HOW BOARDS WORK

Economist Moyo, who serves on numerous corporate boards, explains their inner workings in admirably clear language.

“Strong and successful corporations are in the best interest of society. Indeed, the centrality of corporations to human progress cannot be overstated.” So writes Moyo, gainsaying those who argue that corporations are evil, outmoded, or both. As a board member, the author writes that she has seen numerous failures short of bankruptcy and just as many successes, even in difficult times. Agreeing that corporate boards need more diverse membership while arguing against quota appointments, Moyo holds that boards have an overarching function that is often ignored: While a CEO is in charge of daily operations, a board of directors and its various committees are collectively responsible for setting and maintaining long-term goals and visions, with “an important and central role to play in navigating global disruption.” The author is at her best when she focuses on that disruption and its many sources—e.g., competition from China, the imposition of trade barriers and other protectionist measures, the fallout from Brexit, Covid-19, the ascent of social media. For all that, she also notes that boards must fight the temptation to micromanage and to enter the realm of short-term thinking rather than long-term strategic decision-making. Boards must also become more aware of the life cycle of a business. Corporations typically last as long as mortgages do these days, not centuries as in the days of old, and even Jeff Bezos has predicted that Amazon and other large companies of today will be gone in 30 years. Finally, Moyo notes, corporate boards are increasingly called on to safeguard values, enforce ethics, and address social concerns such as gun control, data privacy, and mental health. “Society is holding companies to account precisely because these issues are important and not going away,” she writes. “In fact, the emphasis is likely only to increase.”

A highly useful primer for investors and board members alike.