The Better Boards Podcast Series Dr Sabine Dembkowski

When companies face increasing uncertainty, they need to lean in and embolden management to do what is right for the business's long-term health. Nowhere is this more pertinent than on the topic of sustainability. 
In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses how board members can help make a difference with Andrew Hobbs from EY's Center for Board Matters across Europe, the Middle East, India, and Africa (EMEIA).

"There's a significant strategic data and information gap at the board level"
One of the big discoveries from the recent EY survey of 200 C-suite or Non-Executive Directors was the data gap. Less than 25% of the total have been identified as leaders on the sustainability and governance front. Leaders were working from a much stronger set of metrics that helped them establish links between ESG decisions and other value-creating objectives.

"Metrics are key for good decision-making"
Effective decision-making on capital allocations for ESG and quantifying returns on investments is impossible without good metrics. Both leaders and followers reported challenges around getting good metrics that allowed them to capture the financial implications of their decisions. It's an area of opportunity.

"It isn't about creating a board full of sustainability experts. It's about encouraging boards, or giving boards enough training to ask the right questions."
Andrew says many boards are seeking members with sustainability skills, but that may not be the right solution to the problem. Instead, boards need training to ask better questions of themselves and management – questions that challenge short-term thinking, probe for a deeper analysis of financial impacts, and encompass more of a holistic, long-term view of what sustainability choices are going to do. 
"We're not saying that boards need to do the job of management"
Boards need to be ready to challenge and question decisions to find meaningful solutions. If a target has been set, due to regulations or internal goals, but things are behind, how can boards create accountability and pave the way for a real change in business practices? How can boards create deeper conversations about costs, benefits, and resource allocations?

"All that gathering of data and setting up the systems and controls to report is giving boards and companies insights they didn't previously have"
There is a huge slew of regulations out there, which some companies view as a nuisance. However, Andrew believes that looking at this regulation as a compliance exercise is the wrong mindset and approach. Instead, boards need to look at these and say, "How can we turn this to our advantage?"

"Businesses need to walk the tightrope between growth and governance"
Andrew feels businesses need a balanced approach to governance and growth. One example is the use of artificial intelligence (AI) to advance or monitor sustainability efforts. Boards need to look at the business opportunities it presents and the environmental impacts surrounding the use of AI.

The three top takeaways for effective boards are:
1.      Boards are the long-term stewards of an organisation. Boards need to be mindful of what's happening now and deal with that but also need to encourage a focus on the future.
2.     Boards need to ask better questions to get better answers and not shy away from the challenges presented.
3.     Boards play a key role in linking reporting to a stronger long-term value narrative for investors. 

What are the key differences between the U.S. and the U.K.  in their approaches to corporate governance?   How do these differences impact an independent/Non-Executive Director in their duties?
In this podcast, with Susan Skerritt, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses corporate governance practices in the U.S. and U.K..  Susan was the CEO of Deutsche Bank Trust Company, Deutsche’s US commercial bank.  Since 2018, she has served on the board of financial services organisations in the US and UK. 
"I've been lucky to find boards that want my experience, perspective, and where I think I can add value"
To Susan, the most important thing when looking at board opportunities is whether you see yourself bringing value to the organisation. She pursues global board opportunities because she's always operated in and enjoyed the global business world.
Susan notes that while boards in the U.S. and the U.K. have their differences, there are also many similarities. Both operate on the Anglo-U.S. model, which differs from the German, Continental, and Japanese models. 
"The most important differences are the philosophical differences"
For Susan, the most important difference is philosophical.   U.K. corporate governance is principles-based. There is a corporate governance code that's updated regularly, and it's applicable to companies with a premium listing on the London Stock Exchange. The code operates on a "comply or explain" basis, and that really recognises that one approach may not be appropriate for all companies. The U.S. approach is more prescriptive. There is no corporate governance code per se. Rather, publicly listed companies are subject to four areas of law and regulation: state corporate law, federal securities law, Stock Exchange listing rules, and federal and state laws related to specific industries, such as financial services. 
The second philosophical difference relates to whom the board is ultimately responsible. In the U.K., the duty of Directors is to shareholders and stakeholders. In the U.S., shareholders' interests tend to be the primary concern. The Business Roundtable and Association of Chief Executive Officers recommended in 2019 that the U.S. shift toward stakeholder focus, but that's still evolving. 
"Beside philosophical differences, there are structural differences"
Susan sees several structural differences between U.S. and U.K. boards. For example, in the U.K., the Chair and CEO are more likely to be separate, with fewer than 10% of FTSE companies having a combined role. In the U.S., over 50% of S&P 500 companies have a combined CEO and Chair role. Susan finds this can lead to conflicts of interest, and prefers the U.K. model.
"There are also differences that impact the Directors themselves"
There are also key differences beyond operational structures that impact Directors themselves. These anchor on board refreshment, compensation structures, and education for board members.
The three top takeaways for effective boards from our conversation are:
1.      If you have global experience that you want to deploy in your board work, consider a board in another jurisdiction. Your experience is precious if the company operates globally and most of its existing board members are from one country.
2.     Corporate governance continues to evolve in every country. By having experience in multiple jurisdictions, you bring different perspectives to the table. 
3.     Even if you don't join a board in another jurisdiction, keep updated about how corporate governance is evolving outside your country. There are best practices you observe in other jurisdictions that could be deployed no matter where you serve.

Climate change has transitioned from a distant environmental concern to a pressing business issue. The rhetoric between business and climate activists has hardened. Friends of the Earth in the Netherlands have sued Shell and are now in the process of suing ING. What should boards do? 
In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses the thinking behind the move to sue ING Bank and learnings for boards with Donald Pols. Donald is the Director of Friends of the Earth in the Netherlands. 
 “We can and will manage to address dangerous climate change if all relevant actors contribute, including the financial sector.”
Donald is bringing the climate fight to boardrooms. He cites the reality of the regulatory gap as a key factor- He explains that while governments sign agreements and individual countries make pledges, large multinationals often have no one person or entity truly holding them accountable. Often, the financial sector operates in this regulatory gap, which is why he is using a lawsuit against ING to make an example as ING is one of the largest financiers of fossil fuels in the world, which gives it a unique opportunity to shape climate change impacts.

“It's time to start acting on all these initiatives instead of only talking.”
The first step in a democratic society is always a dialogue and a conversation, but Donald notes that conversations have happening for decades with no real progress. So, taking things to court is an intentional escalation. Donald sees going to court as part of the democratic process, which allows parties with a difference of opinion to get a judgment on those opinions. It also creates a way to close the regulatory gap. 
“If there's only one message I can give to your listeners, it is that climate change is not an ESG issue. It's a material issue.”
Donald feels that for boards to truly take climate change seriously, they must stop treating it as a side issue. It is a material issue that is crucial for the financial continuity of a company. 
“What we notice in our engagement with companies on a C-level is that climate change knowledge is lacking in general.”
In Donald’s view, acting on climate change starts with leadership from the top. Boards must make climate change a company-wide priority. Ideally, this will result in climate change being a fixed issue on the board agenda, whose importance influences policies not just for the firm, but also for suppliers and clients.
“The boards of multinationals that I visit are concerned with achieving and measuring impact. However, the way we measure impact is fundamentally different.”
As Donald sees it, most boards measure shareholder value. Firms in the activism and non-profit space, measure stakeholder value. For them, it is less about how much money is made and more about what noticeable changes are achieved and what societal support is won.
The three top takeaways for effective boards from our conversation are:
1.      There's a need to act to prevent dangerous climate change, and this need has become a new societal norm applicable to all corporate and financial institutions.
2.     Climate change is a material issue with fiduciary implications. Not acting in accordance with this responsibility already has and will have legal implications in the future.
3.     On a more personal note, you're a CEO, but you're also a parent and a grandparent. You're a board member, but you're also responsible for life on Earth, especially for your family. The discussions you have and the decisions you make daily will have an impact on the future of our shared planet. There's no profit on a dead planet. Act accordingly.

The board is a powerful asset for tech start-ups. Yet, since the interaction takes place behind closed doors, there is a lot of uncertainty about how the CEO and director dynamics play out. How open is the communication between both sides? 
In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses tech start-up boards with Yael Benjamin,   Founder/CEO of research firm start-up Snapshot, and Tzahi (Zack) Weisfeld, Vice-President and General Manager of Intel Ignite, Intel's accelerator program. 
"One of the main conclusions of the research is the focus on communication, or we'll call it the lack of communication, and transparency between tech CEOs and their directors"
Yael research finds one of the biggest issues is communication. Some 61% of the CEOs say they're not fully transparent with their board. 
"The lack of transparency is leading to a situation where CEOs do not utilise the value of the board"
Yael's research finds the lack of transparency and trust leads to extra challenges and diminishes the value board members can bring.
"There's a difference between first-time founders and people trying to manage or work with a board for the first time versus the more experienced founders that have a better handle on the governance of their start-up"
Zack feels the experience is a large and underappreciated factor here, both on the side of CEOs and founders and also on the side of board members. 
"CEOs that are young and inexperienced need to get the right kind of mentorship"
Zack feels it is important for young and inexperienced CEOs and founders to find advisors who can be great sounding boards and resources for managing board situations. He feels consultants are not a good choice. 
"A great way to help first-time or younger founders is to have an independent board member"
As founders seek advisors, Yael's research shows that 60% of start-ups do not have an independent board member. 
"Investors overestimated the value they're providing versus what those CEOs said they're receiving"
As an additional consideration when looking at investors as board members, Yael's research finds there's a large imbalance in the perceptions of the value of advice and guidance. 
"The reality is that VC partners are often on too many boards" 
Considering Yael's data and his own experience, Zack feels an issue not often talked about is that VCs and investors are on too many boards. 
"When we talked about selecting your advisor, your mentor, you need to select a partner that's going to invest in you"
At times, the only thing a VC has to offer is their cash. This means start-ups need to look for someone else to serve in that mentoring or advising capacity very intentionally.
The top takeaways from our conversation are:
1.      Yael notes that a lack of transparency is going to prevent getting value from the board.
2.     Zack wants to remind everyone to choose your mentors, VCs, and board members as carefully as possible – with at least as much care as you would a co-founder or spouse.
3.     Zack would also like to remind CEOs and founders that they are in control of their companies, not the boards. While boards play advisory roles, the ultimate responsibility for managing the firm lies with the CEO.
4.    Finally, Zack notes when it comes to boards, mentors, and advisors, adopt a "help them help you" approach. The more friction you can take out of the process, the more likely you are to get the help you need from busy people.

Environmental risks make up half the Top 10 risks over the next ten years. Climate change remains one of the most urgent challenges confronting boards in their oversight capacity. How can boards improve their oversight of climate-related risks? And what does accounting have to do with it?
In this podcast, Dr Sabine Dembkowski, Founder and Managing Director of Better Boards, discusses how boards can improve their oversight of climate-related risks with Mike Mahoney. Mike is the CEO of the E-liability Institute, a global non-profit organisation advancing accounting upgrades to drive green innovation and reduce carbon emissions. In November 2021, Professor Bob Kaplan of Harvard Business School and Professor Karthik Ramanna from the University of Oxford published a prize-winning paper, Accounting for Climate Change, which is the foundation of the E-liability concept. 
"Let's focus on the fact that investors say climate change poses one of the largest sources of financial risk to companies and their asset owners"
Climate change has been discussed for years in the context of ESG and sustainability, but Mike says it remains a top risk for boards. Of course, risk is often the flip side of opportunity. Mike feels companies can develop and sustain advantages in how they effectively mitigate these risks or in how they help customers mitigate these risks. These are important strategic issues for management and boards alike. 
"As emissions continue to grow around the world, the current system simply isn't working"
Most companies use approaches to carbon accounting based on carbon disclosure requirements that aren't fit for purpose. To appropriately analyse and mitigate climate risk, companies need to precisely understand the carbon intensity of their operations and that of their suppliers. Instead, firms are leaning on estimates and industry averages, which can be highly inaccurate and introduce so much distortion as to render carbon disclosures useless. 
"There are six questions to answer about how the company and management are thinking about measurement and accounting of climate-related and emissions data"
Listen to the podcast and add the questions to your repertoire.

"With e-liability, instead of accounting for costs, we're accounting for carbon"
E-liability is an accounting algorithm that allows organisations to produce real-time accurate and auditable data on their total direct and supplier emissions and those of any of its products and services. It is a simple, open-source, free-to-use set of principles that can create an accurate and auditable total "cradle to grave" carbon footprint number. 
The three top takeaways from our conversation are:
1.      Climate risk is financial risk, and companies and their boards should manage it as such. Climate risk can be quantified, measured, and mitigated. It can represent a strategic opportunity for competitive differentiation as long as the company's claims for differentiation can be audited and are meaningful to its customers.
2.     It matters how a company does its carbon accounting. Management and the board need rigorous emissions accounting to understand and mitigate risks and seize opportunities.
3.     Everyone should learn more about how companies can improve their carbon accounting by visiting the E-Liability Institute (https://e-liability.institute/). The site has a wealth of information, including the original papers published Bob Kaplan and Karthik Ramana, and a chance to connect with the company to learn more and explore pilot adoption of this approach.

 Generative AI will profoundly impact how we work and how organisations operate. My podcast partner has said that it is the most dramatic change we have seen since controllable electricity. Yet, in our board evaluations, we see little about the systematic integration of AI in the agendas of boards. What questions do Directors need to ask in the boardroom?
In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses the questions boards need to ask about AI with Professor of Management Practice at Harvard Business School Joe Fuller. 
"Companies are asking entirely the wrong questions"
Prof Fuller feels many companies are still asking the wrong questions. Too many firms look at AI as a super SaaS product. It's not, and that misunderstanding is limiting them in preventable ways. Instead of asking, "How can this make my current process more efficient?" Professor Fuller feels companies need to ask, "How do I build the processes to make the most of this technology?" That shift captures the astonishing breadth and potential of AI. 
"It's very important that boards and management go on a learning journey together"
According to Professor Fuller, management and boards need to work together to demystify AI for their employees. AI is the subject of a lot of spurious reporting and a lot of rumors. Worse, while some 60% of workers feel AI will change the world of work, only 25% of workers feel it will affect them. That's a level of disconnect Professor Fuller feels will catch many people by surprise.
"For a board not to be asking these questions and, through their dialogue with management, learning how to ask better questions, I think, is a rather important abandonment of their responsibility"
AI has many positive applications, but it also brings with it risks. Who owns those risks, tracks them, and is held accountable for them? Professor Fuller feels boards can play an essential role here, helping set up governance structures and models of use to protect and serve the company's operations. 
"If you have a lot of data, that's a huge natural advantage with AI. And so the question becomes, how quickly can I train that data?"
Professor Fuller feels success with AI has two parts – the amount of data available and how fast that data can train your AI into a useful state. Companies that use AI and keep pace with updates could end up with a permanent competitive advantage. 
"The skills we're going to be looking for will change as this technology becomes firmly rooted in business processes and provides management with the types of insights and data that were often unavailable to them in the past"
Professor Fuller notes that what companies will be looking for in top talent and for board members is changing. Responsive technology trained on historical data has the potential to replace traditional time-linked credentials and make tenure in a role less valuable.

The three top takeaways for effective boards are:
1.      AI is as important a development in business as we've seen in the last 200 years. It will drive a permanent, critical transformation as impactful as the steam engine or controllable electricity.
2.     It's changing rapidly, and while there is a learning challenge, companies have to view this as an unbelievable opportunity to create a competitive advantage. 
3.    AI is a very powerful tool. We hope it will be used for good but boards need to be mindful of what a powerful tool can do in the hands of bad actors, and guard against that risk where possible.