Intro/Outro(00:08.706)
Welcome to the Corporate Director Podcast, where we discuss the experiences and ideas behind what's working in corporate board governance in our digital tech-fueled world. Here, you'll discover new insights from corporate leaders and governance researchers with compelling stories about corporate governance, strategy, board culture, risk management, digital transformation, and more.
Dottie Schindlinger(00:32.398)
Hi everybody and welcome back to the corporate director podcast, The Voice of Modern Governance. My name is Dottie Schindlinger, executive director of the Diligent Institute, and I'm joined once again by my amazing co-host, Megan Day, strategy leader here at Diligent. Megan, how are you doing on this fine spring day? I am great, Dottie. Fine spring day and happy to have you back here on the show. It's been a minute.
Yeah, it's great to be back. I mean, it was definitely a whirlwind trip down to Australia. I spent about 11, 12 days in Sydney and then pretty much an equal amount of time in Melbourne and went to lots of different events, including the Australian Institute of Corporate Directors. I went to events with Gartner. We did a couple of great user groups, did a GRC summit at the big Marvel Stadium in Melbourne. So it was really kind of an interesting trip.
Yeah, I will say lots of very similar things happening down in Australia that are happening here in the US, which is a good segue to mention that we have a special guest on the show, which is our producer and the head researcher at Diligent Institute, Kira Ciccarelli, who we wanted to have come on and talk about a recent paper that she's done in concert with Ethisphere on the most ethical boardrooms. And that was a topic that came up a lot in Australia. So Kira, welcome to the show. Thanks for joining us.
Kira Ciccarelli (01:54.636)
Yeah, of course, Dottie, I was just filling in while you were gone, but now that you're back, I just can't bring myself to leave.
Dottie Schindlinger(02:01.582)
Don't, don't leave. Stick around. We beg you. But listen, I mean, seriously, there was a lot of conversation at these conferences in Australia about really compliance related issues, ethical issues. You know, there's a big piece of legislation that went into effect in Australia this year around modern slavery. And so there's a lot of conversation around how do you ensure that there's no forced labor anywhere in the value chain or supply chain. And it's a real challenge because, obviously,
And being in that part of the world, Australian companies, well, any part of the world, companies do a lot of business with China. so ensuring that there's no forced labor in the supply chain coming out of China is very difficult because you don't get the same level of disclosure. So it's something that we talked a lot about at some of these sessions. So I'd love to hear from you. What did you learn in this paper about what the most ethical boardrooms are doing that's different and special?
Kira Ciccarelli (02:53.942)
Yeah. So ethics and compliance, certainly incredibly universal, I think for all companies and foundational as well. So the rest of the work that you do, particularly in the boardroom, we got linked up with Ethisphere to work on this research and just to give a little bit of background. Ethisphere every year has this incredibly detailed and lengthy and robust questionnaire that they give out to, you know, organizations that want to take a look at it and
You fill the questionnaire out, send it back into them, and they kind of use that as their survey instrument to create the list of the world's most ethical companies. So this is something that they've been doing for, I believe it's been about 20 years now. And every year you fill it out, you send it in, and if you kind of meet certain criteria for them, you are published as part of their world's most ethical companies list. And this year,
At Diligent Institute, we wanted to take a really close look at the section of that incredibly long questionnaire that looks specifically at the boardroom. So it's called their corporate governance section and it actually makes up about 20 % of your overall score. So it's a pretty decent chunk of what will actually land you on the list. Took a very close look at how the honorees this year did on the corporate governance section and we identified the top governance scoring cohort.
So this was a subsection of the companies that made the overall ethical companies list that had governance scores of at least 80 % or higher out of 100. And we were able to kind of dig into what were some of the practices that really define not only what makes your company incredibly ethical and high scoring on this list, but what are the specific boardroom practices that are sort of best practice.
Dottie Schindlinger(04:44.91)
So what are the big ah-has, what are the big takeaways?
Kira Ciccarelli (04:47.586)
Yeah, so lots of really interesting stuff. would say the biggest standouts to me were sort of the level of ethics and compliance expertise that the board members had. So things like having chaired the Ethics and Compliance Committee on a previous board or having been in charge of ethics and compliance in a previous operating role. I think another portion of that was if you were a former CFO who directly oversaw ethics and compliance in your organization.
So on average, the companies that scored higher on the corporate governance section and the companies that made the list overall were more likely to have that expertise. And I think the other portion of it was information flow. So organizations that regularly received robust updates about ethics and compliance at their organizations, did trainings, did tabletop exercises, things like that, that was also more likely to land you on the list.
Dottie Schindlinger(05:41.336)
So spend more attention on it, you do better on it.
Kira Ciccarelli (05:44.502)
Yeah. And then this doesn't, we don't get into this too much in the piece of research we published because we were kind of hyper-focused on boardroom practices, but Ethisphere has put out their ethics premium, which is sort of their companion research to the list that they publish every year, where they track the companies that make the list against a benchmark. And what they found is that the companies that are on the list outperform the benchmark by 8.2%. So
Good ethics and compliance is good business. Those companies are also more resilient. So in incredibly volatile times, hint, hint all the time, the companies that are on the list tend to, when stock prices fall, they kind of take less of a hit and they also recover more quickly from the hits that they do take. So I think just all around not a causal factor necessarily, but if you've got good ethics and compliance at your organization, you are maybe better prepared for the times ahead.
Dottie Schindlinger(06:38.742)
Yeah, what really struck me, Kira, about the report and congratulations on it, it's really well done. You know, it's treating ethics, compliance, culture as not this once a year kind of check the box thing. I feel like we do talk about that, you know, from time to time here on the show. But again, this comes back to boards being really focused on building continuous data-driven visibility into what's happening inside their organization. And that
that information has to get into the hands of board members. That's great. Well, know, actually, Megan, that's a pretty good segue to our interview for today because we had the opportunity to speak to JoeHurd, who is on the board of a number of different big public companies, including Lloyd's of London, Hayes, TrustPilot. He also was a former member of the Commerce Department under the Obama administration. And he has recently been doing a lot of work to really
help boards understand how they need to have a much more fluid and real-time approach to monitoring situations like geopolitical crisis, like ethics and compliance fraud potential crises, like AI and technology. And he looks at them as what he calls poly crises. So it's not just one thing, it's got multiple dimensions. So why don't we listen to that interview? There's a lot to chew on. And we'll come back and have a quick conversation at the end.
Dottie Schindlinger(08:09.528)
Joining us on the Corporate Director Podcast today is JoeHurd. Joe is a former executive at Facebook and Gannett and a current non-executive director at Lloyds of London, Hayes PLC and Trust Pilot Group. Joe, welcome back to the show.
Joe Hurd(08:24.066)
Thanks, Dottie. It's great to be here and really appreciate you and Diligent providing this opportunity. Looking forward to the conversation.
Dottie Schindlinger(08:30.338)
Well, I'm excited to have you back on the show. I know you were with us a number of years ago. And so I wondered if you could start by giving us just a brief introduction about your career path and some of the work that you're doing these days, more than just the titles that I shared.
Joe Hurd(08:44.344)
Sure, no problem at all. It's interesting, know, the three companies I'm on the board of now are in three separate industries, right? You Lloyd's, as you know, is the global insurance marketplace. Hayes is a professional services firm and TrustPilot is a B2B marketing platform. that's by design, right? Because my career to date has been a pretty deliberate exercise in range. I started my career as a corporate securities lawyer.
London law firm called Link Laters. I then pivoted to business and spent 25 years as a tech executive in Silicon Valley at a couple of companies. You mentioned Facebook and Gannett earlier and some startups, Friendster, if you remember them, way back when, and Video Egg. Then, know, midway through, I took a detour and I did public service and I spent four years during President Obama's first term at the Commerce Department. And now I'm in the boardroom and I've been on five boards over the past eight years.
And the thread that sort of goes through all of this is something that some people called contextual intelligence. It's the ability to read across geopolitics, technology, regulation, and then translate that into actual governance. And I think we'll talk a bit about that today. It's been a really fun journey.
Dottie Schindlinger(09:59.416)
That's awesome. Well, I'm really excited to talk to you because you recently wrote a blog piece for Diligent that opened with kind of a striking two week stretch in January where geopolitical developments were unfolding at a crazy pace. You know, it would have taken months in the past and was taking days in January. And of course, things have not slowed down on the geopolitical front. Things have gotten even wilder.
Joe Hurd(10:22.734)
Those were the good old days back in
speaker-4 (10:26.586)
Yeah.
Dottie Schindlinger(10:27.02)
Right. So what wasn't about that period that really crystallized for you that quarterly geopolitical risk reviews are really no longer sufficient for boards?
Joe Hurd(10:36.322)
Yeah. So, you know, when I wrote the piece, know, let's go back to those two weeks in January, because you had a two week stretch that was really a masterclass in geopolitical time compression. If you can remember, had a military operations related to Venezuela. You can characterize that however you wish. We had the World Economic Forum at Davos that raised alarm bells around institutional trust, their continued volatility in the Middle East, and ongoing escalation dynamics in Ukraine.
all those events really stacked on top of each other, not over a period of months, but over a period of days. And what crystallized for me is any one of those events in isolation is manageable through a quarterly risk review, right? If you remember what happened last year with liberation day and the tariffs, or the pandemic, which was one event that played out globally over time, any single one of those events you could handle in a quarterly review. But when you have
multiple events happening in multiple countries with multiple effects on multiple industries, then you have something that a lot of people call polycrisis. And that's the term that I used in the article, right? It's not that any single risk is unprecedented. It's the simultaneous occurrence of multiple risks that creates compound effects that boards have never had to process at this speed. And that's what I was trying to account for in the article.
Dottie Schindlinger(12:03.97)
Well, and to your point, less than a month later, there's bombing in Iran, right? to your point, it's not even a full quarter that there's new military action taking place.
Joe Hurd(12:13.814)
Right. And that's the problem with the quarterly risk review, right? Because a quarterly review assumes that risks arrive sequentially and can be triaged sort of one at a time, right? But the world doesn't work that way anymore. What I'll be thinking about is, you know, we have a structural issue, but we have a procedural issue as well, right? So think about it from an insurance perspective. When Venezuela policy shifts overnight, that
reprices political risk, marine risk, trade credit, energy exposure simultaneously across syndicates. And we're seeing that also play out with around right now, right? Or for a global staffing firm where you have a tariff announcement or sanctions, it doesn't just affect one market, it reshuffles hiring patterns, integration flows, capital allocation across multiple geographies at once, right? So the question for board is what would have to break
either simultaneously or in rapid sequence in short order that would threaten our company's strategy or going concern. And lot of boards haven't really stress tested that compound scenario, right? You look at your risk register, you take each risk by itself, and you say risk mitigation effect, probability. But looking at risks in total compounding, that's where it gets really interesting. So for boards doing quarterly reviews,
That's fine, we can see the car coming from a block away. But when you're in a situation where three cards are converging from three different directions simultaneously, and you have seconds, not minutes to react, that's what I was trying to convey in the article. That's what we need to adjust for. Does that make sense?
Dottie Schindlinger(13:50.752)
It makes perfect sense because our research backs you up, right? So we did the, directors think survey that we do every year with corporate board member and the 2026 edition. Now the survey would have fielded sort of in the third quarter of 2025. So just keep that timeframe in mind. But even back then, know, 84 % of our public company director respondents were saying that they have strengthened their approach to scenario planning. They're doing more of it. It's happening more frequently. They've widened the scope.
Joe Hurd(14:05.75)
And
Dottie Schindlinger(14:19.692)
yet 71 % still weren't incorporating geopolitical conflicts into crisis scenarios. So how do you think about this gap between the effort that boards are putting into scenario planning and what risk they actually need to be overseeing? How can we help them understand that gap?
speaker-4 (14:37.933)
Yeah.
Joe Hurd(14:38.51)
Dottie, your survey highlights that gap is incredibly important data point, right? But the explanation to me is counterintuitive. It's not that boards are lazy or unaware, right? It's that directors are applying enormous effort to the wrong mental model, right? The 84 % who strengthen their scenario planning, they're mostly doing more of the same. Going back to my earlier answer, they're planning for the car coming from a block away, right?
I think if I remembered your data correctly, know, 49 % of them had expanded the scope of their scenario planning. 46 % of them had increased the time that they spent thinking and discussing these various scenarios, whether it's cyber or economic shocks or regulatory shifts. These are risks that boards have already lived through, right? They've got playbooks for, they feel very competent in discussing them. So spending more time discussing them, that's a perfectly logical response because you've already seen the risk.
you know what's coming down the pike, let's spend more time discussing it. But when you bring geopolitics into play, most boards characterize the geopolitical risk as sort of a macro backdrop rather than operational risk that hits my P &L. And that's where the cognitive bias kicks in, right? You've got a familiar risk preference because boards are gravitating towards risks where they can feel they can add value and have institutional memory, and they shy away from risks where they really lack expertise, right? So when you look at
9 % of directors citing geopolitical as a risk, yet geopolitics is the accelerant that really turns every other risk category into a compound crisis, right? Looking at cyber, cyber is a risk until it's a state-sponsored attack. Now it's a geopolitical risk, right? Don't have a playbook for that. Supply chain disruption is an operations risk until it's caused by tariffs or sanctions. Now you've got geopolitical risk. Regulatory change is a compliance risk.
until it's driven by industrial policy or national security concerns. And that's where the geopolitics comes into play. So bringing geopolitics into the conversation, building a poly scenario, poly crisis, where you wire geopolitical risk into every existing risk scenario and testing the compound effects, that's what I'm advocating. That's what I think boards should spend more time doing, right? Not looking at them one-on-one seriatim, but looking at them happening simultaneously.
Joe Hurd(17:03.426)
with the geopolitical overlay. And again, that's not a muscle that a lot of directors have flexed, but that's exactly the type of thinking that needs to be brought into the board.
Dottie Schindlinger(17:12.437)
One of the other things that you argued in this article that I thought was quite interesting was that geopolitical risk oversight needs to move from being periodic to being continuous, as sort of an always on discipline. But practically speaking, what does that look like in the boardroom? What does an always on approach actually mean? Especially if I'm thinking in between meetings in terms of information flow, agenda time, the relationship with management, how should that look?
Joe Hurd(17:38.242)
You know, this dance is probably not going to make me the most popular director in the room because it does mean more work. But I think the job is becoming more complex, right? The list of things that directors are being held to account for, both by regulators, by activists, by the plaintiffs bar is ever growing and ever increasing. And again, part of what I'm arguing is the quarterly model.
of showing up, coming together, looking in rear view mirror to discuss what has happened and the impact, is moving into a more frequent meeting cadence, being more proactive and more prospective in planning. now I really got some inspiration from the military, believe it or not. given with what's going on in Iran, our men and women in uniform are much involved these days.
But military planners have a phrase called left of boom, right? Meaning plan before the nation, before the crisis materializes. And in a corporate context, you know, I think the difference between preserving value and destroying value will increasingly be decided left of boom in the preparation, in the intelligence, in having pre-wired response playbooks, right? So what is always on me? You mentioned, you know, information flow between meetings. Well,
What that looks like is, yeah, I would argue, you know, maybe it's time for board chairs or the lead independents to create a geopolitical pulse communication channel. It's not a formal board meeting, but a curated signal that goes to directors between meetings when material geopolitical developments affect company exposures. And it's not simply forwarding a news article, you here's what happened, you know, in the world last night.
I'm thinking more like a one or two page brief, maybe assisted by AI that connects whatever the geopolitical event is to the company's specific revenue exposures or supply chain dependency or regulatory position, talent footprint, right? Now, not every company has access to real-time risk intelligence. One of my companies does. We've got a great global risk intelligence network, but not every company can tap into that.
Joe Hurd(20:01.73)
What that means is most corporate boards are flying blind between meetings. So providing them those nuggets of information real time as they happen can help directors arrive to the quarterly meeting better informed, better armed, and better able to have that geopolitical scene setting conversation because they've been brought up to speed in between meetings, tying whatever the event is to how it's going to impact the company.
I also think in between meetings, look, I'm fortunate to be a member of the Council on Foreign Relations. I'm a former member of the Trilateral Commission. But these networks for me give me early signals that don't show up in mainstream media for a couple of days or a couple of weeks. And having access to my own intelligence network, it's critical if you're looking for insight into what's going on in the world and then bringing that into the boardroom. You mentioned agenda time. So again, I bang the drum.
You know, already in this conversation, the current meeting format is broken. You know, your survey showed almost 60 % of directors want more strategic planning signed. 42 % went for discussions and more discussion. So here's a radical idea. Start every board meeting with a 20 minute geopolitical and macro context segment at the opening, right? Set the external context first and then evaluate internal performance against it. Maybe building upon those, you know, one pagers that have come
to the board in between the meeting, picking up that conversation in the boardroom. And leading that conversation, it may be the chief risk officer, it may be someone that has genuine geopolitical fluency, it may be a director with relevant background, but having that scene setter at the top building upon the information that's been shared in between the meeting, I think does set a board up very well for having a more strategic in-depth
conversation. The challenge with always on and this is where get into the relationship with management because here's where the rubber hits the road. Having an always on approach, I think requires a different different compact with the CEO and the management team, right? Management will need to understand that more frequent board engagement is not micromanagement. It's simply the board doing its job.
Joe Hurd(22:28.47)
in a world that moves faster than the meeting cycle, the meeting cadence, right? And it really, you know, if positioned the right way, it's managed to be able to tap into, you know, seven or nine or 12 additional brains and lenses on whatever that risk is for the business and bring that data to management because management's dealing with this every day, right? The board doesn't need to be dealing with it every day, but certainly more frequently than quarterly because these events are moving so quickly. And having a chair that sets the tone that
Escalating these signals early is something that is to be rewarded and welcomed, not penalized and avoided. So that's sort of the Cades with management point that I was trying to make. that is, again, going back to where I started, governing left of boom. It's doing the hard thinking before the crisis hits. So when it does hit, you're executing against a plan, not convening a committee or spending time that you shouldn't be spending getting everybody up to speed, so they're reading from a safe handle.
You have all that pre-wired up front.
Dottie Schindlinger(23:30.702)
I think that's an incredible list of very practical steps that boards can take. I have to say, hopefully this isn't too shameless of a plug, but everything you said resonated so strongly with me because those are the very things that we're trying to build at Diligent. giving people that global lens on risk, giving them continuous monitoring, real time information flows, like those are, you're speaking our love language.
Joe Hurd(23:53.294)
Listen, that's not a shameless plug. If you are a multi-billion dollar hedge fund, right? Or a global investment bank or a global insurance conglomerate syndicate, you already have this. It's part of your business as usual. Not every company has access to those resources, right? So bringing it full circle, the platform that Diligent is building and the services that Diligent is providing is incredibly important to those companies that
want to avail themselves of the intelligence, but don't have the infrastructure already built in to be able to effectively utilize it. So I think you guys are providing incredibly important service.
Dottie Schindlinger(24:32.142)
Thank you for that. I want to bring in the theme of AI into this conversation because I think there's a lot that AI can do to be helpful here. Besides it being a risk that needs to be monitored and managed and has a geopolitical overlay in its own right, I think there's a lot that AI can do to help change the pace of conversation for boards and really change board oversight. But I want to share with you, despite the potential of AI,
Our research found that only 23 % of directors are regularly using AI tools for strategic decision-making, and 40 % are just not using AI at all in this context. And so what do you think are the main barriers that you're seeing to adoption at the board level, and how can chairs and committee leaders really help their boards get more comfortable and make good use of the tools available to them?
speaker-4 (25:18.744)
Yeah.
Joe Hurd(25:20.088)
So again, I'm probably not winning myself many allies with this answer, but you asked me what I think, so I'll tell you what I think. Listen, I think the barriers are real, right? But it's not what you would think. It's not what most people think. It's not an education issue. It's not an access to the technology issue, right? I think there are three. One, quite simply as a lawyer, comes down to legal liability, right? And discoverability.
You know, directors are trained to be careful about creating records, AI generated analysis, scenario outputs, risk assessments, all of those could become discoverable in shareholder litigation. So, you know, look, no director wants to be asked in a deposition, your AI tool flagged this risk six months ago, why didn't the board act upon it? Right? And so in a real way, this creates a perverse incentive to not have better intelligence.
because better intelligence leads to greater accountability. And I would argue that's not a problem with the technology, that's a problem with the governance design and our litigation environment. The second issue, you can call it a probability paradox, Boards want certainty in answers, AI delivers probabilities. A board member is going to ask, will this tariff affect our European revenues? They want a yes or no answer.
AI is going to respond, well, there's a 68 % probability of a 12 to 50 % revenue impact in Q3 contingent on these three variables. That may be more useful data, but it's a lot more difficult to act on. And so I can see for a lot of boards, the AI tools feel uncomfortable because of the probability and the options that are generated, as opposed to empowering, leading to a straight yes or no answer. And then the third is, you know, this gets back to the difference between
what directors are doing personally, and I think your data backs that up, and what's happening institutionally. Personally, we know, we know, we know, that two thirds of directors are using AI for meeting prep, they're using AI to summarize the materials, they're using AI for research, right? But the vast minority of boards are using AI in the boardroom with proper governance procedures. And so what that tells me is, directors are comfortable using AI individually?
Joe Hurd(27:47.296)
And they're comfortable telling their companies how to be using AI. But in the boardroom, as a governance tool, the institutions have not caught up, right? They're not keeping pace. So you have a gap between, and again, this is a governance framework gap. It's not a literacy gap. It's a governance framework gap because we are not yet in the boardroom providing the guard whales and the frameworks around what people are doing individually or what they're.
you know, what the effect is that happening on their companies. And that's a mismatch. That's a disconnect, right? So I think, you know, for chairs and committee leaders, you know, the first thing is, I think table stakes, do it yesterday if you haven't done it already. Create an acceptable AI use policy for the board. Get agreement on what tools directors can use, what data can be input.
and how are you going to rely upon AI-generated analysis? It's already happening. Bring into the boardroom and get real about it because it's out there and your directors are doing it whether they're telling you or not. And that also leads to the shadow AI problem, which is well-known and well-documented and it's a risk your company doesn't need to just by not facing into it. Run a structured pilot, right? Pick one area, have manager present both the traditional briefing
and then have an AI enhanced version side by side and do that for a meeting or two or three and see how the AI operates, you know, compared to what management is telling you and where the strengths and weaknesses are there. You know, do a security audit of the AI tools that your company is using. I took a look at OpenClaw recently. A lot of people are talking about OpenClaw these days and its ability to be an agentic AI tool. And I think OpenClaw is absolutely lovely as a security.
risk. I think it's incredibly scary. And having your CISO look at these tools and really evaluate whether they're safe for your company's information, set up an instance that is safe, but really most importantly, people using them. And it's important for all of us as directors to be very mindful of the tools that we're using and the security posture, because all it takes is for,
Joe Hurd(30:09.038)
one leak free information to get out there, there is an audit trail. And again, those aren't questions that you want to be answered.
Dottie Schindlinger(30:18.744)
So, Joe, you've given a lot of really, really practical advice on how directors can do this better. But as you've mentioned a couple of times, you're sort of adding a little work to the plate. for directors who may be feeling a little bit overwhelmed, do you have maybe just one sort of best and final pro tip of how boards can kind of build something to take competitive advantage of vigilance and have their oversight become more always on rather than periodic or episodic?
Joe Hurd(30:45.262)
Yep. So, know, I'm reminded of the old saw about, do you eat an elephant? One bite at a time, right? And I understand it when directors feel overwhelmed, right? You've got everything in the headlines. You're thinking about cyber, you're thinking about supply chain resilience, you're thinking about all the macroeconomic issues confronting your company. And now I've just added geopolitical risks onto your plate and everything's happening simultaneously. know, one of the things could be to
throw up your hands and say, too difficult. I'm not sorting that out. But my counter to that would be for directors, you don't need to plan for everything. You need to plan for the two or three compound scenarios that most threaten your strategy or your going concern. So in your next board strategy session, ask this question. What would have to break either simultaneously or in rapid sequence
to most threaten either our overall strategy or our going concern, right? What is that one, two or three things that would need to happen? Don't look at your risk register and test risk in isolation. Think about compound scenarios. What happens if there's a cyber breach during a trade war? What happens if there's supply chain disruption that coincides with a regulatory shift in our key market, right? And the value is
in looking at these interaction effects and stress testing these compound failure models, but tying it all back to what's most going to affect our strategy or our going concerns. So maybe looking at all your markets and picking your most important market or your most important product and figure out, what is going to take that product offline or that market offline? What needs to converge? That you can get your arms around. So now you're not trying to boil the ocean. You're trying to think about the one thing, you know, or two things that most affect your business.
You know, another idea is to look at your geopolitical exposure and then just build a specific map across all your markets. So look at a matrix of your top 10 revenue markets on the X axis, the top five geopolitical risk scenarios on the Y axis, and then start scoring, you know, each interaction for probability and impact. Right. So you start thinking about geopolitical stars. It could be tariffs. It could be, you know, a cyber attack in your major market. It could be.
Joe Hurd(33:11.694)
you war and, and, but you plot all those out. You look at your top 10 revenue markets and then you figure out, okay, what scenarios go to effect, which, which revenue market and then think about, don't miss second order dependencies. Right. So it's not just what's going to affect your primary business, but what about your largest customer? Right. What if their supply chain goes down? Right. Or your large supplier? What if, if there's a cyber attack on them and how does that exposure impact impact your business? Now here's a funny one.
You can also, again, a lesson from the military, take a descent by design approach, right? So as you're having strategic discussions, Deliberately assign a red team role to one director, make that director's job, argue the opposite case, stress test the assumptions, get out of the group, think, and this isn't adversarial, it's good hygiene, right? The military does this routinely, corporate boards, you know, almost, you know, very rarely, right?
Make one or two people argue the counterfactual for every strategic discussion. And then the last thing I alluded to earlier is, don't be afraid to pre-wire response playbooks. So once you identified those top four or five scenarios, build out the playbook, the day one, day two, day three, who are our first phone calls, if this were to happen, have the playbook, even do a tabletop exercise around them, right? But the goal is to have these conversations upfront
get boards thinking about this, again, left of boom, in advance of anything occurring, so that when it does happen, and as sure as the sun rises in the east, something's going to happen at some point, and we're seeing it happen faster than ever, you've got people that are fluent in these conversations, they've done some of the thinking upfront, they can take the playbook off the shelf and dust it off. And then the last, last thing is, for directors that are interested in this,
Build your geopolitical fluency now. I'm a big fan of the Council on Foreign Relations. I've plugged them once. I've been a member for 20 years. They've got a great website, cfr.org. My Roman, my former colleague from the Obama administration is the current president. If you want to become an instant expert on anything that's happening in the world today, go to the CFR website and they've got a number of white papers. They can get you up to speed pretty quickly. But that's where I get a lot of early signal.
Joe Hurd(35:39.136)
as to what's going on in the world. And I can then take that across my boards and think about how is this going to affect each of our businesses across each of these different sectors. It becomes very tangible to me to have in front of me. But I say it again, being vigilant is a competitive advantage, right? If you build this muscle, you will see over time opportunities that others miss. You'll be able to avoid crises that others stumble into.
And yes, unfortunately, it is more work and it is more time, but it is to your and your company's benefit.
Dottie Schindlinger(36:14.988)
Well, Joe, this has been an incredible conversation, but before we let you go, there are three questions we like to ask every guest that joins us on the show. So the first question is, what do you think will be the biggest difference between boardrooms today and 10 years from now?
speaker-4 (36:29.368)
Ha ha.
Joe Hurd(36:30.446)
So again, not the most popular answer. Let me at least stay on message for this conversation. I think by 2036, one of the biggest differences we'll see is that the board meeting structure cadence, as we know it, will be dead, will be replaced by continuous governance. So the current model of four to six meetings a year, you 300 plus page board packs.
speaker-4 (36:37.208)
Listen.
Joe Hurd(36:58.342)
committee reports, management presentations. I think all of those are artifacts of a world where information moves slowly and boards meet to discuss what happened in the past. I think 10 years from now, aided by technology, boards will operate on a continuous information flow. There will be real-time dashboards, the AI-generated intelligence briefs that I talked about earlier.
AI systems that continually monitor the company's risk landscape, surface anomalies that require board attention. And what will happen is sort of asynchronous decision-making on pre-agreed frameworks. And then the in-person session when directors actually come together will be primarily weighted towards really strategic and judgment-intensive discussions, right? It won't be the report out. It won't be the business as usual because directors will already have that, you almost real time.
the directors 10 years from now, the ones who will be successful, won't be the ones who could process the most information and read the 300 page board back, right? They'll be the ones who get asked the best questions of the dashboards and the technology and exercise the best judgment in the room with all this information before us, right? Very similar to the workers of the future, when information's ubiquitous with AI,
It won't be, you who's the smartest person in the room. It'll be who's the person that can ask the best question and communicate the information the best. One more prediction, right? Boards will be smaller, they'll be faster. So the 12 person board that does the quarterly meetings, it'll be more seven or eight people that'll meet more frequently with deeper expertise, faster decision cycles. know, almost, you very similar to what I see with my UK boards. UK boards, seven to nine people.
meeting six, seven, eight times a year, right? They'll be smaller, nimbler, more frequently, but with much, much, much more current data at their fingertips. And because the data is there, it will be, all right, what do we need to do strategically to capitalize upon the data, as opposed to how best can we organize the process and re-curgitate what's in front of us? So you heard it here first, but that's my prediction.
Dottie Schindlinger(39:20.812)
love it. Joe, what was the last thing that you read or watched or listened to that made you think about governance in a new light?
Joe Hurd(39:28.45)
Interesting. you know, I'm fortunate in that I get to read and listen to a lot. Here's one. So last week, right, I was at a board conference, you leadership conference, couple hundred people in a room hosted by one of the big fours, fantastic conference. And this particular firm did a great job bringing in people from the outside to really, you know, get us as directors to think. And we heard during one of the sessions from Michael Lewis.
speaker-4 (39:30.147)
Huh.
Joe Hurd(39:57.794)
Michael Lewis is that New York Times bestselling author. wrote Moneyball. He wrote The Big Short, The Blind Side, a bunch of other books. And Lewis spoke to us about how he built each book around a main character, right? And each one of these characters all had something in common. They were a little lopsided, right? None of them would really light up the room or dominate the conversation. But each one of them ended up changing their respective worlds. And Lewis said, you know, that
The secret of each of these individuals was the power of observation. They didn't have to be the loudest, they didn't have to be the boldest, they didn't have to have the first insight, but they had a unique skill in looking at the way things are currently done and questioning, right? And what that made me think about as a director is groupthink in a governance context, right? When we're all together in the room and...
The conversation's flowing a certain direction. Heads are all nodding. Who's the quiet person in the room or on the management team or on the board who may have a perspective that is completely different to the direction of travel that could change the entire conversation. And then how, you know, I'm going to be, I'm entering into leadership on my boards. I'm already a committee leader on one board. I'm going to be chair of REM on another board and chair of another committee on a third.
So as I come into committee leadership, how could I do a good job as a leader reading the body language in the room, being vigilant, and identifying the person or the people who might have that insight that could completely shed new light on the conversation and bring them in, right? And that was sort of my Michael Lewis muddy ball moment was looking at, you the insight comes from uncharacteristic directions. It's not the person that's banging the table.
It's not the person that's speaking first. It's not the person that is speaking the loudest. It may be the quietest person in the room that has the most to add and to really, from a governance perspective, do an affirmative proactive job of bringing that person in, creating an environment for them to succeed because that insight might be the thing that changes the entire conversation. So that was my takeaway.
Dottie Schindlinger(42:15.628)
love that. Well, finally, Joe, what is your current passion project?
Joe Hurd(42:19.79)
So you and I have spoken about this in the past and I was passionate about it a year ago. When we spoke, I'm still passionate about it. So every year I put together a bio book, right? And, you know, I'm fortunate enough to go to a lot of conferences. I meet a lot of people on panels. But what I've started to doing is every time I go to a panel, I come across someone that says something particularly insightful. You know, I write their names on a list.
And every year at the end of the year in Q4, I pick 30 executives, diverse executives, people looking for their first board seat. And I put them together in a bio book. I do it to pay it forward, to create opportunities for others, to leverage the access that I have, Dottie, with you and the rest of the diligent team and bring people in alongside behind me. Right? I've been doing it for five years. I started
African-American, I know you can't tell on screen, but just for your audience, I'm a black male. The first book was identifying 30 black males. I then expanded it to females and then expanded it to Latinos and AAPI candidates. And those bio books over time have led to eight board seats, directly responsible for putting eight people on boards. It's led to a couple of hundred discussions and conversations, but more importantly,
it's helped everybody expand their network, right? Because you don't know who you don't know. And the funny thing is, this year I was challenged by a colleague of mine who happened to be a white male. And he accused me of trying to social engineer the boardroom and asked him, what do you mean by that? He said, well, Joe, you clearly have an agenda. It's a diversity agenda. And that's not everybody's agenda.
I took his point on point, you know, listen, this is a microcosm of what's going on in society. know, DEI is on the table and it's a proper conversation. But the conversation with my colleague did get me thinking. And he was asking Joe, you know, where's your political diversity? Where's your socioeconomic diversity? What about white males? Where's the room for white males to be part of this conversation? And he was right. He had a point. And what got me thinking was, you know, I've always been banging the table saying,
Joe Hurd(44:43.064)
that diverse groups make better decisions, diversity in all its forms leads to a richer conversation, right? It really is a person's point of view. And it's their lived experience that contributes to the mix. It's not necessarily the race or the gender. And I was am using race and gender as a proxy for diversity without being expansive in what true diversity looks like, including politics or social economics, which then might create
an avenue for white men, white women to be part of the conversation as well. He's right. He made me think of it. Sorry, I think you might see some changes in next year's book because my goal is in taking people who don't have the access that I have and expanding the opportunities for people that aren't part of the conversation to come into the conversation. And if you're a Nam Gov chair out there,
If you're a CEO looking to hire, or if you're a board chair looking to hire, why wouldn't you want the deepest, most richest talent pool to choose from? Right? This isn't a race conversation. It's not a gender conversation. It is a merit conversation. It is a point of view conversation. Why not have the widest pool of talent? So if you are predominantly left leaning in your political outlook and most of your friends are
Democrats, why not bring a conservative into the mix? Right? Why not bring XYZ people from different socioeconomic backgrounds? That's a valid conversation. And I really take my hat off to my colleague for asking me the question, putting himself out there, but really leading to a richer dialogue because he had a point he was right. So, you know, I may be spicing up the book a little bit next year and creating opportunities for people.
all towards the greater ambition, is creating opportunities for others, giving them access, and ultimately leading to a richer conversation in the boardroom because that's the job, right? That's what we're all about. So there you go. That's my passion project.
Dottie Schindlinger(46:58.36)
I love that so much. Joe, I can't thank you enough for taking all this time with us today and sharing your wisdom with us. There was so much to take away from this conversation. So thank you so much for having it with me.
Joe Hurd(47:08.258)
No, listen, I appreciate you giving me the opportunity. hope I didn't take all the rope that I was given and hang myself. there was some, listen, know, part of the art on these podcasts, you in these conversations is to participate in the arena of ideas, put ideas out there. Let's have a conversation about them, right? But you have to put yourself out there. So I appreciate you giving me the chance to share a few thoughts with your listeners. Look forward to the commentary. Feel free to reach out.
If you disagree with what I've said or we got it wrong, do let me know because that's how we get better, right? That's how we improve. That's how we get better. So I appreciate it.
Dottie Schindlinger(47:47.298)
We've been joined today by JoeHurd, who is a non-executive director on Lloyds of London, Hayes PLC, and TrustPilot Group. Joe, thank you so much for joining us.
Joe Hurd(47:56.622)
Thank you, Dottie, and thanks to your team.
Dottie Schindlinger(48:07.758)
That might be my favorite of the year. There are so many nuggets that I wrote down from Joe. One that really stood out to me was that no one's accusing boards of not working hard, but maybe they're not focused on the right mental model. They've expanded scenario planning. They're spending more time talking about risks, but they're still omitting certain things like geopolitics.
They're planning for the car coming from one block away rather than three cars converging at once. That really, really stuck with me. Yeah, Kira, any big ah-has for you in that interview?
Kira Ciccarelli (48:49.238)
Yeah, for me, I think a lot of it tied back to the findings that we saw out of what directors think, which I think Joe was referencing a few times and just this idea. And he said it a couple of times. He's like, I don't know if I'm going to win myself any friends with board members here. But the job is just getting harder. And I think we found in the survey that only about half of boards are receiving real time information and updates in between meetings on like a regular basis.
And I just wonder what that number would have been if we had asked the question even five or six years ago. So I think just the base level of attention that needs to be paid has gone up.
Dottie Schindlinger(49:25.902)
totally agree, Kira. This idea that you may have an instinct to try to plan for everything, but it's literally impossible. I thought his advice across the board was really, really smart. know, focus on two, three, four compounded scenarios that could really, really threaten your strategy. Make sure that geopolitics is wired into that in a way that it probably hasn't been before, and you're really going to have a leg up.
I think all that is right. And it was a really interesting conversation. We talked about a lot of different things. One of the things that really stuck with me after the interview was when I asked him his sort of vision for the future of boards. Like, what is it going to look like 10 years from now? And his vision, it was kind of the first time I've asked that question. It came away from the answer thinking, wow, this is going to look really different. think, you know, not to say that the other answers we've gotten in the past haven't given me somewhat of that impression, but he was really saying like, we have to
fundamentally rethink what boards do. And he was describing was kind of like continuous monitoring, auditing, real time data. The board meeting structure and cadence has to totally change. It needs to be smaller, nimbler, meeting more frequently. What a meeting is might need to change the definition. Like it's maybe not this long convoluted thing that requires weeks of prep time by the management team, but it's like quick calls, quick check-ins. Those briefs he talked about from...
Briefs, yeah, exactly. And just more data at their fingertips. So it's not anyone preparing data for the board to review. It's the board all has access to the same intelligence and they just look at it and have a conversation about it. mean, for me, it continues the theme, Megan, that you and I have literally been talking about now for years, that the lines between management and governance are blurring a bit. And I think there's two schools of thought.
There's probably more than two, but there's at least two that I'm familiar with. One is you can't let that happen because then, you you're, stepping on management's toes and the board is taking on too much of the management responsibility and that gets really ugly, really fast. And the other school of thought that's that says, if boards want to do a good job, they have to think more like managers and they have to be more in the flow of what's happening day to day in the business in more of a real time way, or they're going to miss really important
Dottie Schindlinger(51:52.002)
cues. there was an analogy that I was on a webinar recently on AI governance of AI with Dominique Shelton Leipzig. And she had this great analogy, is, know, at her, she travels a lot. And in her house in California, she's got a security system in place so that if someone, you know, breaks in a window or tries to open the back door, she instantly gets an alert that that happened. And she's like, that's real time monitoring versus if
I just had a call with the local police once a week. Someone might be squatting in my house for that whole week and I wouldn't know it. And then we would find out at the end of the week. And at that point, who knows what damage has been caused. And she used that very specifically in the heading of governance of AI. But everything Joe was saying to me resonated in that same vein, which is how do boards do this job if they're only getting information once a quarter?
and it's weeks old by the time they get their hands on it. I just, I think he's right. I just don't think it's feasible moving forward. I think it's gonna have to look different.
Kira Ciccarelli (52:59.936)
Yeah. just don't think nose in fingers out is super relevant anymore. Unfortunately.
Dottie Schindlinger(53:04.558)
I don't think so either. It's a whole body in.
Kira Ciccarelli (53:07.722)
a radical reconfiguration of, okay, what are the things we need to do and is management doing it or is the board doing it? But I just think the level of oversight across the board is going to have to go up.
Dottie Schindlinger(53:21.838)
Do you think it's going to be a gradual change or do you think we're going to have a world common Enron, a significant issue, a collapse of one of the largest companies in the world to trigger change at scale or do you think it's going to be, we wake up 10 years from now and things look kind of different?
Honestly think like we probably need to take a page out of Joe Hurd's book and do the scenario planning for it because I think I think both are plausible I think you you it's a you kind of need to look at it both and and you probably need to think about a poly crisis like here's an example You know when we when we went through the pandemic Suddenly every board had to be virtual and very few boards were comfortable with virtual meetings at that time if you might recall There was definitely sort of a culture around
If you don't show up for the meeting and you're the one that dials in, you shouldn't get paid for attendance. Like there was a whole culture around that. was like seen as like a mark against you. Well, those days are long gone, right? We just overnight all became very comfortable with virtual meetings and it's now the norm. It's like, it's rare to have face-to-face meetings now. Not, maybe for the full board, but like, you know, we get on a phone with somebody without any hesitation and yeah, it's just the norm. So I think you could have a situation like an AI bubble burst.
or some greater expansion of all the stuff happening in Iran across the Mideast region that so radically disrupts the flow of supplies through the Gulf of Hormuz or through the Strait of Hormuz and creates downstream a major global recession that then is compounded by AI and cybersecurity. Like you could see these poly crises happening that might require bores. They're happening right now. Right? They're happening right now.
that might require boards to start meeting differently, far more frequently to keep their companies afloat. And that might be a hard bell to unring. I feel like you could see a scenario where it changes quickly, we all have to do it. And then once we've all started doing it, we don't stop. And I could also see an alternate scenario where we're all like boiled frogs, where things are changing constantly and we don't notice until we look back and go, holy.
Dottie Schindlinger(55:41.954)
Wow, this looks so different than it did 10 years ago. Kara, what do you think?
Kira Ciccarelli (55:46.112)
me wonders if the pandemic has already done that for the 50 % of boards that say they are receiving real-time information at a regular basis in between meetings. Like when would that have started? Something tells me it's at some point in the last six years.
Dottie Schindlinger(56:00.718)
I think you're right. I think you're right. You're right. basically, well, so actually we're seeing both scenarios happen right now where half of the boards use the pandemic as the time to make that switch and the other half of boards are on the journey somewhere.
Kira Ciccarelli (56:14.574)
waiting for some... I mean, if I put on my doom and gloom hat, it's going to be some massive AI data privacy related scandal that happens at a major organization because we were at the global ethics summit just last week and that's all anybody in ethics and compliance would talk about is how afraid they were of something like that happening.
Dottie Schindlinger(56:36.184)
Well, mean, to that point, there's a lot of stuff already happening, right? Like, I mean, again, on this webinar that I did with Dominique, like, she has these great anecdotes. I mean, they're great anecdotes in that they're good stories about horrible things happening. You know, companies that, like, there was a startup that was so excited to create an AI buddy for young adults, and then that AI buddy started telling them to kill themselves. And two of them did. And then, and so, like, the company obviously went out of business, and the people who were involved, like, they're...
careers are destroyed. And it was because they didn't have the right governance structure in place around that AI to catch when the model was drifting in real time and stop it. I mean, it's really horrific things can happen with all the best intentions with, you know, this was an AI first company, like the whole company was AI, like that was their whole business model. And they didn't get it right. And it just, you know, it's horrific. So there's so much going on. Well, listen, I will be interested to talk to Joe, let's say five years from now.
Not 10 years. 10 years feels too long now. Yeah, seriously. When was he last on the show? It might have been about three or four years ago now. we could I think it was about three or four years ago. Yeah. I think we need to talk to him again in like five years and find out how close to reality his predictions were in 10 years. But it was really funny. He's like 10 years. It's too far. is. Maybe we have to start changing that question, Megan. Maybe we need to start saying next year. 10 months. Things are changing so quickly.
Well, that wraps up another episode of the Corporate Director Podcast, The Voice of Modern Governance. We have several very special thank yous to say today. First and foremost to our wonderful guest, JoeHurd, who came on and shared a lot of insights about polycrisis and how to be a great board member. But I want to say a very, very special thank you to a member of our crew, Laura Klein, who's been a stalwart producer for this show for at least the last two years. I've had the opportunity to work with Laura now
over that time and really get to know her and just love her. And unfortunately, she is going to be leaving Diligent at the end of April. We're so sad that she's going to be leaving us, but she is going to be going on to brighter and better things. She's taking a little time away from podcast production and she's going to be expanding into broader marketing program and project management. And so she's going to take a little time off and then find her next endeavor. And we wish her all the very best. And whoever gets to hire her next is super, super lucky.
Dottie Schindlinger(59:01.74)
So we hope that she lands someplace amazing. I also want to take a moment and thank Kira Ciccarelli, our other podcast producer, for joining us on today's show and being an amazing researcher. And also Steve Clayton, who edits our show and is our third and most amazing podcast producer. Also say a special thank you to our sponsors for the show, KPMG, Wilson Sonsini, and Meridian Compensation Partners. And thank you to Diligent for continuing to sponsor this show. If you like our show, please be sure to give us a rating on your podcast player of choice.
Five stars only, please. And you can also listen to our episodes and see more from Diligent Institute by going to Diligent.com slash resources. Thank you so much for listening.
Intro/Outro(59:39.412)
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