Getting in shape for the future
Let’s say you’ve worked through the above steps, including establishing purpose. Now, you could try applying your outcomes to find the right structure for your “board of the future”.
As you know, boards in Australia largely use the classical one-tier, British 'unitary' model, and by and large, it’s served them well.
But, this one-size-fits-all structure belies the huge variety of organisations it serves. It also makes it easier for shareholders to view board members as both omniscient and solely accountable. And likewise, executives can feel they aren’t really 'on the hook'.
As the focus on purpose grows, the expectation is that structures will begin to vary. Unitary models may well still dominate. But we’ll also see more two-tier boards and networked structures designed to reflect the business and its operating environment.
These alternative models are already gaining attention, as one interviewee explained when comparing a unitary board with the Nordic system. “[With a unitary board], in the public’s mind, all focus is on the board. Whereas when you've got the two boards… there's at least that question mark in people’s minds. And if you say, 'Well, I do this, and they do that', there's kind of a shrug of the shoulders and, 'Fair enough, then I don’t expect everything [from you]'. Whereas in our model [they expect us do everything]. So, to me, having two boards helps to set people’s expectations.”
What’s more, as boards build the courage to be more bespoke in their structures, they’ll be more ready to explain and stand behind them. And investors will both understand and accept the need for less homogeneity.
Here are three options for what these revised board structures could look like.