Happy Friday. Some changes can only happen from the top.
As the pressures on businesses to respond to a rapidly changing world become more extreme, the role of the corporate board is shifting. It needed to, says Fortune’s Lila MacLellan.
“Today, the best boards operate as an advisory team, almost player-coaches, who manage multiple pressures, including traditional expectations around increasing revenues and building strong leadership succession plans, but also newer requirements, such as shrinking a firm’s carbon footprint, boosting social equity, and complying with increased regulations,” she says.
This is why Fortune’s second-annual Modern Board 25 list has become such a vital snapshot of future business success. It’s a tangible sign that companies are taking shareholder needs seriously through a stakeholder approach to managing opportunity and risk. And that means drawing from a wide range of expertise and asking directors to work differently.
This year’s ranking, published this week, looks for governance innovation within S&P 500 companies by measuring board independence, financial performance, sustainability, diversity, and range of expertise.
Every company on the list has an important lesson to share, but I was particularly delighted to see Seattle-based cybersecurity company F5 atop the list. Its CEO, François Locoh-Donou, inherited a homogeneous board when he joined the firm in 2017. Locoh-Donou, one of the few Black leaders of a major tech firm, immediately sought to balance the board and his executive team by drawing expertise from underrepresented populations. “I felt strongly that the technology industry at large had been apathetic to the issue of creating more diverse and inclusive environments,” he says.
I got to know Locoh-Donou in 2021 while moderating F5’s Real Talk in Tech event, which convened Black business superstars and racial bias experts to offer candid career advice to Black tech professionals at every stage of their careers. It got very real. (You can watch it here.) It was apparent then that he was working with a different playbook, which is now reflected in the firm’s continued success. Despite economic headwinds, the company saw revenue rise 11% year over year in the second quarter of 2023.
But if change is to come from the top, the people in those spots need to be prepared to do the work.
“I think the stakes are higher for directors today,” Locoh-Donou tells Fortune. “The bar for governance, which includes regularly assessing the performance of members, ensuring the right representation of board members, the practice of succession planning for directors, issues related to ESG—all of these things have moved up a notch year after year. Being a director today requires being quite an athlete on all these topics.”
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
This edition of raceAhead was edited by Ruth Umoh.
