Advancing Talent Governance

The board’s trust in the CHRO is essential. That was one topic surfaced by a distinguished panel addressing talent risks and human capital management before an audience of directors, investors, and governance professionals. Co-hosted by Farient Advisors and Paul Hastings at the law firm’s Manhattan office, the discussion delved into the oversight of human capital, now primarily recognized as a core business asset; ongoing backlash against environmental, social, and governance (ESG) initiatives; and the delicate balance of aligning management and stakeholder interests.

Five Key Takeaways

• Compensation committee oversight of talent management requires a strong relationship with the CHRO. One panelist remarked, “The CHRO is now the board’s best friend.” Trust and open communication with CHROs to gain formal and informal insights into cultural dynamics and turnover are essential to a board’s informed decision-making. As always, boards need to trust and verify.
• Balancing governance with management presents an ongoing challenge, with boards striving to oversee management actions while safeguarding shareholder interests. Ensuring a transparent record of board discussions and inquiries helps mitigate litigation risk. Board members are encouraged to focus on dialogue rather than micromanagement. Effective oversight requires a careful balance of guidance and independence.
• Succession planning and external assessments of potential candidates are essential tools in leadership development, enabling boards to pinpoint strengths and areas for improvement. Leadership readiness should be assessed through 360-degree reviews and scenario planning exercises. Boards were advised to ask difficult questions and, in turn, foster a safe culture to ensure they hear candid responses to gauge leadership capabilities confidently.
• ESG considerations are increasingly integral to corporate strategy and compensation as performance measurements despite pushback. Corporate ESG statements have evolved from aspirational goals to more clearly documented commitments motivated by value creation, compliance, and societal impact. Although many companies are cautious about publicizing ESG efforts, linking these efforts to strategy and business impact is essential.
• Diversity, inclusion, and power dynamics within boards also play a pivotal role in shaping the embrace of transformative new technologies such as artificial intelligence. Boards need to understand the challenges and opportunities of AI to enhance their understanding of what skills, upskilling, or reskilling may be required, and their impacts on the organizations directors oversee.