IE Business School held one of its lively business debates this week, gathering an elite panel in London to chew over what corporate boards of directors should be doing to ensure the sustainability of their firms.

Lucy P Marcus, IE Professor of Leadership and Governance led the discussion, and started by highlighting five key issues that all boards need to think about: infrastructure, technology, internationalization, communication and balancing continuity and change. Increasingly, she said, boards are looking at issues that will affect their firms 15 or 20 years out.

Lucy P. Marcus

As well as being a professor at IE, Marcus is the non-executive chair of the Mobius Life Sciences Fund and BioCity Nottingham, and CEO of her own firm Marcus Venture Consulting which advises venture capital and private equity funds on business sustainability. She’s a prolific commentator and tweeter on all things corporate governance. Read more about her here.

First up was Manny Amadi, who heads C&E Advisory, a corporate social responsibility consultancy with clients such as Accenture, E.ON, Vodafone Group, BP and Microsoft.

Manny Amadi

Amadi defined sustainability from a business perspective as “meeting the needs of an enterprise and its stakeholders while sustaining resources that will be needed in the future”. He cited a recent KPMG report that found that more than half of the world’s biggest 250 firms had “created value” through sustainability-related activities.

Rory Cellan-Jones commented on some of the non-executive directors that he’d met as BBC technology correspondent, observing that many of them were very distant from the people and activities within the firms they led, while executive directors were mostly focused on investor relations and keeping the financial analyst community happy.

Rory Cellan-Jones

Nokia came up several times during the discussion. Cellan-Jones said the firm was a warning to boards of the risks of growing out of touch with technological breakthroughs in their market. Nokia was the world’s leading smart phone maker ten years ago, but has since been taken to the crushed by Apple’s iPhone.

Trevor Phillips, Chair of the UK’s Equality and Human Right’s Commission also listed Nokia as one of four examples of how a lack of diversity at the top can lead to disaster for organizations. The other three were Olympus; political parties led by dynasties including the UK’s Labour Party and Libya’s ruling Gaddafi family(!); and News International.

Trevor Phillips

The greater the diversity on corporate boards in terms of race, gender and geography, the lower the risk of falling victim, to "unknown unknowns" in Donald Rumsfeld parlance, said Phillips.

Sue O’Brien, CEO of executive search firm Norman Broadbent lifted the lid on how firms look for new non-executive directors. There is a trend for fewer and fewer executive directors to be on the firm’s board, and a greater balance of non-executive directors.

Sue O'Brien

This is a dangerous trend. According to O’Brien, there isn’t a single HR director on the board of a FTSE 100 company, despite the importance of people to a company’s success. Executive search firms that are hired to find board candidates often rely on the same roster of “career” non-executive directors when what is needed is not someone who has been on lots of boards already, but a person with expertise in a functional area such as media or technology.

There are too many accountants and finance experts on boards, she said, adding that functional diversity was more critical than ethnic or gender diversity for a firm’s long-term success

Also problematic are instances of conflicts of interest in the executive search industry, when the same executive search firm is appointed both to conduct a board evaluation and to make board nominations.

Sir Robert Worcester, founder and chairman of market research firm MORI, gave the example of Jack Welch who said that in order to run General Electric he needed just three metrics: customer satisfaction, employee satisfaction and cash flow. Board members need to keep in close touch with customers and employees, said Sir Robert.

Sir Robert Worcester

He also suggested that non-executive directors should not be paid if they are to be truly objective: “We need Non-Executive Directors who can afford to ask tough questions”.

Trevor Phillips agreed, saying that in his experience board members often succumb to “group think”, because they worry that they might look stupid if they ask questions outside their area of expertise.

Other topics under discussion included: the optimal size of a board; board members outsourcing their intellectual role to firms like McKinsey and giving less strategic advice themselves; and what makes a good chairman – apparently someone who asks questions but makes sure everyone around the table gets to ask theirs first.

Some of these questions merit a discussion of their own… this is the first in a series of events IE Business School is holding in London we’ll keep you posted on forthcoming events!