Michelle Lyng is the CEO of nationally-acclaimed Novitas Communications, which specializes in corporate, issue and crisis communication.
In the wake of several recent corporate missteps, SharkTank’s Kevin O’Leary eloquently opined on how and why companies have stumbled so—and it’s not what you think. In the article, I feel that the author really buried the lede. This paragraph was snuck in two-thirds of the way down in a lengthy piece:
“We almost need a new committee on boards. We have committees for risk… compensation — We’ve got compliance committees. We need a communications/media committee to advise the rest of the board who don’t even have Twitter accounts or don’t have Facebook or don’t use LinkedIn.”
Wait. Corporate boards don’t have communications committees? Why not?
According to Harvard Law School’s Forum on Corporate Governance:
“The majority of boards at public companies with over $5 billion in annual revenue now typically have four or five committees, rather than the three generally called for by stock exchange listing standards.”
In case you weren’t aware, the required committees include: audit, compensation and nominating/governance.
The same Harvard report cites that as of June 2022, just 25% of S&P 500 companies had three or fewer committees, 20% had five committees and 38% had four committees. A whopping 13% had six committees. This is a dramatic increase from the last time this survey was conducted in 2013. To add context, financial services companies are required to have a risk committee, which means each of these companies also have more committees by default.
The research also showed a stark difference between the number of board committees between the largest and smallest companies. To put it in perspective, 69% of companies with annual revenue under $100 million had three or fewer board committees, but just 17% of companies with $50 billion in revenue or greater had the minimum requirement. Similarly, just 1% of the smallest companies have six committees or more whereas 25% of the largest companies do.
Are smaller companies anti-committee? Likely not. Harvard hypothesizes that larger companies have larger boards, which makes filling committee seats easier. Fair.
For those companies that have more committees than required, the next three most likely committees are executive committee, finance committee and risk committee.
Of the committees highlighted, a communications committee seems uncommon. Perhaps one could argue that the risk committee houses the communication function. Maybe, but, the term “communication committee” is not even mentioned on Harvard’s Corporate Governance Forum website.
An October 2022 Ernst and Young report noted that just 4% of S&P 500 corporate boards even had a public policy and regulatory affairs committee, down from 5% in 2019. Just 11% have a corporate responsibility committee, still not exactly a communication committee.
What O’Leary is generally referring to is a committee that is charged with reputation or brand management and stakeholder engagement. I don’t believe he’s suggesting that the committee review documents to ensure brand standards are being met. I do believe he’s rightly suggesting that there be an oversight committee that reviews reputation strategy and strategic communications—and evaluates how well their strategies and activities align with and support the company’s overall strategy.
With reputation risk at an all-time high thanks to cancel culture from all sides of the aisle, a communication committee, or even a communication sub-committee of a risk committee, is a no-brainer. And, there’s another benefit—could including a communication committee offer space for a more diverse board?
According to Deloitte, research consistently shows that companies with diverse boards and leadership teams perform better than less diverse companies. The report also featured commentary by Eileen Murray, former co-CEO of Bridgewater Associates, who offered insight:
“Until we have more women represented in the C-suite, we’re going to continue to have a smaller population to choose from if that’s the only place we look.”
Harvard again points out that women and minority board members “currently are more likely than white men to bring experience with corporate sustainability and socially responsible investing, government, sales and marketing, and technology in the workplace to their boards.”
Deloitte also notes that corporate boards are more likely to have to delve into the ranks of senior management to find these candidates who bring so much to the table. Sadly, women remain underrepresented, with 1 in 4 C-suite executives being female, and 1 in 20 being a woman of color, according to McKinsey’s Lean In report.
There is a clear business case for putting more women and underrepresented minorities in corporate leadership, and there’s certainly a business case for putting more women and minorities on corporate boards. Could expanding corporate board committees, and, in particular, including a communication committee, play a role in helping make more room at the table? In my opinion, it does.
For companies interested in adding a new committee, there is no hard and fast rule of how it’s done, but O’Leary is suggesting the communication committee have the same status as other recognized committees. Typically, the process for adding a new board committee is outlined in an organization’s bylaws. Those interested should consult bylaws or board legal counsel. As noted above, those best qualified for these roles may be nontraditional candidates, and boards should keep an open mind about who has the expertise to appropriately offer counsel.
Besides forming a diverse committee, organizations can tackle this matter more broadly. Leaders should review hiring practices for biases that deter diverse candidates. Setting clear diversity goals and sharing them companywide signals inclusion as a priority. Regular progress evaluations can lead to an inclusive leadership team, vital for innovation and sustainable growth.
With an extensive and growing list of issues that companies are expected to navigate in the current reality, it is important for board directors to take a step back and consider how their oversight role has shifted and whether the current committee structure still supports their oversight role and efficacy.
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