January 11, 2021
2021 board priorities: Empathy, inclusion and sustainability
Matthew Fortier, Vice President, Policy and Public Affairs
The zeitgeist sentiment is to kick 2020 to the curb. Understandable but when it comes to corporate governance, this would be a mistake. While traumatic in many respects, the past year taught boards valuable lessons, precipitating an evolution in oversight that will be captured in the coming months through the ICD and TMX’s Chart the Future initiative. In advance of that Committee’s interim report due in February, here are only a few of the trends that will impact Canada’s boards in 2021.
Broader board EDI
2021 should be the year Canadian boards – both in the corporate and not-for-profit sectors – begin to take seriously the need to diversify beyond gender. While work will and must continue to improve gender diversity, external forces and common sense are combining to make broader diversity an imperative. The social justice movements of 2020 shone a light on the need for more Indigenous and Black directors, for example, to influence decision-making. In response, the ICD helped co-create with other leading organizations, the federal government’s 50-30 Challenge to assist organizations in their efforts to achieve greater board and senior management diversification and inclusion.
If organizations are still reluctant to follow trend lines, there is also the growing reality of inducement. Changes to the Canada Business Corporations Act compelling federally incorporated companies to report on their board diversity efforts have been in place for a year and other jurisdictions are proving to be even less patient. Legislation in California, for example, requires companies headquartered in that state to have at least one director from an underrepresented group this year.
The past year has taught corporate Canada many things. For example, scenario planning is critical when dealing with probable financial distress, “agility” is the new “productivity,” and it’s important to unmute when speaking.
Perhaps most important for business leaders is the realization that empathy and understanding are critical management and governance tools. Colleagues and partners will continue to face mental health challenges wrought by the isolation and uncertainty of the pandemic. Additionally, significant portions of the working population will need to continue balancing the constraining stresses of childcare and online learning with their work responsibilities. Directors in 2021 will also need to appreciate the implications of employees distraught by the social upheavals of the past months, including violence and political strife in the U.S.
The goal of every firm is to be competitive. For boards and senior management, this means thinking deeply and wisely about how to get the most out of your workforce at a time when people are at their most vulnerable, not often in the company of their colleagues and 9-5 is out the window.
Future of Work
Speaking of not seeing colleagues, the “great work from home experiment” will continue well into 2021. Aside from making many of us realize we over-invested in cuff links, the flight from the office will have implications well beyond 2021. The commercial real estate sector will be unsettled (though may well emerge from the crisis) but more than this, how, where and why work gets done will continue to evolve this year. Boards and their management will need to consider the skills required in their workforce to execute their strategies and then allocate the capital necessary to re-skill or up-skill their employees. More fundamentally, leaders will have to recognize that culture is how strategy gets done and then figure out how a common culture can be fostered when their people work remotely.
The pointy end of the climate reporting stick
2021 should also finally be the year when corporate Canada begins to sharpen its focus on the fight against climate change. Reporting regimes, including the Task Force on Climate-Related Financial Disclosure (TCFD), are becoming better understood and utilized, the federal government’s Net Zero legislation sets out a plan and timeline and, most fundamentally, the damaging physical and economic impacts of severe weather have become regular occurrences. All of these necessitate corporate planning and response. Boards will have to step up their oversight of climate reporting in 2021, understand the tangible and reputational risks of climate change to their business, and direct and incentivize management to make changes to their operations that are compatible with the sustainability of their business and the environment.