The spontaneous outrage of Egyptian citizens, and the subsequent fall of Hosni Mubarak and his cabinet, will be the defining moment for the current and next generations of corporate leaders and directors in America — even if they don’t yet know it. The worst seems to be behind us in Egypt. It’s tempting to believe that the uprising is over, even as it spreads to other countries, but that is simply not true. The unrest that was unleashed is just the beginning of government and corporate social reform that will transform all companies and their boards of directors in ways none of us could have ever imagined.
The causes are simple and well documented. The past decade has seen a steady increase in demand by customers and employees for a voice in their organizations’ strategy, direction, product and service development, and even in their equity and debt financing.
As social media are spreading around the world (Facebook and Twitter now reach about 10 percent of the planet’s population, or 600 million people), we are witnessing increased tension between organizations and their customers and employees that is no more containable than the protests in Egypt.
Carl Icahn, take note: Proxy fights in the future will be fought using social media, and it won’t be just investors fighting; customers and employees will join the war. Business leaders and corporate directors will need to adapt or pay the price.
The challenge to CEOs and corporate directors did not arise as a result of our recent recession. Rather, it began to manifest itself a decade ago when public trust in companies and boards began to erode. That trust continues to diminish as a result of rising income inequality, high unemployment, spiraling budget deficits and a host of other issues. Social media are just accelerating and amplifying what has been festering for a while. Thus, if you want to ensure the prosperity of your organization in today’s social and open world, there are five rules for transforming your boards:
• Implement good succession planning. You must have a CEO on your board who has the technology skills and know-how to deal with today’s connected society and who can step in during a crisis if need be.
• Build a situation room capable of dealing with this social revolution, and equip it with the people, processes and technologies to be proactive as well as reactive.
• Recruit independent directors with skills that enhance your organization’s financial, international, marketing, product and technology knowledge. Boards will gravitate away from the politically correct rainbow coalitions of the 1980s to a diverse but expertise-based approach.
• Increase your compensation for independent directors to reward them for the increased risk and time commitment that today’s boards demand.
• Consider reverse-mentoring for your board members by Millennials — the 20-somethings who are causing the revolution. Partner with them to avoid the consequences of not understanding their social media and mobile capabilities as well as their desire to connect online to be heard.
Virginia Gambale is a great example of a modern-day board member. Gambale, a recognized technology guru who sits on the JetBlue Airways Corp. board, would not have shown up in researchers’ databases or in the bowels of the big executive search firms, whose job it is to selectively dole out candidates to the 100-plus U.S. searches for board members that are being conducted at any given time. Instead, her expertise and brilliance were recognized by JetBlue’s lead investor. The company’s confidence was quickly rewarded as Gambale played a critical role in helping JetBlue pull its technology and reservation system into the 21st century, creating a significant competitive advantage.
It’s time for CEOs and boards to understand how powerful customer and employee social interactions truly are, and how they are accelerated and enabled by online communications and cloud technologies. For boards to succeed, nothing less than a shift from traditional closed governance to open and socially aware independent directorship is required.
Social media changed the face of Egypt. It will do the same to corporate boards. So take heed; don’t let what happened to Egypt’s leadership happen to your board or senior management. It is time to open a dialogue with your customers and employees, including citizens and stakeholders, about how your organization can become more transparent, accountable and engaged. • •
Barry Libert is chairman and founder of OpenMatters, a Boston-based social media advisory firm. Steven Potter is CEO of Allyon Human Capital Solutions, a New York–based executive search firm.