A PDA University podcast series of insightful and dynamic conversations between leading private company directors and an ESG thought leader and practitioner.
Environmental, social, and governance (ESG) practices are becoming essential strategic and operational priorities, with ESG outcomes increasingly core to company valuation calculations. Privately held and family-owned enterprises have good business reasons to establish an ESG platform to keep them competitive. But boards must find new ways of working if they are to meet rising expectations for successful performance on ESG indicators. Listen as private company directors explore new options and imperatives with a long-time expert in corporate integrity practices.
Governance change in an interconnected world
How will ESG compel private company board directors to change how they work with each other and their C-suite?
Traditional board recruiting and development approaches, as well as governance working models within private companies, tend to rely on personal networks. The “closely held” and under-the-radar mindset that is often characteristic of leaders in private enterprise runs contrary to the hyper-transparent and accountable mode in which leaders of publicly held companies must operate.
Venita Fields MBA and Art Stewart MPM consider how ESG’s evolution is increasingly challenging private company board directors to redefine their roles, modernize their mission as a body, reorientate their relationships to each other, rebalance internal power structures, and take on broader portfolios involving an expanding landscape of risks, liabilities, and material/non-material competitive concerns.
Some of the new, uncharted questions can be painful, awkward, and a cause for self-reflection.
ESG and the convergence of politics and business
What’s a board member to do?
America’s current policy debates are characterized by a tug of war between public and private interests. Climate change, leadership ethics, diversity and equal opportunity are but a few of the themes playing out at this growing convergence of business priorities and public concerns.
As the ESG movement advances globally and nationally, financial markets and investors are looking for business to pursue profitability agendas more deliberately aligned with stakeholder-centric standards. Companies are not only expected to operationalize corporate values and policies but to benchmark them against KPIs, measuring their impact upon stakeholder value creation.
Venita Fields MBA and Art Stewart MPM consider how boards can manage the delicate balance between a company’s appropriate role in change activism and the board’s own pragmatic fiduciary responsibilities.
Finding answers through difficult questions
How ESG is confronting outdated assumptions and causing private company board directors to address new priorities.
ESG factors will increasingly affect the competitiveness of privately- or family-held companies, given the broadening interdependencies of public and private markets today. Adopting ESG standards requires private companies to be more transparent and accountable for their policies and actions, including how their ESG initiatives directly impact top- and bottom-line performance. Board directors may be unaccustomed to deep or direct conversation about the changing expectations for their business, the appropriate role for ESG practices in their enterprise, or their own board’s limitations and failures. Venita Fields MBA and Art Stewart MPM discuss how private company boards can adapt and flourish in this new world.
What to know now
Trending environmental, social, and governance issues private company board directors need to master.
Navigating COVID and its aftermath continues to force private company board directors to grapple with dramatically changing business paradigms. Increasing pressure and scrutiny is being applied to both public and private enterprises to measure the real material impact of their responsibility initiatives on top and bottom-line performance – whether involving revenue, calculated and validated material risk reductions, operational and in-market innovations, resilience building initiatives, or deepening customer engagement. Directors need to acquire greater working knowledge of ESG-related issues. Deb Boyda MSA and Art Stewart MPM outline what this rising tide of priority concerns looks like.
ESG and new models for private company governance
Changing the structure, process, and functionality of board responsibility.
ESG is upending private company traditions. Historically, the norms of private company board culture, director recruitment and relationship dynamics, as well as governance priorities and practices, were defined by the prerogatives and advantages that come from operating in a closely held context. Private companies enjoy less regulation, narrower scrutiny from stakeholders, significant avoidance of bureaucracy, more natural agility, and management approaches born out of the personal values and worldview of company owners.
Now, advanced ESG metrics and analytical capabilities are requiring different investments in R&D, customer experience innovations, risk management and human capital capacity, among other areas. Deb Boyda MSA and Art Stewart MPM discuss how board structures, processes, and functions must be redesigned to align with the transformed business operations needed to sustain durable competitiveness and avoid exposure to damaging risks or liabilities.