View from the boardroom: Jan Babiak reflects on 2020

EY alumna and veteran independent/non-executive director shares perspective on the evolving role of board leadership in a transformative year.

In brief

• Board members and management have a new frame of reference for the long-term horizon, but purpose in business continues to be a high priority for boards.
• Organizations should consider the human connection and impacts on a diverse workforce when planning for the future of work.
• When seeking to diversify thinking in the boardroom, look for sensible voices with alternative views.

Jan Babiak, an EY alum and veteran independent/non-executive director, has served as both committee chair and senior independent director. She currently serves on public and private corporate boards in the UK, US, Canada and Australia. In conversation with Abby Abruzzo, she sheds light on her current role and shares her views on the future in terms of impact on employee base, remote working, D&I and more.

It’s been a challenging year for many people. How are you managing and how have you seen your role as an independent director shift in 2020?

I have always thought about board work falling into three buckets. First is the day job, which is well laid out in the charters and regulations, particularly in financial services. You have those responsibilities both in regular times and through crisis. The second is anticipating and responding to the unexpected or a rapidly changing environment. In these last six months, this category has been exaggerated due to all the things that are having an impact on us. It’s not just COVID-19; it’s also dealing with the effects of people working from home or, as a retailer, being on the front lines of life-threatening risk. And at the same time, recent events have resulted in most corporations publicly committing to significantly increased actions in the fight against racial injustice. It’s all these things coming together in a very dynamic way all at the same time. Then the third part of the job is looking to the horizon — thinking about, defining and preparing for the future, which has more uncertainty than usual due to all these factors.

All three jobs exist all the time but the balance for board members and for management has shifted.

We still have to do the business-as-usual items but the lens is different. For example, we now have new disclosures around COVID-19 that weren’t there two quarters ago. The second bucket is influencing the first bucket in a very different way than we might expect. The future view is changing too. For example, many organizations had plans in place around digital transformation and the norm was that a big project could take a year or more to implement. When you then move 50,000 people to work from home in six days, you realize maybe we could do some of this faster. That new frame of reference is changing the way board members and management look at the long-term horizon.

There have been major shifts to remote work in the last eight months. What are the positives and the challenges you’ve seen?

For all my boards, we had some element of remote working already. The balance has changed; there’s more use of video now compared with the conference call. It’s almost as if people have this new toy. Some people believe we’ll never go back but I’m not of that view. I remember when 9/11 happened and we all stopped traveling on planes. I got my first headset and started doing global conference calls. Everybody thought we’d never go back to air travel. Well, it took a couple of years but we went back. People missed that human contact.

Working remotely is working now because we know each other. We’ve worked together with our colleagues before this shift. When I’m chairing a committee and I know somebody is being unusually quiet on a subject they usually have views on, I can pause and say, “You’re being quieter than usual, what’s your thought on that?” It’s harder when we bring somebody new into the mix because when we see their facial expression, we don’t really know what it means.

What about the effects on the employee base?

You’re seeing a lot of mixed messages. I saw survey results recently showing that 30% of people still want to work from home when this is all over. Part of this is that employees don’t trust that they’re safe. If tomorrow there was a cure or a vaccine, you could ask the same question and I think you might find people would be in a different place. So companies need to be very careful about overreacting and getting rid of all their real estate because I think they’ll find that might adversely impact the culture of the organization. I also think people will find that working in isolation when they’re not petrified does not feel as good as when they’re worried about their lives or fearing for their families.

One concern I have is that business is going to go backward on gender diversity. Something interesting I am finding in conversations with people is that some individuals with caretaking responsibilities for children or elderly family members are finding working at home, at least part of the time, to be helpful. It allows them to feed somebody lunch, drop a load of laundry in and mix their workday in across 16 hours instead of trying to fit it into eight hours. Then, on the other end of the spectrum, you have people with limited caretaking responsibilities who are finding the distraction of the four-year-old wandering in during a video conference really difficult so they want to get back into the office. If that dynamic gravitates toward social norms of more women acting as the caretaker at home, you could end up in a scenario where more men are returning to the office with the benefits of network and power brokering and it could cut out some of the women from those networks and circles of influence. If we’re going to think about remote work as a long-term option, we must also think about not losing ground on areas of diversity.

That’s come up in conversations with some of our clients as well. What impact do you think a lack of those in-the-moment or in-office social connections may have on underrepresented minorities, women and younger generations in the workforce?

The impact is huge. Humans are social creatures. We get to know people through those interactions but that’s also how we can learn. In the pre-COVID-19 world people would offer, “If you have any questions, let me know.” When you’ve got people doing that, as a new hire you can take advantage and there will be people who offer to get a drink or coffee and talk about it. That all has to be much more scripted in this world.

If I know there’s going to be a big topic on the board or committee agenda, I’ll make my way around to two or three people during the breaks or meals and get a feel for the room in advance of the meeting. Now, that process is more forced. If I read something I’m uncomfortable with, I’ve got to chase somebody down and figure out if there’s a 15-minute window when we’re both not on video calls when we can talk. Remote connecting just doesn’t achieve those connections in the same way when you want to understand how others feel about something beyond just their contribution in the room.

Some people say their board meetings are so much more efficient now because they don’t have side cracks or comments and that’s because you can’t put your little quick comment in on video conference without it breaking up the conversation. But you also lose the chance to make points and to build on each other. From my experience chairing boards and committees, when everybody’s in agreement, you can see people’s heads nodding. But virtually, it’s harder to scan a room and identify if someone looks uncomfortable. It’s become more academic as opposed to practical from that standpoint.

That brings us to the question of purpose in business. Last year, more than 180 large public companies signed the Business Roundtable statement on the purpose of the corporation. How has this new era shifted the conversation of stakeholder versus shareholder capitalism and the way the organizations you’re aligned with are thinking about their roles in society?

This has always been a high priority for the boards I am on. That said, I do think there are some areas – racial equality being a good example – where there’s now a kind of societal imperative, where companies now have a new permission from society to act differently. Whereas before we were all acting in isolation, now shareholders understand this, politicians understand this, business understands this, so we’re working toward a more societal response that will facilitate broader progress. We’re still in that forming stage and not anywhere near the norming stage as a society but there’s something about the fact that we’re doing this as a community that I think will make a difference.

We’ve heard from some board members recently who’ve mentioned that political tensions seem heightened in boardrooms this year. What guidance would you have for boards that are struggling to adapt or come together to overcome a crisis?

I’m on boards where people are deep blue and bright red and we are respectful of one another. So I haven’t seen that tension, though politics has been amplified since 2016.  Given the size of the companies whose boards I serve on, we have customers and clients on both sides of the political aisle and we do quite a lot of government work between Medicare, Medicaid, government contracts for construction and the like. So it’s been very important to have both ends of the political spectrum represented on those boards. As should always be the case when there are differences of opinion, you should be able to execute your obligation to dissent as a board member but without being disagreeable.

So I suggest to people looking to get on boards to think about whether they can be respectful of people with a different view. This is something prospective directors should be testing as part of their due diligence before joining a board so they don’t find themselves in a crisis dealing with something they didn’t expect. It’s kind of like premarital counseling: find out what the person’s going to think before you marry them so you’re not surprised later.

Across my 30-plus year career, I have always had friends who were on a different side of the political spectrum. We’ve always had good, respectful conversations and then moved onto the next thing but it has become much more difficult to have conversations because of the binary positioning some politics have come to recently. But just because politicians have chosen to do that does not mean that we as members of the business community need to sink to that level. When people go low, we can go high.

Do you think the existing boards also have a responsibility to create space for new perspectives and cultivate new voices to come in and influence change?

Yes, but those voices also need to understand they need to come into a board atmosphere with respect. Boards need people who have alternative views but it’s so important to the collegiality and ability to progress on difficult subjects for people to know how to speak respectfully even when they may have diametrically opposed positions. If you’re wanting to diversify the thinking in the boardroom, go look for sensible voices with alternative views.

There has been movement recently across several organizations to tie CEO and executive compensation to D&I metrics. What do you think of that?

It’s important that we hold management and everyone accountable. Too frequently, we just focus on the C-suite but if you’re a big organization with 50,000 or 300,000 employees, you must hold people accountable right down to the shop floor because that’s where it starts — it’s about the culture and how diversity fits in.

There are many tools to achieve that accountability; sometimes they are tied to metrics for CEOs, sometimes they’re not. I have boards where we don’t build it into the CEO’s metrics but we jolly well hold them completely accountable for diversity and we challenge them on it. Other times, those metrics have been assigned to some individuals as the keepers of making sure everybody across the organization is compliant and sometimes it’s spread across everybody’s scorecard. I don’t believe there’s one right answer but I do believe we have a responsibility to be intentional and to ensure we hold people accountable.

Do you think quotas are appropriate?

For years, I was completely opposed to them, but I have moved my position. Often the choice is given as a binary: quotas or no quotas. But on that basis, it’s either quotas or the status quo and the status quo is not good enough since it precludes a meritocracy. If you can give me a good second choice, then I’ll probably go for that. But until that is an option, I think we need to move quotas or public commitments forward. And, I should note, speaking of areas where not all board members agree, this is one with very strong differences of opinion.

I often think of this example: the UK in 2012 came out with “comply or explain” to get to 25% women on Financial Times Stock Exchange (FTSE) 100 boards. The regulators didn’t set rules, they just said, “comply or explain,” and in three years, women’s representation on boards moved from 12% to 26% with only one-third of appointments going to women by the way. That progress happened because of the threat of it becoming a requirement. In the end, the UK didn’t need quotas because the goal was public and companies met the expectation. I think you can do something similar in jurisdictions that are lagging – with the right body setting the expectation, meaningful progress could be made. If you focus on moving the needle through a cultural move such that, “this is the way we behave,” then you can assess whether a metric is still needed. It’s a very complex question and I don’t think there’s one right answer other than yes, people should be held accountable and action should happen when measurable progress is not made.