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The best boards explore these 2 topics in every meeting, says former Vanguard president

The future of the American junta is already here, as the truism goes. But not all boards have caught up.

That was the upshot of my recent conversation with Bill McNabb, former CEO and Chairman of Vanguard, about a new report released by the National Association of Corporate Directors (NACD).

McNabb co-chaired the commission tasked with writing The Future of American Boards report, a pandemic-era update of the association’s landmark 2008 document of key agreed principles. Back then, boards were almost entirely focused on accounting. and compliance, which made sense for the times. . Of course, today’s boards are expected to cover much more territory.

As such, the new 55-page report sets out 10 principles that fall under broad concerns such as corporate purpose, board culture and renewal, transparency and compensation. Each chapter ends with a series of questions intended to generate discussion and debate, for a total of 83 questions. An example: “What weight does the board give to stock price versus the achievement of strategic objectives, operating metrics, corporate ethics, or citizenship goals when measuring progress?”

A sample query on talent reads, “Is the company’s approach to compensation rational and equitable, including in the relationship between CEO pay, CEO pay, and workforce pay?” usually?”

These are meaty questions. However, McNabb, a board member for IBM and UnitedHealth Group, says boards that have successfully moved into the modern age are already addressing them.

In fact, the most future-proof boards discuss talent and strategy at every meeting. That’s the only way they can be as agile as the companies they govern, says McNabb. “The one thing we’ve collectively come to appreciate through the pandemic is that whatever you expect, it usually doesn’t turn out that way.” Effective boards continually ask how their companies prepare for whatever comes next, keeping long-term aspirations in mind. (Laggards spend too much time on compliance, an issue committees can and should monitor.)

Boards once “picked the right CEO and got out of the way,” says McNabb, and that was the extent of the talent discussions. Forward-thinking boards understand that surviving and responding to uncertain times requires a diverse and well-incentivized workforce. It urges boards to ask themselves, “To achieve what we want to achieve strategically, where do we think that talent will come from? How are we going to nurture and develop it? What evidence does management have? [that nurturing] is it really happening?”

How the work of directories, another topic covered in the report, is also revealing. Boards that are stuck in the past are passive. Members typically watch a slideshow prepared by an executive and ask a couple of questions, says McNabb. More future-ready boards send materials to directors before a meeting, so everyone arrives informed. Directors also seek information that does not come directly from executives. Then the board and management team sit down and talk.

That time-tested practice will never go out of style.

Lila MacLellan
lila.maclellan@fortune.com
@lilamacellan

word of advice

“Boards have to govern, so they have to be that tough, constructive voice in the group on behalf of investors and other stakeholders. The flip side of that, though, is if you have a great board and you’re a real good management team, you want to get as much as you can out of that board. It’s nuanced, but it’s also an important evolution of the board’s role.”

—Bill McNabb, former CEO and Chairman of Vanguard

on the agenda

👓 Read: new report of FortunePhil Wahba breaks down the struggles at Bed Bath & Beyond and the challenges that lie ahead for Sue Gove, interim CEO and board member. “Where are they now?” Mark Cohen, director of retail studies at Columbia Business School, muses for Wahba. back to where he was he, and that was a pretty horrible place.”

🎧 Listen: Harvard Business School professor George Serafeim joined the Harvard Business Review podcast Cold call to discuss BlackRock’s ESG mission and CEO Larry Fink’s approach to effecting change.

📖 Bookmark: A working paper from economists in Europe and the US found that more companies are linking executive pay to ESG goals, which appears to be effective.

Onboard/Outboard

Tesla named co-founder of Airbnb joe gebbia to the automaker’s board. julie brown leaves Roche’s board; he will soon be joining a different pharmaceutical company in a management position. mandrel oak is stepping down from the board of directors of web hosting company GoDaddy, where he has been chairman since 2015. Chinese retailer JD.com took advantage Carol Yun Yau Limanaging director of the Yale Center Beijing, as an independent director.

Soon

– Corporate governance experts are concerned about the independence of the board at Tyson Foods, where the 32-year-old son of the company’s chairman has just been named chief financial officer.

– Byron Allen, the mogul behind Allen Media Group, sued McDonald’s for $10 billion, claiming the company’s advertising practices show a pattern of discrimination against black media.

– The SOC Investment Group sent a letter to Starbucks asking for stronger policies around CEO succession planning.

– Researchers find that having various Y inclusive directories correlate with higher stock returns.

Editor’s Pick

Do you know a company or a CEO eager to play with cryptocurrencies? Send them this charming cautionary tale by FortuneIt’s Leo Schwartz. He noticed that Chipotle was running a promotion with digital payments company Flexa, the maker of an app called SPEDN. The “steak try” promotion would give app users 99.95% off the cost of their Chipotle purchase if they paid with ether. Schwartz thought he would take up Chipotle’s offer.

Here is a snippet:

“When the fateful moment came and I asked if I could pay in ETH, the cashier, unsurprisingly, blankly replied that she had no idea what the hell she was talking about. With mounting embarrassment, I showed her the Chipotle tweet thread as the line behind me stacked up. He called his manager, who hadn’t heard of the promotion either, but had the foresight to realize there was probably a QR code inside the SPEDN app. We pulled it out and scanned it with the POS from Chipotle system.”

Find out what happened here, and have a great weekend.