Jennifer Reynolds is the chief executive officer of Women Corporate Directors (WCD). Her 25-year career in the financial services industry includes senior roles in investment banking, venture capital and global risk management and corporate director roles in the banking, insurance and asset management sectors.
Not long ago, success for a chief executive officer was driving profit and share price. Beat your competitors on those two fronts and you were in good standing with the board and shareholders come AGM time. The rise of stakeholder capitalism has challenged the traditional role of the CEO and the corporation, and it is only getting more complicated.
A recent study that surveyed more than 36,000 people, in 28 countries, found 81 per cent believe CEOs should be personally visible on public policy and societal issues. Those issues range from climate change to economic inequality to trustworthy information. Most recently in the United States, and to some degree in Canada, we have seen that scope extend to the rights of women to control their reproductive health. In this rapidly changing landscape, the prototypical CEO profile is not likely the leader of the future, and leadership models and styles are being put to the test.
This shift in public sentiment extends to the role of business more broadly. That same survey found business is the most trusted institution, relative to government, NGOs and the media. Of those institutions, only business was seen to be both competent and ethical, while government and the media were seen as both incompetent and unethical.
In a world where distrust in institutions has grown at an alarming rate, trust in business seems to be holding up more firmly. Information from employers is now seen as more trusted than other public sources. At first blush, this seems like a cause for celebration in corporate boardrooms. The reality is that leadership in the business community has become far more complex and challenging, and it requires a broader range of skills and capabilities than it has in the past.
Leadership teams now have to pro-actively assess the policy and societal issues on which they will weigh in, and they need to develop strategies that demonstrate their commitment to addressing those issues. Effectively communicating those positions and strategies to employees and the broader public is critical, but as we move past bold announcements of initiatives and goals, delivering tangible results on large scale societal issues is no small feat.
In the face of that remarkable challenge, one would certainly question if the better strategy were to just not speak. Staying silent on societal issues avoids some significant risks. After all, you are unlikely to find a position that pleases everyone in your stakeholder base. Secondly, you will likely have to develop or hire a broad array of people with new skill sets and talent.
The problem with the choosing-not-to-speak strategy is that stakeholders are actively voting on businesses on the basis of their CEO’s and company’s position on societal issues. Sixty per cent choose their employer based on their values and beliefs, which implies that those employees have made an assessment of the mission and values of their employer. Fifty-eight per cent surveyed buy or advocate for brands based on their values and beliefs, and 64 per cent invest on that basis. Not only are individuals voting for – or against – businesses on societal issues, 88 per cent of institutional investors subject environmental, social and governance issues to the same scrutiny as operational and financial considerations. The risks to staying silent are considerable.
The bar for business and its leadership has clearly been raised, and the complexity of achieving success will require a different skill set than what was required in the past. It would seem logical that if CEOs are expected to be personally visible on public policy and societal issues, it becomes even more critical for the pool of CEOs to reflect the demographic of the communities they serve.
Today, there are more CEOs named Michael (7) and Mark (6) than those who are female (5) running companies listed on the TSX – about 4 per cent relative to the close to 50 per cent of the work force. Similarly, fewer than 7 per cent of board directors are from racially diverse backgrounds, relative to 22 per cent of Canada’s population. If the business community is to remain credible as a leader in societal issues, it is going to have to look like our society. To speak out is commendable, to succeed we will need to include society in our economic leadership.
This column is part of Globe Careers’ Leadership Lab series, where executives and experts share their views and advice about the world of work. Find all Leadership Lab stories at tgam.ca/leadershiplab and guidelines for how to contribute to the column here.
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