Most industries are experiencing change at lightning speed compared to years past, with technology and global market dynamics often the catalysts. Corporations and other organizations understand that their leadership must change at the same pace to ensure sustained competitiveness. But what they often fail to see—or realize too late—is that their board governance must adapt as well, and more rapidly than in the past.
In this article we present several essential ways in which today’s boards must change and evolve. We cite examples from three Life Sciences market leaders—Pfizer, Merck, and Amgen—to illustrate our points, though our suggestions can apply to most any board, in any industry.
1. Go digital. Digital technologies and communications drive everything that companies do internally and externally, and yet many boards lack in-depth digital expertise. One of Pfizer’s most recent board recruitments is Shantanu Narayen, president and CEO of software giant Adobe Systems. Few boards have the resources to bring in someone of Narayen’s caliber, but Pfizer is large enough to be able to target high-tech firms for their new recruits.
2. Understand modern media and communications. Pfizer’s newest board member is James Smith, president and CEO of Thomson Reuters Corp. The company knows that reputation and media savvy are critical for success in today’s business environment, and Smith makes perfect sense as a director. Amgen’s board includes Frank Biondi, Jr., former head of Universal Studios and Viacom, as well as François de Carbonnel, former CEO of French multimedia giant Thomson S.A. Merck’s board includes former Thomson Reuters CEO Thomas Glocer. Across industries there is a definite trend toward directors who “get” the information age.
3. Go young.It should be noted that, at 51 and 55, Narayen and Smith are Pfizer’s youngest directors. But the average age for the company’s board members is in the mid-60s. As such, don’t be surprised to see Pfizer—and other companies in the same situation—bring a sub-50 director or two on board. Board youth is even more critical for smaller, fast-moving companies. With the millennial generation approaching the demographic size of the baby boomers, and the oldest millennials now in their mid-30s, firms must begin to tap into this younger mindset with board members from that era.
4. “Rightsize.”A board must have just the right amount of members. Too small and it won’t have the requisite breadth of skills. Too large and it won’t be nimble enough to make quick decisions or adapt to change. Pfizer, Amgen and Merck all have about a dozen members. This decision is really organization- and industry-dependent and can be aided by regular reviews and skills audits.
5. Encourage managed turnover.While board stability is a good thing, stagnancy is not. It is essential to get new blood in every few years. Oftentimes term limits (or tighter term limits) are the answer for this.
6. Prioritize market expertise. A company or other organization must know its changing marketplace and adapt its board to it. Today’s life sciences landscape, for example, is increasingly driven by reform taking place in healthcare. On Amgen’s board is Judith Pelham, president emeritus of Trinity Health. All boards should continue to recruit and embrace members who truly understand where markets are headed and—as in the case of the expanding influence of large health systems within the life sciences— understand the shifting of decision-makers.
Building a better, more agile board is a challenge. It is also something that organizations should strive for to remain viable and competitive in their markets.