Written by Katy Goshtasbi
Posted on: September 19, 2019
At the heart of every effective company is a body that is independent and provides advice and experience to the CEO and the rest of the c-suite in an organization.
Even if your company is not large, you could still use a board of directors or advisers. In the public company world, it’s a whole different story.
Who goes on your board of directors? How could this composition serve to maximize shareholder value? What about the internal operations of your company and the employees who make it all work?
For many years, I was counsel to boards of directors. The focus was rarely on internal operations as much as it was on maximum profits. That makes sense. But are they really two separate notions or are both issues interrelated more than anyone wants to believe?
To start, the most important issue is having a diverse set of directors. Why?
As I often talk about, diversity shows how creative and open a brand really is and thus, how they handle growth: clients/customers and employee/culture. Diversity isn’t really an “initiative”, which would imply a start and an end date. Diversity is really a lifelong commitment to maximizing value to your companies’ clients, customers and if you are public, shareholders. I’m not talking about men versus women. I’m talking about maximum points of view to allow your company to thrive.
It seems diversity is no longer just a nice idea, but the law. Effective January 1, 2019, all California based companies are required by law to have at least one woman on their boards. There are some stiff fines for those companies who don’t comply with the law. Other states are following as well.
Nationally, according to the Credit Suisse Research Institute 6-year study, “…companies with women directors out performed companies without women directors in return on equity, average growth, and price book value multiples. Companies with at least one-woman director had better share price performance than those companies without women.” BlackRock, with more than $6 trillion in assets under management, announced it will vote against chairs of nominating/governance committees at boards with fewer than two women directors.
From a marketing/branding perspective, it doesn’t look so good if your company isn’t willing to be diverse. The 2020 Women On Boards organization (2020wob.com) tracks and ranks companies and their diversity accomplishments on their boards. I wouldn’t want to be one of the companies with zero women on their boards, especially when you look at the statistical, economic benefits that come from a diverse board. Group think is only good for so long. Diverse and open points of view are necessary to grow any company.
But how can maximizing shareholder value via a diverse board also harmonize with the best interests of all employees? Is this really a unicorn? Over the past decade as a consultant, I’ve found that it’s a challenge for management to always see the direct, causal connection between employees and productivity and growth of a company.
One CEO in particular role models this idea very well in his company. Garry Ridge, CEO of WD-40 Company, often refers to the idea of developing a tribal culture within his company. In the book, Helping People Win at Work, that he co-wrote with Ken Blanchard, Garry focuses on the physiological and emotional needs of employees, noting that people are social beings and have a need to belong and be recognized. It’s brilliant of him to note this, and yet it is so simple.
To me, this is very clear. If a company isn’t cultivating the only asset it has to grow, it’s employees, then how can it maximize shareholder value?
I call this the Whole Person idea: every employee is a human. Garry Ridge understands this concept about his employees.
As humans, we all have pasts which leave us with baggage and a story we live in and with. We bring this baggage and story with us to work each day, whether we want to do so or not. Denying that we are all humans, leaves a very hollow person as an employee. I often hear employees state that they feel like imposters or feel lost at work. Many complain of isolation feelings at work.
All of these issues signal a lack of productivity for the employees driven by lack of motivation. The end result will always be an impact on the bottom line and growth, impacting maximum shareholder values. Implementing a process whereby employees are recognized and the Whole Employee welcomed and cultivated at work will drive up growth and shareholder value.
What does this mean for you? Stop and consider:
• What are you doing to promote diverse points of view within your organization? Within your employees?
• If you are a public company, how diverse is your board of directors? Why or why not?
• How has diversity helped your brand?
• How could more diverse viewpoints be of value to your business and brand and marketing plans?
• What are you doing to promote employee personal growth? How are you recognizing the real value of each and every employee to maximize shareholder value?
• What’s one action you can take to bring this issue to the light within your organization?
• Where can you reach out for collaborative support to make this all happen?
Katy Goshtasbi is a former securities lawyer, with SEC regulatory and compliance experience, DC lobbying experience and experience serving as in-house investment counsel advising boards of directors. Katy is now CEO of a global consulting company where her expertise is in having companies grow by managing change (M&A, technology implementation, downsizing, etc) and developing leaders and employees who are productive and can sell the corporate brand effectively. She has worked with all size companies, from $11 billion to small and mid-cap companies. Her breadth of board governance experience allows her to be industry agnostic.
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