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Corporate leaders and executives explore range of issues in plenary sessions and break-out groups

What does it take to be a courageous director? That’s the question participants of the third Salzburg Global session on corporate governance sought to answer earlier this week.

Around 40 corporate leaders and executives convened at Schloss Leopoldskron, in Salzburg, Austria, to take part in Session 582 – The Courageous Director: Can Corporations Better Serve People, Planet, and Profit?

In a series of plenary discussions, participants explored topics such as the corporation as a good citizen and the role of shareholders. Smaller break-out groups saw participants discuss their views in further detail.

Navigating between long-term and short-term goals, meeting shareholders’ expectations, and maintaining corporate responsibility requires certain attributes from directors: the courage to ask difficult questions, a high level of alertness, and the confidence to tackle issues head-on.

During discussions, participants reflected on issues such as sustainability and diversity and agreed both were important constituents in their own right. Some argued corporations inherently hold an ethical responsibility, which sometimes means risks have to be taken. 

One participant highlighted electric car manufacturer Tesla as a shining example of a risk-taker which has shown signs of success despite initial uncertainty around the venture.

Ahead of the session, participants were divided into groups to research three timely case studies: The Volkswagen emissions scandal, the fake accounts scandal at Wells Fargo, and the Google anti-diversity memo.

During the three-day program, break-out sessions took place for each case study to be reviewed.

The group discussing the case of fake client accounts at Wells Fargo concluded there were no proper control functions in the company.

While the board may not have been aware of what was happening, participants thought they should have been responsible for requesting adequate and transparent reporting on the sales results.

The board should understand why a certain product is doing well. “If you’re outperforming your competitors, it should be a yellow flag (if not red),” one of the participants commented.

The group discussing Volkswagen’s falsified emission results drew similarities between their case and the Wells Fargo case study.

Participants suggested Volkswagen’s “authoritarian culture” –  with a very heavy sales pressure on low-level employees –  resulted in a lack of trust in verification and ethics. Participants suggested this materialized in the attempt to sell in the U.S. at any cost.

The group said Volkswagen needed a culture of compliance, one that started from the top down in order for change to happen as it is boards rather than people at the bottom who hold the cards.

Rules and regulations are in place for a reason, but there must be a willingness to apply them.

The final case study participants explored concerned the Google anti-diversity memo and asked participants how they would have responded to the memo.

The break-out group who looked at the incident said there was a “missed opportunity” for Google to talk about the value of free expression but also the importance of diversity and why the memo was not well reasoned.

During the group’s discussions, one participant suggested Google’s response and the manner in which the incident was handled had failed to reassure anyone.

On the final day of the three-day program, participants made suggestions for topics to be covered in future sessions.

A wider discussion on the best practices for a board, including bringing in positive role models to talk about their experience, were seen as important steps moving forward.

The impact of technological transformation and effective ways for corporations to be “good citizens” and carry their social responsibility in a globalizing world were also seen as useful discussion topics.

One participant suggested markets aren’t created to be fair, so it can’t be left to the markets to create fairness. Corporate governance will continue to require business leaders to adapt to new challenges. The next generation of directors will need the courage to learn, question, and innovate in the face of obstacles that come their way.

The Salzburg Global program The Courageous Director: Can Corporations Better Serve People, Planet, and Profit? is part of the multi-year series, the Salzburg Global Forum on Corporate Governance. The session is being supported by Shearman & Sterling LLP, BNY Mellon, UBS, Barclays, CLP Group, Goldman Sachs, and Teledyne Technologies. More information on the session can be found here.