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Future trend – The Future of Governance

bofd.jpgI was in Colorado Springs yesterday, as the opening keynote of the Leadership Institute for Directors for FCCServices — they’re the business services arm of the US federal Farm Credit System.

In attendance were members of the Boards of Directors for a wide variety of state and community farm credit co-ops; these folks are the backbone of the US farm lending infrastructure. The Directors are local farmers, community leaders and business executives, and hence, need to be aware of the trends impacting the local and global agricultural industries, so that they can plan accordingly, assess risk, and make sound business decisions with respect to their co-ops.

My keynote took a look at “what comes next in the agricultural sector” – it’s one of many talks I do within the industry. And agriculture is certainly subject to high velocity change: there’s rapid evolution in science (bio-crops); new markets (bio-fuel) ; rapidly changing skills; new direct to consumer market opportunities; globalization (current food production must double in the next 30 years to keep up with global population growth.) All of which could spell opportunity if approached correctly — or turmoil and challenge if ignored.

The intent of the talk — and the overall theme of the leadership conference — was to ensure that these folks have the insight to direct their organizations into the future. That’s an important and critical role for Boards; and FCC Services is an example of an organization that has made sure that the “future” is closely linked to the issue of “governance.”

I think there are too many organizations that don’t do this. Sadly, with all the current focus on “compliance,” I’ve come to believe that there is a critical lack of future planning on many other corporate boards around the world. The result is that potential risks are often ignored; then things go wrong; then the company gets sued for significant sums of money. Is this Board negligence? That’s an interesting question, isn’t it!

Here’s an example: years ago, I wrote an article indicating that one of the critical CEO/Board level issues that must be addressed had to do with network security; certainly, everyone knows that organizations should properly secure their information assets. Yet in the article, I suggested that I believe that many Boards aren’t dealing with the issue, and that it was an area ripe for future exposure, noting that:

“If I were a tort lawyer, I’d be licking my lips in anticipation of the opportunities to come in the next few years.”

Boards and CEO’s should ensure — as they are required to do with financial controls — that the information assets of the organization are properly locked down. They must understand obvious future trends, and ensure that management has planned accordingly. I strongly believe this to be the next wave in Board responsibility.

Do many Boards of Directors ensure that the organization is properly preparing for the rapidity of trends? Not many. Witness the shenanigans with the TJX Group, which had its corporate network hacked and millions of credit card numbers stolen. (The company runs HomeGoods, Marshalls, A.J. Wright, Bob’s Stores and The Maxx stores; in Canada the chain consists of Winners and HomeSense.) Now comes news that a group of banks want to sue the company with respect to the issue.

I can only imagine the questions that the Board of TJX is now asking!

Currently, much of the focus of board governance has to do with “compliance” — how well are boards, and the companies they are responsible for, dealing with the new realities of the post-Enron era.

I believe that within the next decade, we will see Board responsbility quickly evolve into a new and much more complex era than simply making sure that “i’s are dotted and the t’s are crossed.’ All we need are a few savvy lawyers to launch a few negligence suits against a few public companies, alleging that a Board failed to develop a plan for and respond to obvious future trends.

It’s a trend worth watching.

  • Next governance grenade – Jim Carroll, August 2004
  • More than 94 Million Credit Card Accounts Compromised by TJX Theft
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