Corporate boards usually wield some kind of silent power: weighing on long-term strategy, signing large-scale investments, and keeping CEOs alert.
But the oversight suddenly became apparent when last year’s run merged into a mess of skyrocketing inflation, supply chain grinding, and the threat of recession.
In companies facing both internal and external challenges, there has been a slew of CEOs suddenly out the door: from Sonia Syngal of Gap Inc. to Julie Wainwright of The RealReal Inc. and Patrik Frisk of Under Armor Inc.
While every CEO was said to “step down” and thank them for their efforts, it’s an exodus that suggests the boards have found their voice.
Now filmmakers are looking closely at what lies ahead and, just like everyone else, they see a future full of question marks.
This is a very uncomfortable place for most.
Boards of directors are not just made up of people prone to all the faults of humanity, but business veterans who have often made it to the top knowing how to move through the corporate landscape and then into the company.
Now fashion and retail are in uncharted territory, having gone through pandemic blockades, a retreating online boom and struggling with consumers who, at least at the lower end, are choosing between food and fashion.
Just look at retail giant Walmart Inc., which this week slashed its annual profit projections and said it was reducing the fashion to move goods, crashing Wall Street, and recalculating retail. High-end consumers are holding on, but given the stock market drop and the rest, how long can they hold out?
Consultant Sean Ryan, partner and leader of the consumer products group at Kearney, said, “When you get uncertain … you start to see the adoption of the conservative principle, which is: do no harm, postpone, delay unless that there is some sort of overwhelming obvious result. “
Ryan estimated that two-thirds of the decisions that come before the board are child’s play, with easy “yes” or “no” answers.
The other third of the decisions that get pushed up to the top of the corporate organization chart, not that much.
“Those are the points of tension,” Ryan said.
They will differ from company to company, but the stakes are always high.
“Recessions can be seen as cleansing moments,” Ryan said. “The company that is well governed by strong and effective advice will survive and, if it does not thrive, it will at least be well positioned by the time we emerge from the recession.”
To some extent, the board, the C-suite and everyone else just have to hold out and get out of 2022, hoping they’ve done their job.
“It’s about trying to differentiate between the part of the business that you can control from the part of the business that you can’t control,” Ryan said.
The list of the uncontrollable is long today.
Jill Standish, senior chief executive officer and global leader, retail at Accenture, said, “Leaders now have to specialize in running a business and then they have to deal with foreign affairs and environmental issues, what’s going on in public policy, what social issues are happening. It’s not enough just to run a business. ”
While the boards and C-suites think about all these moving parts, they are struggling with a kind of fast and furious change that hasn’t been seen in at least a generation.
“The pandemic has happened to them,” Standish said. “There was no debate, it was, ‘just do it.’ The speed with which they make decisions is accelerated. “
For at least some boards, this included big decisions on areas of the business that weren’t always fully appreciated.
“In clothing, I’m not sure the board of directors understood how fragmented the supply chains were: the buttons come from this country, the raw materials come from this farm. Have we ever exposed the cards to this? ”Standish said.
And the future is still coming fast with more changes in store.
“What I see are a lot of requests for educating the councils,” Standish said. “Demystifying the metaverse, demystifying things is a good word. We have to take them with us on the journey ”.
He said there are five major forces rampant in the industry: the metaverse, talent shifts, technology, sustainability, and general reinvention.
“Every company is striving to reinvent, human resources will be different, laws will be different, store operations will be different,” he said. “Total reinvention of the company. Every company is thinking, ‘How fast can I change?’ ”
This is because change is no longer a “nice to have”, creating a crowded meeting room.
Les Berglass, CEO of executive research firm Berglass + Associates, said, “This is a wonderful time to embrace change. Business as usual is a death sentence and not a path to the future.
“The second most important” must have “on a board’s list, after profitable growth, is predictability – boards hate surprise,” Berglass said. “They look to their CEO to provide that predictability. Harry Truman was right, ‘The dollar stops there.’ “
Even though the corner officer comes with many perks, from multimillion-dollar paydays to prestige and power, that pressure does have an impact.
As a result, there may be more than a little C-suite fatigue.
“It’s been a really tough two and a half years to be a retail CEO,” said Joel Bines, global co-head of AlixPartners’ retail practice. “Many of the people who are changing roles have held the role – if not the CEO, at least a C-something – for some time.
“Retail executives are exhausted and when staring into the abyss of a potential global recession after two and a half years of battles [COVID-19]… Maybe it’s a little more mutual than it looks, ”Bines said. “’It’s not you, it’s me,’ that kind of breakup.
“It’s rare for a board to fire a CEO,” he said. “Most of the time what happens is that the relationship between the board and the CEO becomes passive-aggressive. Board members make derogatory comments or send derogatory emails. The CEO is tired and passive-aggressive. The advice is passive-aggressive. Everyone comes to the same conclusion.
“Remember the game going on, CEOs manage their boards or think they manage their boards. And the boards think they manage their own CEOs. And none of these are true. Most people are just managing. People like to be on boards. And, in general, people like to hang out with people who don’t make their life miserable.
“The board of directors is playing a governance role, but the CEO is playing a leadership role and sometimes we see these relationships become blurry,” said Bines.
And when everything is changing up and down in the business, that blur may simply be too much for everyone involved.