January 27, 2021

Six Ways a Board of Directors Can Ensure Future-Readiness

In response to my blog post about a report published by the EY Center for Board Matters listing six key areas corporate boards of directors should prioritize in 2021, a reader recommended that I review Is Your Board Future-Ready? The Expertise You'll Need, a report that presents six ways a company's board of directors can ensure future-readiness.

Produced by Nasdaq Governance Solutions, a business of Nasdaq, Inc., a global technology company serving the capital markets and other industries, the report notes: "The competitive landscape in nearly every sector is changing rapidly. You are likely looking for ways to remain relevant and drive your company's mission while making changes to reflect shifts in society. A future-ready board adds value by augmenting opportunity identification and maintaining its duties to investors and stakeholders."

The report also asserts that a "future-ready board is diverse, socially responsible, and tech savvy, understands inclusion, and demonstrates keen awareness of how to balance profit expectations with long-term stakeholder values. A future-ready director embraces efficient technology. As the age of many directors and CEOs increases, future-ready also means understanding the needs of the company during board and CEO succession planning. Particularly, long-term investors are holding boards and CEOs accountable for taking action with regard to increasing impact on society. A future-ready board is prepared for the task ahead."

Below are the six ways boards can ensure future-readiness:
  1. Balance of Profit and Purpose: Whereas profit is essential, communicate how your company effectively engages key stakeholder goals.
  2. More Gender and Racial Diversity: Consider the gender, race, experience, and skillsets of minority candidates to bring diverse and unique backgrounds to your board.
  3. More Age Diversity: Add younger leaders who have a pulse on today's societal and economic shifts and offer new perspectives.
  4. Expertise in Technology, Risk, and Security: Assign technology and risk oversight responsibilities and activities to one board committee.
  5. Experience in ESG: Build ESG into your corporate strategy, given the focus of today’s investors and stakeholders on such issues.
  6. More Diverse Backgrounds: Encourage forward-looking, ongoing board member education, including an onboarding program that brings new directors up to speed quickly.
While I strongly support each one of the report's recommendations, I particularly agree how the report addresses the need for board to address gender and racial diversity. "Investors and stakeholders are holding companies accountable if they don't have a board of directors that reflects gender and racial diversity," the report says. "In order to acquire the depth of perspective that best represents the modern customer base, more diverse faces and voices need to be present."

Crucially, "However, it must be done in a way that's relevant to your company's strategy—and overall board goals. Don't ask directors to join your board solely to 'check the diversity box.' Now more than ever, the general public is more aware of tokenism and performative allyship and they will call out your business for such actions. Formalizing the 'Rooney Rule' for your corporate governance guidelines will help ensure that your board considers at least one woman or minority candidate and have meaningful interviews with these parties whenever there is a vacancy."

For those unfamiliar with the Rooney Rule, an article by Sports Illustrated provides a good explanation about the origin of the policy from the National Football League (NFL):
Adopted in 2003, the Rooney Rule is an NFL league policy that requires teams to interview ethnic-minority candidates for head coaching jobs. Since then, the Rooney Rule has been expanded to include general manager jobs. A similar rule requires that a woman be interviewed for every business front-office position that opens in the league.

The policy is named after former Steelers owner Dan Rooney, who was credited with spearheading the effort. In 2002, Rooney was approached by groups concerned with the lack of coaching and front-office opportunities in the NFL.

Variations of the rule are now in place in other industries, including in the city of Pittsburgh. Facebook and Xerox have similar company policies.
I also appreciate how the report addresses the value of age diversity for boards. While in my late 20s, I had the opportunity of meeting a mentor who encouraged corporate leaders within his professional network to consider me as a qualified candidate to serve on their firm's board of directors. Unfortunately, they did not understand how my age and perspectives would provide value to their firm as a board member. As the report explains, "The average board member age is 63, and directors aged 50 and under filled only 6% of S&P 500 board seats. Age diversity in the board is a point of contention for companies, largely because boards look for candidates who have significant experience in leadership roles. This experience takes time to accumulate."

"However," the reports suggests that "younger board members may bring expertise in cybersecurity and cutting-edge technologies, helping companies uncover new opportunities, partnerships, and business models. Additionally, because younger board members are still professionally active, they have their fingers on the pulse of best practices, employee challenges, and changing consumer expectations. These younger leaders may help you adapt your culture to societal and economic shifts and broaden the board's overall perspective of where the industry is heading."

With respect to technology, risk and security, the report says:
Many companies are comprised of a technology element today. Directors are expected to meet a minimum technology understanding threshold. For example, the global average cost of a data breach is $3.92 million—a 12% increase since 2014.

Today, data security is everyone’s responsibility. A director duped by a phishing scam puts your company at monetary and reputational risk. Unfortunately, fewer than 40% of directors say the board fully understands the cybersecurity risks facing their company, while only 36% say the board has sufficient expertise in cybersecurity.

The board should support embedding security and risk mitigation into all areas of the company and recognize that they need to invest in ongoing improvement, especially as new collaborative technologies and processes are implemented.

The board should also consider specifying who oversees technology and cyber risk. Most S&P 100 companies (88%) have already charged at least one board-level committee with cybersecurity oversight, typically the audit committee (64%) or risk committee. Consider combining cybersecurity and risk expertise into one committee.
As for the recommendation of recruiting prospective board members with more diverse backgrounds, I agree that boards should "consider taking a more comprehensive approach to director assessment, focusing on skills and areas of expertise." Furthermore, "Determine if there are redundancies in board member experiences and identify what type of candidate will help fill the gaps in the board’s overall readiness. Look for candidates—other than former C-level executives—who have the insights and skills needed.

"While an understanding of financials is generally appropriate, expanding your range of candidates to those who are well-versed in other areas of business is beneficial."

Lastly, "In order to build a future-ready board," the report concludes that "it's important to conduct annual evaluations that provide metrics and insights into composition, functioning, and performance. With these insights, the board can take the right steps forward."

Do you have additional recommendations for how a board of directors can ensure future-readiness?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

January 24, 2021

EIU Report Looks at the Strengths and Weaknesses of Vietnam's Business Environment

According to a report published by The Economist Intelligence Unit (The EIU), "Vietnam has received increasing attention as an alternative manufacturing hub to China amid the US-China trade war. However, its rise as a low-cost manufacturing base in Asian supply chains predates these more recent international tensions. Among many aspects, its appeal to investors owes much to the country's internal political stability in recent decades. This is in contrast with many of its regional neighbors, which, while able to offer low-cost labor, have suffered policymaking instability and intermittent breakdowns in relations with major countries."

Rising star: Vietnam's role in Asia's shifting supply chains takes an in-depth look at the strengths and weaknesses of Vietnam's business environment, focusing on three key areas: labor, investment incentives and trade relations. The EIU also benchmark the country's business environment ranking against its regional counterparts, providing a realistic view of Vietnam as an investment destination.

The EIU expects Vietnam's upcoming leadership transition, at the 13th National Congress of the Communist Party of Vietnam scheduled for Jan. 25th-Feb. 2nd, 2021, "to proceed smoothly and put in place another administration committed to policy continuity in regards to foreign investment and the improvement of the business environment. The report further says, "This is not to say that Vietnam is not without major obstacles to doing business—for one, corruption among public officials remains a major issue. However, the assurance of overall political stability, means that other elements of the business environment are of more immediate concern: what are Vietnam's current key advantages over regional competitors and how will these evolve over time?"

An analysis of the three areas in Vietnam's business environment that have contributed the most to its competitiveness as a manufacturing hub—labor, investment incentives and trade relations, "will help investors and supply chain managers to understand Vietnam's potential compared with the wider region":
  • For labor, the report highlights "how low-skilled manufacturing wages will remain competitive for years to come, while scarcity of specialized labor will persist as a disadvantage of the business environment.
  • In regards to investment incentives, Vietnam will continue to offer generous arrangements for international firms, with the downside that local supply linkages in more advanced manufacturing will remain limited for the next decade.
  • Vietnam's proliferating membership of free trade agreements represents a strong point of its trade relations, reducing export costs. There are only modest risks to this advantage, mainly in the form of trade tensions with the US.

The Association of Southeast Asian Nations (ASEAN), EU-Vietnam Free Trade Agreement (EUVTFA), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Regional Comprehensive Economic Partnership (RCEP) are all free-trade agreements where Vietnam is a member, giving the country entry to many of the world's largest economies. During a webinar about the report, Divya Sangaraju, a research analyst at The EIU, said that participation in these trade agreements provides favorable access (i.e, low or no-tariffs) for Vietnam's manufacturing and export-oriented firms who want to access larger markets.

While there are many positive attributes to doing business in Vietnam particularly in the electrical machinery sector, which is the country's largest export sector, businesses and investors should proceed with caution. The report asserts that "Whilst continuity in policymaking and favorable international relations will be reassuring to business, Vietnam will not be free from operational risks. For instance, there is potential for unintended consequences from the government's efforts to maintain international competitiveness. The risk of Vietnam being reprimanded by Western countries (including more severely than we currently expect by the US) for limiting the appreciation of its local currency could partially jeopardize the tariff-free access it has to major markets. Moreover, efforts to keep wage costs low for foreign enterprises via modest minimum wage increases and limited mandatory employee benefits could stoke disquiet, which could later develop into labor protests."

Is Vietnam a market you are currently operating in? If so, what benefits and risks have you identified in doing business in the Southeast Asia nation?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

January 23, 2021

Report Explores How Digitalization Can Create Quality Jobs in Africa and Contribute to Achieving the African Union's Vision for the Continent's Development

"COVID-19 poses an unprecedented threat to financing Africa's development by creating new risks and exacerbating pre-existing vulnerabilities," according to a report jointly prepared by the African Union's Commission for Economic Affairs and the OECD Development Centre with support of the European Union. More encouragingly, however, the report explains that the COVID-19 crisis is strengthening "the role of digitalization in contributing to Africa's productive transformation and in fulfilling Agenda 2063, the African Union's vision for the continent's development."

Africa's Development Dynamics 2021: Digital Transformation for Quality Jobs is a fact-filled annual reference book that "brings readers the latest information on development policies on the African continent and its five regions" – Central, East, North, Southern and West Africa. Furthermore, "It presents a new narrative assessing Africa's economic, social and institutional performance in light of the targets set by the African Union's Agenda 2063. This third edition of Africa’s Development Dynamics explores how digital transformation creates quality jobs and contributes to achieving Agenda 2063, thereby making African economies more resilient to the global recession triggered by the COVID-19 pandemic."

The report's Executive Summary importantly notes that "governments can drive Africa's digital transformation and trigger large-scale job creation, including outside the digital sector, through four complementary actions:
  • "Promote the dissemination of digital innovations beyond large cities through place-based policies. Ensuring universal access to digital technologies calls for enhancing coverage, affordability and the availability of suitable content. Internet access has expanded thanks to the growing prevalence of mobile phones: 72% of Africans now use them regularly, with the highest number in North Africa (82%) and the lowest in Central Africa (63%). However, digital adoption remains unequal across genders, income groups and other groupings. Only 26% of the continent's rural dwellers use the Internet regularly, compared to 47% of its urban inhabitants.
  • "Prepare Africa's workforce to embrace digital transformation and guarantee social protection. By 2040, own-account and family workers will represent 65% of employment under current trends. The share of own-account and family workers will be the highest in West Africa, accounting for 74% of employment in 2040, and the lowest in North Africa at 25%. Presently, 45% of youth feel their skills are inappropriate for their jobs. The apparition of new livelihoods on the web requires setting solid regulatory schemes and providing social protection for informal iWorkers.
  • "Remove barriers to innovation that prevent smaller firms from competing in the digital age. Dynamic small and medium-sized enterprises (SMEs) need support to adopt the most appropriate digital tools for innovation and trade. For example, having a website is positively associated with a 5.5% increase in the share of direct exports in firms' sales. Only 31% of firms in Africa's formal sector have a website, compared to 39% in Asia and 48% in Latin America and the Caribbean. Today, only 17% of Africa's early-stage entrepreneurs expect to create at least six jobs, the lowest percentage globally. Enticing these firms to scale up is critical for job creation.
  • "Deepen regional and continental co-operation for digital transformation. Digital technologies pose new challenges to national regulators. Supranational co-operation can provide solutions in areas such as digital taxation, digital security, privacy, personal data protection and cross-border data flows. Harmonizing continental and regional regulations is an important complement to national laws. As of today, only 28 countries in Africa have personal data protection legislation in place, while 11 have adopted substantive laws on digital security incidents."

To support the four recommended actions above, the report presents the main policy areas for digital transformation for each of the five regions:

Central Africa
  • Co-ordinate investment in digital infrastructure regionally to expand coverage and ensure inclusive and reliable access.
  • Equip the workforce with the adequate skills to facilitate the school-to-work transition and reduce the skills mismatch.
  • Leverage digital technologies to promote entrepreneurship and foster the digital transformation of regional value chains.
  • Implement, monitor and evaluate digital strategies at the regional and national levels.

East Africa
  • Facilitate the school-to-work transition, notably through digital literacy and technical and vocational education and training (TVET) programs, and monitor technological developments to anticipate future skills requirements.
  • Nurture digital entrepreneurship and innovation by adapting the regulatory environment, and promote technology parks, notably through easier financing.
  • Strengthen regional co-operation on digitalization, and mobilize public and private resources for regional infrastructure.
  • Set up a single digital market by promoting seamless connectivity, harmonizing regulations and facilitating the interoperability of cross-border payments.

North Africa
  • Support the development of financial technology by loosening regulatory constraints and experimenting with new regulations (e.g. sandboxes).
  • Modernize education and training systems by monitoring and evaluating digital literacy and programs for science, technology, engineering and mathematics, and promote lifelong learning and reskilling of the workforce.
  • Encourage digital entrepreneurship by fostering innovation through public-private partnerships and improving governance in the region.

Southern Africa
  • Reduce the digital divide by developing reliable and affordable digital infrastructure beyond urban centers.
  • Improve the quality of education and promote lifelong learning to meet future skills demand.
  • Harmonize existing digital initiatives at the national and regional levels, and accelerate their implementation, targeting the digital transformation of strategic value chains.

West Africa
  • Strengthen government support to technology parks and start-up incubators, and monitor progress.
  • Implement supportive regulatory frameworks to develop fintech, foster financial inclusion and diversify sources of financing for private sector development.
  • Support entrepreneurs and SMEs in using digital technologies, especially in agricultural sectors, to strengthen their integration into regional and global value chains.
  • Invest in human capital to align skills with future market needs, and promote TVET through strategic partnerships with the private sector.

Regarding cybersecurity, the report reveals that "Only a fifth of African countries have a legal framework for cybersecurity (digital security), while just 11 countries have adopted substantive laws on cybercrime (digital security incidents)." What is more, "In 2014, the 23rd Assembly of the AU Heads of State and Government adopted a Convention on Cybersecurity and Personal Data Protection as a first step towards continental co‑operation. Yet, as of June 2020, only 14 AU member states had signed it, and 5 had ratified it (Ghana, Guinea, Mauritius, Namibia and Senegal). This is still far from the 15 ratifications required for the Convention to enter into force."

And addressing the urgency for cooperation in digital security, the report asserts that the "cost of cybercrime in Africa is increasing and brings the risk of holding back Africa's digital revolution. Several assessments show that Africa's online ecosystem is one of the most vulnerable in the world."

Lastly, the report includes an editorial authored by H.E. Moussa Faki Mahamat, Chairperson of the African Union Commission, and H.E. Angel GurrĂ­a, Secretary-General of the Organization for Economic Co-operation and Development, which says, in part, "For Africa’s economic recovery to be sustainable, the digital transformation must be felt in all of the continent's priority sectors. This will require the commitment of all stakeholders, both private and public, and of the continent's partners."

What are your recommendations for how to stimulate the digitalization of economic sectors to kick-start a new growth cycle after COVID-19?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

January 15, 2021

SBA Launches Its 'Ascent for Women' Online Platform Geared to Help Women Entrepreneurs Grow and Expand Their Businesses

"Women entrepreneurs start and own nearly half of all businesses in the United States, employ 9.4 million workers, generate $1.9 trillion in revenue and represent all industries," the U.S. Small Business Administration (SBA) said in a press release announcing the launch of its new initiative for women interested in starting or growing their small businesses. According to the Jan. 11th, 2021 announcement, Ascent for Women is "a first-of-its-kind, free digital e-learning platform geared to help women entrepreneurs grow and expand their businesses. Ascent has valuable content such as tips on preparing and recovering from disasters, strategic marketing and business financial strategy development."

A joint initiative between the White House, the SBA, the U.S. Department of Labor's Women's Bureau and the U.S. Department of the Treasury, Ascent is "designed to support women entrepreneurs looking to remain resilient in their operations" and the platform "is packed with content and resources from each agency and backed by academic research," the press statement explained.

Developed by experts in women's entrepreneurship, the platform is divided into major topics called Journeys. Within each Journey, users will find Excursions with the tools they need to master a topic. Each excursion includes a time estimate for completion. Below is a list of items users can explore within Excursions:
  • Exercises & Tools: Learn and apply growth practices to your business;
  • Fireside Chats: Learn from experts about how women grow their businesses;
  • Infographics: Gain a snapshot view of growth concepts;
  • Success Stories: Be inspired by stories from real-world entrepreneurs;
  • Discussion Guides: Use questions to stimulate thinking for you, your advisors or team;
  • Videos: Grasp key concepts in just minutes;
  • Key Insights: Understand key topics to support your business growth; and
  • Self-Assessments: Benchmark your current practices through self-focused inventories.

The aforementioned press release noted that "Ascent offers several key journeys to assist women business owners with strategies towards growth and success, including Disaster & Economic Recovery, Strategic Marketing, Your People, Your Business Financial Strategy and Access to Capital. Each journey contains content and tools needed to grow your business. Additional topics will be added over time."

This initiative is one of two learning platforms created by the SBA designed to empower and educate small business owners, The previous post on this blog focuses on the SBA's Learning Center, which is aimed to help small business owners start, pivot, or grow their business.

SBA Launches Largest Expansion of Women's Business Centers in 30 Years

Prior to announcing the launch of the Ascent for Women platform, the SBA issued a press release on Jan. 4th, 2021 saying "grant funding and the historic launch of 20 new Women’s Business Centers (WBC) across America to serve rural, urban and underserved communities alike. The opening of the 20 new WBCs is the largest single expansion of WBCs across America in its 30-year tenure, and these centers will be pivotal to the success of women-owned businesses as they continue to recover during this time. The WBCs will be hosted in rural and underserved markets and widen the footprint and partnership with Historically Black Colleges and Universities (HBCUs)."

The press statement added that "SBA's WBCs are a national network of 136 centers that offer one-on-one counseling, training, networking, workshops, technical assistance, and mentoring to women entrepreneurs on numerous business development topics, including business startup, financial management, marketing, and procurement."

What are your thoughts about the SBA's initiatives to help women entrepreneurs? Are there additional resources you recommend?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

January 11, 2021

SBA's Learning Center Helps Small Business Owners Start, Pivot, or Grow Their Business

In my post "Your Business Plan Is Your Business's Roadmap," I include numerous online resources entrepreneurs and small business owners should utilize in building their business plan. One resource is a business guide the U.S. Small Business Administration (SBA) created to help small business owners through the process of launching their business. A comprehensive business plan serves as a roadmap for how to structure, run, and grow a business.

In addition to its business guide, the SBA created an online learning platform, which include two learning programs designed to empower and educate small business owners every step of the way. One program is SBA's Ascent for Women, which is the topic of the following post on this blog, is a free online learning platform for women interested in starting or growing their small businesses. This post focuses on the SBA Learning Center, which consists of 17 courses covering 236 objectives. The objectives address a wide array of topics including how to estimate startup costs, strategies for employee recruiting, understanding customer intent, and how pricing relates to marketing. The videos and worksheets, which are accessible for free, are segmented into the following five groups:

Plan (Research, plan, and document your ideas)

Launch (Turn your business plan into a reality)
  • Financing Your Business (18 objectives): Assess your financing needs and discover financing options for your business.
  • Introduction to Pricing (20 objectives): Understand strategies and the impact that pricing has on the success of your business.
  • High-Tech Products (11 objectives): Understand the product life cycle of high-tech products.

Manage (Master day-to-day operations to run your business)
  • Employee Recruitment and Retention (7 objectives): Strategies to help you locate, recruit, and retain talented employees.
  • Understanding Your Customer (16 objectives): Discover resources that will help you understand your customer and increase sales.
  • Sales (19 objectives): Review sales plans and other tools to get your product or service into your customer/consumer's hands.
  • Selling Your Business (8 objectives): Examine how to sell or close your business.

Market (Understand your competition and strategies to win customers)
  • Market Research (13 objectives): Identify your customers and start developing your marketing strategy.
  • Marketing 101 (12 objectives): Define marketing and understand its vital role in the growth of your business.
  • Competitive Advantage (9 objectives): Leverage the uniqueness of your business to develop your competitive advantage.
  • Social Media Marketing (18 objectives): Use social media to help increase sales of your product or service.

Grow: Expand by finding new funding, customers, and locations.

Do you find SBA's Learning Center a useful tool?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

January 7, 2021

EY's Six Priorities for Boards in 2021

Many will agree with this assertion: "Following a year of global upheaval, organizations are re-evaluating every aspect of their business." Produced by the EY Center for Board Matters, the report, which lists six priorities corporate boards of directors in 2021, further says "companies and boards will face an acceleration of existing challenges" in the coming year "and be compelled to address how they are building resilience and creating sustainable value in a rapidly changing business environment."

I have published posts about EY's recommended priorities for boards for previous years. Whether serving on a board of a company that is publicly-traded or privately-held, I appreciate that this year's report recommends that when evaluating a company's existing business model, the "strategy should be inclusive of investments in strategic competencies to meet material stakeholder needs and future expectations, including those related to environmental, social and governance (ESG) matters."

Not only did the business disruption caused by the coronavirus pandemic remind corporate leaders of the important role ESG has on a company's culture and relations with its investors and customers, but the events of past year serve as a reminder that a company's most valuable asset is its workforce. The report encouragingly notes: "Boards have an opportunity to help guide workforce strategy to create competitive advantage and long-term value, and this requires the right information. This involves making the chief human resources officer (CHRO) a central board resource, regularly reviewing well-defined and robust metrics for human capital and culture intelligence, and finding opportunities to bring the employee perspective into the boardroom."

Therefore, "With increased investor scrutiny and stakeholder considerations, boards will be well served to focus on the following priorities in 2021."

1. Overseeing strategy to create long-term value

"In today's stakeholder-focused business environment, it is imperative that companies define both financial and nonfinancial value drivers and include them in strategy-setting as they consider the needs of investors, employees, consumers, society and other key stakeholders," explains the report. "Longer-term assumptions within the strategy should be developed using internal and external sources of information on megatrends, investment flows by venture capital and private equity entities, along with monitoring merger and acquisition, alliance and joint venture activity. Traditional sector and adjacent construct analyses along with external risk intelligence can provide early indicators of emerging opportunities and risks."

In addition, "Management should integrate strategy and culture with the company's enterprise risk management process and provide the board with timely updates related to strategic opportunities and risks."

The report importantly proposes that "the board and management should collectively challenge whether they have the appropriate governance processes to enable the timely review and implementation of a robust strategy across the short-mid-, and long-term time horizons. A long-term value dashboard that includes metrics to gauge financial, human, consumer and societal value should be reviewed regularly by the board and monitored by management to ensure metric credibility. Board time should also be evaluated along with the potential use of a committee or an ad hoc committee given the need to continuously review strategic assumptions over a longer term."

Key actions for directors to take in 2021:
    • Balance the board's oversight of strategy and investments over the short, medium and longer terms to sustain long-term value.
    • Obtain an appropriate mix of internal and external data and information to validate key assumptions and determine strategic pivots.
    • Integrate ESG opportunities and risks into strategy frameworks and decisions.
    • As strategy shifts, evaluate that the culture has been redefined to incorporate new behaviors required to drive the strategy over the long term.
    • Create a long-term value dashboard with regular briefings to the board to ensure shareholder value improvement manifests from a balanced focus on financial, human, consumer and societal value drivers.

    2. Promoting enterprise resiliency in the face of uncertainty

    "Board members are playing a pivotal role in helping management adapt their organizations to the world beyond the pandemic and overseeing how resiliency is built into all aspects of the business."

    Key actions for directors to take in 2021:
      • Set aside more time on board agendas to challenge assumptions, review contingency plans and verify that management is incorporating low-risk/high-impact scenarios into its ERM frameworks and strategy.
      • Analyze megatrends and identify key management and external advisors to regularly report to the board on material business environment developments and data points to continuously improve oversight of strategy and risk.
      • Turn emerging risks into strategic value by taking a balanced approach to risk management across the three dimensions of risk: downside, upside and outside, with a greater focus on upside and outside risks.
      • Review key performance indicators developed by management to measure key risks and opportunities and assess the value of material intangible assets — such as human capital and culture.
      • Re-evaluate risk oversight practices and related structures to assess whether board or committee oversight changes would enhance oversight.
      • Review management's conclusions and effectiveness following postmortems regarding corporate responses to the pandemic, social justice movements and other material economic and business impacts in 2020.

      3. Focusing on workforce transformation and new ways of working

      "Historically, many boards limited their talent oversight responsibilities to C-suite succession planning and development. Today's leading boards recognize human capital as a key driver of long-term value."

      Key actions for directors to take in 2021:
        • Review the board's approach to overseeing strategic workforce issues, including how related committee responsibilities are allocated (e.g., succession planning, human capital initiatives).
        • Make the CHRO a central and strategic resource to the board by aligning their participation to strategy, business and disclosure discussions.
        • Regularly review a comprehensive set of workforce and culture-related metrics, understanding how they are being collected, measured and controlled.
        • Align decision-making related to the human capital strategy with the company’s purpose, culture and values.
        • Consider how the company's investments in reskilling workers or recruiting new employees are meeting current and future skills gaps and addressing innovation.
        • Assess the quality and consistency of the company’s human capital disclosures across various communication outlets and challenge how to optimize the impact on the company's brand and reputation, including with prospective employees and other key stakeholders.

        4. Leading on diversity, equity and inclusion

        "Making real progress on diversity, equity and inclusion (DEI) will be one of the hallmarks of 2021 as leaders implement significant changes to their recruitment and management processes and boards hold their management teams and themselves accountable."

        Key actions for directors to take in 2021:
        • Work with management to define and determine how DEI can help drive value for the company.
        • Challenge how DEI considerations are embedded in the company's human capital management programs throughout all steps in the employee life cycle.
        • Understand how the company’s human capital management programs enable equitable opportunity, advancement and compensation.
        • Consider how executive incentive pay could be more directly tied to the achievement of DEI goals.
        • Assess how the board’s composition and director nomination process reflect the company's commitments to DEI.
        • Include DEI metrics as part of the company's long-term value dashboard for credible reporting and updates to the board

        5. Guiding an ESG strategy that drives stakeholder engagement and value

        "A sustainable-investing surge is underway. Driven by many forces, such as investor demand and increasing recognition that ESG factors can be financially beneficial, record-setting inflows are going to companies deploying ESG investing strategies, and significant growth in ESG-branded funds points to continued momentum."

        Key actions for directors to take in 2021:
          • Capitalize on ESG investing and stewardship trends.
          • Understand the ESG ecosystem and developments impacting stakeholder expectations.
          • Guide ESG strategy development based on a materiality assessment and oversee the identification of ESG metrics and goal setting.
          • Support the integration of ESG with broader strategy and ERM.
          • Consider how the company tells its ESG story through various channels and confirm that messaging is consistent and data quality is validated.

          6. Challenging board composition and effectiveness

          "Throughout 2021, boards should continue to enhance their own effectiveness. Board competencies, practices and committee structure and responsibilities can be continually improved to meet ongoing and emerging challenges, including the impacts of COVID-19."

          Key actions for directors to take in 2021:
            • Confirm the board is receiving the information it needs from a variety of sources to keep pace with external developments and challenge status quo thinking.
            • Assess the board's expertise and diversity against rapidly evolving strategic opportunities and risks and stakeholder expectations. Develop individual and collective learning opportunities to enable directors to stay on top of current trends and leading practices.
            • Challenge whether board and committee meeting frequency, length, format and security remain fit for purpose in a continued virtual environment.
            • Contemplate using a third party to provide objectivity and facilitate or improve the board evaluation process and actionable outcomes.
            • Promote ongoing board evaluation beyond the formal annual process, such as making time for reflection on performance during board and committee meetings or quarterly executive sessions.
            • Enhance communications to stakeholders to build confidence in a time of uncertainty.

            While very few of us predicted that the world would experience anything like the coronavirus pandemic, which has gripped the global economy in 2020, the pandemic serves as one of many external risks that may impact a company's operations and financial performance. Crises like the current pandemic or the Great Recession that occurred between 2007 and 2009 provides an opportunity for boards to reevaluate how they run the companies they serve. I encourage directors to use EY's report as a tool to help boards serve their role prudently and effectively.

            Do you agree with the six board priorities?

            Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

            January 3, 2021

            What Is Intellectual Property and Why You Should Protect It

            The value of many businesses may be found in its intellectual property (IP), which include patents, trademarks, copyrights and trade secrets. Protecting your IP by filing the necessary application with the U.S. Patent and Trademark Office (USPTO) is crucial to protecting your creativity, idea or brand. Understanding the USPTO's complex application system, however, can be overwhelming. Adam Philipp, Founder of AEON Law, an intellectual property law firm focused on patent, trademark, copyright, trade secret, and related IP matters, presented "VIPs: Very Important Patents" to the Seattle Entrepreneurship Club (SEC). His presentation brought clarity to defining intellectual property and how a business should protect its invention or brand.

            Organized in 2008, the SEC is a nonprofit organization that offers a variety of services to help entrepreneurs, investors, and professionals succeed in Seattle and throughout North America. The Medina, Wash.-based organization also cooperates with organization in different industries and fields to promote the exchange of enterprises, talents, and culture between China and North America. While I recommend watching Mr. Philipp's presentation in its entirety via this link or in the embedded video at the end of this post, here a few takeaways entrepreneurs and investors may find of value on why and how they should protect their IP.

            Mr. Philipp presented six reasons on why you should file for a patent:
            1. Marketing: Good for public relations. "There is a stamp of legitimacy, particularly in the U.S., if a consumer hears that they are using patented technology";
            2. Defense: Prove possessed of the invention. "Let's other companies know that you have been working on this technology at a provable point in time and it puts them on notice that they shouldn't threaten you if you were ahead of them";
            3. Access: Leverage to others' IP. "A more sophisticated way of using intellectual property is patents are a special kind of tool that can be a force multiplier. So a small company with a strong patent can get the attention of a much larger company to get access to that larger company's IP. If the larger company is either threatened or wants access to the patented technology from the smaller company, the patent can be a lever that will move in otherwise much larger adversary or potential partner";
            4. Monetization: License the patent for money. "You can use your patent like you would any other piece of property; it's like your car or house. You can give permission for other people to use it in exchange of something of value, usually money";
            5. Offense: Sue for money or injunction. When your patent is infringed upon, "you can sue for money or damages, or you can sue for injunctions," which is "getting a court to tell somebody to stop doing something"; and
            6. Value: Patents are assets. "Many companies value the use of patents as a barrier-of-entry tool that keeps competitors from getting into the same marketplace and boosts the value of the company that owns the patent. So patents are seen as company assets and can boost the valuations or the perceived value of the company."
            Mr. Philipp talked about one additional reason on why you should file for a patent. The calendars of most investors, myself included, are full with meetings with entrepreneurs who are trying to raise capital for their business ventures. These entrepreneurs often request investors sign nondisclosure agreements (NDAs). But most investors will rarely sign one because doing so creates an undue burden on the time and cost of negotiating and monitoring the multitude of NDAs (a point that I address in my post, "There Is No Such Thing as a 'Standard NDA'"). Therefore, according to Mr. Philipp, an investee who has an interesting invention should obtain a patent before soliciting funds from an investor. "Revealing a trade secret without some form of confidentiality agreement (e.g., NDA) destroys the trade secret."

            When I started my career in the early 1990s, it was common for the USPTO to take five or more years to examine a patent application. The long period of time often deterred companies from going through the patent application process. Today, through the USPTO's Prioritized Patent Examination Program (also known as Track One), Mr. Philipp encouragingly noted the examination process has been shortened to 4-10 months. "This has been dramatically changing how people think about IP protection, particularly patent protection with startup companies because once you have an enforceable tool that can keep people out of the marketplace, that can be a powerful tool with the right kind of investment."

            Trademarks, Mr. Philipp explained, is a word, phrase, logo or other identifier (e.g., brands) of a source of goods or services. In the U.S., trademarks are used in commerce and they protect against other companies using a confusingly similar mark or similar goods or services. As for when a company should register its trademark, the time to consider trademark protection is when the company dedicates $5,000 or more in its marketing or brand enhancement strategy. "Why spend all that money only to find out someone has beat you to it beforehand?" asks Mr. Philipp.

            While it is advisable to retain the services of a U.S.-licensed attorney to file the patent or trademark application with the USPTO, I encourage you to become familiar with the government agency's website to learn more about the patent application and maintenance process as well as the basics of trademarks.

            What aspects of Mr. Philipp's presentation did you find of value? What has been your experience in protecting your company's IP?

            Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.