Corporate boards typically wield a kind of quiet power — weighing long-term strategy, signing off on major investments, and keeping CEOs on their toes.
But the oversight has suddenly become apparent as last year’s rush merged into a jumble of sky-high inflation, a delay in the supply chain and the threat of a recession.
At companies facing challenges both internally and externally, a slew of CEOs have suddenly stepped out the door – from Sonia Syngal at Gap Inc. to Julie Wainwright at The RealReal Inc. to Patrik Frisk at Under Armor Inc.
While every CEO has been told to “step down” and thanked for their efforts, it’s an exodus that suggests boards have found their voice.
Now directors are looking hard at the future and, like everyone else, face a future full of question marks.
This is a very uncomfortable place for most.
Boards are made up not only of people susceptible to all of human error, but of business veterans who often got to the top by knowing exactly how to move through the business landscape and later up the company.
Now fashion and retail are in uncharted territory, having weathered pandemic lockdowns and an online boom in retreat, struggling with consumers choosing between food and fashion, at least at the lower end.
Just look at retail giant Walmart Inc., which this week slashed its annual earnings forecasts and said it’s devaluing fashion to move goods, crashing Wall Street and repricing retail. High-end consumers are holding out, but given the stock market declines and the rest, how long can they hold out?
Advisor Sean Ryan, partner and group practice leader for consumer products at Kearney, said: “When you get uncertainty … you’re beginning to see the adoption of the conservative principle, which is do no harm, postpone, delay unless there is some kind.” overwhelmingly obvious result.”
Ryan estimates that two-thirds of the decisions made in boardrooms are a piece of cake, with simple “yes” or “no” answers.
The other third of the decisions that get pushed to the top of the company org chart – not so much.
“Those are the tension points,” Ryan said.
They will vary from company to company, but the stakes are always high.
“Recessions can be thought of as cleansing moments,” Ryan said. “A company well run by a strong and effective board of directors will survive and, if not thrive, will at least be very well positioned when we emerge from the recession.”
To some extent, the board, the C-suite, and everyone else just has to hold on and get through 2022 hoping they’ve got their job done.
“It’s about distinguishing between the part of the business that you can control and the part of the business that you can’t control,” Ryan said.
The list of the uncontrollable is long today.
Jill Standish, senior managing director and global lead, retail at Accenture, said: “Leaders now need to focus on running a business and then on foreign policy and environmental issues, what’s going on in public policy, what’s happening in social spending. It is not enough to just run a business.”
As boards and c-suites think about all of these moving parts, they’re grappling with a kind of rapid and furious change not seen in at least a generation.
“The pandemic happened to them,” Standish said. “There was no debate, it was ‘just do it.’ The speed at which they make decisions has increased.”
For at least some boards, this involved big business decisions that weren’t always fully appreciated.
“With apparel, I’m not sure the boards understood how fragmented the supply chains were – buttons come from this country, raw materials come from this farm. Have we ever exposed Boards to this?” said Standish.
And the future is still moving fast, with more changes in store.
“What I’m seeing is a lot of requests for board training,” Standish said. “Let’s demystify the metaverse, demystifying things is a great word. We have to take them with us on the journey.”
She said there are five major forces sweeping through the industry – the metaverse, talent shifts, technology, sustainability and overall reinvention.
“Every company strives to reinvent themselves, HR will be different, legislation will be different, business operations will be different,” she said. “Total reinvention of the company. Every company thinks: “How fast can I change?”
That’s because change is no longer a nice-to-have, leading to a busy boardroom.
Les Berglass, CEO of executive search firm Berglass + Associates, said: “This is a wonderful time to embrace change. Business as usual is a death sentence and not a way forward.
“The second most important ‘must’ on a board’s list after profitable growth is predictability – boards hate surprises,” said Berglass. “They expect their CEO to deliver that predictability. Harry Truman was right: ‘That’s where the buck ends.’”
While the corner officer comes with many perks, from multi-million dollar paydays to prestige and power, these pressures take their toll.
As a result, the C-suite might get more than a little tired.
“It’s been a really tough two and a half years to be a retail CEO,” said Joel Bines, global co-head of retail practice at AlixPartners. “A lot of the people who are moving have been in the role for quite a while — if not CEO, then at least C-something.
“Retail executives are exhausted and staring into the abyss of a possible global recession after two and a half years of struggle [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 commonly, the board-CEO relationship becomes passive-aggressive. Board members make derogatory comments or send derogatory emails. The CEO is tired and passive-aggressive. The board behaves passive-aggressively. Everyone comes to the same conclusion.
“Think of the game that’s going on, CEOs run their boards or think they run their boards. And boards think they’re managing their CEOs. And none of them are true. Most people just manage themselves. People like to be on board. And in general, people like to be on board with people who don’t make their lives miserable.
“The board has a governance role, but the CEO has a leadership role, and sometimes you see those relationships blur,” Bines said.
And when everything changes in the company, this lack of clarity can simply be too much for everyone involved.