Corporate boards typically have a kind of quiet power—weighing in on long-term strategy, signing off on big-dollar investments and keeping CEOs on their toes.
But the oversight has suddenly become overt as last year’s rush coalesced into a maelstrom of skyrocketing inflation, a blow to the supply chain and the threat of recession.
At companies facing internal and external challenges, there has been a sudden flurry of CEOs out the door — from Sonia Syngal at Gap Inc. to Julie Wainwright at The RealReal Inc. and Patrik Frisk at Under Armor Inc.
While each CEO was told to “step down” and thanked for their efforts, there is an exodus that suggests boards have found their voice.
Now directors are looking hard at what lies ahead, and just like everyone else, they see a future filled with question marks.
It is a very uncomfortable place for most people.
Boards are not only made of people who are subject to all the faults of humanity, but of business veterans who often got to the top by knowing exactly how to move through the business landscape and up the enterprise later.
Now fashion and retail are in uncharted territory, having gone through pandemic shutdowns, an online boom in retreat and battling consumers who, at least at the lower end, are choosing between food and fashion.
Just look at retail giant Walmart Inc., which cut its annual profit forecasts this week and said there was a downturn in the fashion to move goods, sending Wall Street tumbling and retail calculations retracing their steps. Higher consumers are holding on, but given the stock market crash and the rest of it, how long can they last?
Consultant Sean Ryan, partner and consumer products practice leader at Kearney, said: “When you get uncertainty … you start to see the conservative principle come into play, which is: Do no harm, delay, delay unless it’s kind of overwhelmingly obvious outcome.”
Ryan estimated that two-thirds of the decisions that come before boards are no-brainers, with simple “yes” or “no” answers.
The other third of decisions that are kicked all the way to the top of the corporate org chart – not so much.
“Those are the tension points,” Ryan said.
They will differ from company to company, but the stakes are always high.
“Recessions can be seen as cleansing moments,” Ryan said. “The company that is well managed by a strong and effective board is going to survive and, if not prosper, at least be very well positioned for when we come out of recession.”
To some extent, the board, the C-suite and everyone else just has to hang on and ride out 2022, hoping they’ve done their job.
“It’s about trying to separate the part of the business that you can control from the part of the business that you’re not able to control,” Ryan said.
The list of uncontrollables is long today.
Jill Standish, senior managing director and global head, retail at Accenture, said: “Managers now have to major in running a business, and then they have to teach foreign affairs and environmental issues, what’s happening in public policy, what’s happening around social issues . It’s not enough to just run a business.”
As boards and C-suites think about all these moving parts, they’re battling the kind of fast and furious change that hasn’t been seen in at least a generation.
“The pandemic happened to them,” Standish said. “There was no debate, it was ‘just do it.’ The speed at which they make decisions has increased.”
For at least some boards, it included major decisions in areas of the business that were not always fully appreciated.
“In clothing, I’m not sure the boards understood how fragmented supply chains were – buttons come from this country, raw materials come from this farm. Have we ever exposed boards to that?” Standish said.
And the future is still coming fast with more changes to come.
“What I’m seeing is a lot of requests to educate the boards,” Standish said. “Let’s demystify the metaverse, demystifying things is a great word. We have to take them on the journey.”
She said there are five major forces sweeping through the industry – the metaverse, changes in talent, technology, sustainability and general reinvention.
“Every company strives to reinvent, HR is going to be different, legal is going to be different, store operations are going to be different,” she said. “Total reinvention of the company. Every company is thinking, ‘How quickly can I change?'”
That’s because change is no longer a “nice to have,” which makes for a busy boardroom.
Les Berglass, managing director of executive search firm Berglass + Associates, said: “This is a fantastic time to embrace change. Business as usual is a death sentence and not a path to the future.
“The second most important ‘must have’ on a board list, after profitable growth, is predictability—boards hate surprise,” Berglass said. “They look to the CEO to deliver that predictability. Harry Truman was right, ‘The buck stops here.'”
Although the corner officer comes with many perks, from multi-million dollar salaries to prestige and power, the pressure takes a toll.
As a result, there may be more than a little C-suite fatigue.
“It’s been a very tough two and a half years being CEO of retail,” said Joel Bines, global co-head of retail at AlixPartners. “Many of the people who are replacing have been in the role — if not CEO, at least a C-something — for quite some time.
“Retail leaders are exhausted and when you’re staring into the abyss of a potential global recession after two and a half years of struggle [COVID-19]…maybe it’s a little more mutual than it looks,” Bines said. “’It’s not you, it’s me,’ that kind of breakup.
“It’s rare for a board to fire a CEO,” he said. “What most often happens is that the relationship between the board and CEO becomes passive-aggressive. Board members make sly comments or send sneaky e-mails. The CEO is tired and passive-aggressive. The board is passive-aggressive. Everyone comes to the same conclusion.
“Remember the game that’s going on, CEOs manage their boards or think they’re managing their boards. And boards think they’re managing CEOs. And neither of those are true. Most people just manage themselves. People like being on boards. And generally speaking people like to sit on the board with people who don’t make life miserable.
“The board plays a governance role, but the CEO plays a leadership role, and sometimes you see those relationships blur,” Bines said.
And when everything changes up and down the business, this uncertainty can simply be too much for everyone involved.