and public-policy backgrounds, academe, and scientists—bringing those into the boardroom so that it doesn’t just reflect businesspeople is clearly something that I believe is beneficial to the organization.
The best corporations will continue to think about adding diverse voices and perspectives to the boardroom. It is also patently clear to me that you want the boardroom to be at least 40 percent populated by people who have been in the CEO seat previously. What is clear is that CEOs of large, complex, global organizations, in particular, need to be able to find counsel, support, and objective perspectives from people who have essentially been in that specific role and seat before.
Know your mandate
What is one piece of advice you would give existing board members and those considering joining a board for the first time?
One of the things I would say to existing board members is that we shouldn’t flatter ourselves. Other boards before us have had, I would argue, even greater challenges. Think for a moment about trying to run a business during the middle of a civil war, or indeed World War I and World War II. That would have been incredibly challenging. We are in a challenged environment, but I’m very optimistic that we can actually do something that will continue to drive better business over a longer period of time.
With respect to new board members, I think the salient point here is for them to understand the mandate of the board and the levers that boards have in order to effect change. The mandate of the board has three key aspects. One is to oversee the strategy of the company, and we do this by having a full-on strategy day. It’s usually two or three days. But also we do that through regular short-, medium-, and long-term strategy planning.
The second is to hire or, in some instances, fire the CEO. This is a very important aspect because the relationship between the CEO and the board is critical, and the CEO defines the cultural aspects of how a company operates. Traditionally, boards focus on financial, operational, and past experiences. But we also need much more perspective on the ethical history of CEOs as we think about them as candidates. We have a lot of responsibility and a great opportunity to effect change in the organization by who we hire, but also through compensation. And more and more, I’m pleased to see that many boards are now adding social aspects that contribute to compensation.
When joining a board, you’re joining in the middle of a movie. Boards have existed for a long time. There’s a lot of scope for improvement.
The third role of the board is this cultural frontier, which I separate into two parts in the book: The part about nonnegotiables, things like excellence, professionalism, and the new cultural-frontier aspect, are much more challenged and have a whole array of trade-offs associated with them.
When joining a board, you’re joining in the middle of a movie. Boards have existed for a long time. There’s a lot of scope for improvement, but fundamentally there’s an important role that boards have played, do play, and will continue to play. And the best new board members are those that bring fresh perspectives but also understand the subtlety and the more nuanced challenges that corporations and boards face.