2024 election cycle will test board directors’ ethics. Here’s a 3-step framework for addressing sensitive issues

If they’re right, and if history is a guide, executives can expect today’s already-tense culture wars to ramp up. Companies will be drawn into heated conversations around immigration, free speech, the climate crisis, and foreign policy. And CEOs will look to their boards for advice. How could a Trump victory affect their supply chains overseas, DEI programs, or ability to hire immigrants? 

Not all boards are ready to handle these times, says Ben Hardy, a professor of organizational behavior at London Business School who teaches ethics. But to assist directors, he recently created a simple, research-based framework he calls the “Three Ds.” Boards need diversity, disagreement, and decisive decision-making to work through sensitive issues and make smart choices. 

The first D requires little elaboration, as the benefits of board diversity have been well established. However, Hardy stresses that age diversity is especially important this election year since younger directors are closer to the generation of workers entering the workforce who, in turn, have a better grasp of shifting societal values. (In 2023, the average age of a new S&P 500 board member was 58, according to Spencer Stuart.) 

Ethical norms change over time, the professor explains, but personal views rarely do. “Most of our ethical views are formed when we’re young-ish,” he says. Boards stacked exclusively with seasoned executives who have hard-earned wisdom to share may not realize that their assumptions about acceptable behavior are several decades out of date. 

What’s more, in his work, Hardy has noticed that older board members are more likely to turn ethical questions into compliance and risk-management exercises—a damning mistake seen time and again in cases of corporate scandals. (The WWE board debacle may prove to be a perfect example of this.) 

Disagreement is also a critical part of addressing an ethical dilemma, Hardy says, but it’d be folly to believe that it happens naturally within teams. His tip for boards tackling moral code questions is to remember that there is no universal consensus about what makes an action kosher. Some people are relativists, others are absolutists, and so on. “Typically, we regard ‘unethical’ as someone doing something that we don’t like,” he says. “But your view of ethics is no more right than mine.”

Finally, boards have to make decisions, which sounds obvious, except that Hardy has noticed boards failing to make sound ethical choices by kicking problems down the road.

It’s tempting to take a wait-and-see approach when “this big lump of uncertainty sits in the way,” he says. But boards need to see through the pre-election haze and use scenario planning and other tools to start making tough calls. That’s the job. 

Lila MacLellan
[email protected]
@lilamaclellan

Author’s note: Speaking of looking ahead, The Modern Board newsletter is going on hiatus effective immediately. You can still follow my coverage and leadership stories from across the Coins2Day newsroom by signing up for the Coins2Day Daily newsletter, here. I’d also love to stay in touch, so please send your story tips and ideas to the email address above. Keep an eye on your inbox for details about a new offering of The Modern Board newsletter.

Editor’s note: An earlier version of this story incorrectly stated that the average age of directors in the S&P 500 is 58. That was the average age of new directors who joined in 2023.

Noted

“If we thought that a shareholder proposal would’ve been sufficient, or potentially removing directors was enough to invigorate oversight, we would’ve considered that. But the lack of oversight the board has exhibited on these issues warrants a change.”

 —Tejal Patel, executive director of the SOC Investment Group, on nominating labor-friendly directors for Starbucks’ corporate board

In Brief

—France is prepared to jail corporate directors who don’t comply with the EU’s recently adopted Corporate Sustainability Reporting Directive. Under the new law, failing to submit an audited report could lead to a prison sentence of up to two years.

—Vince McMahon resigned from the WWE board after a former employee filed a lawsuit accusing the ex-CEO of rape and sex trafficking. The employee called the board’s recent investigation into McMahon’s treatment of several women at the firm a “sham.”  

—When two firms begin sharing a board member, the number of employees moving between both companies drops by 20%, suggesting interlocked directors may impede worker mobility. 

—Women have made gains in corporate governance, but parity is still nearly a decade away. Today, only 29 companies in the S&P 500 have a gender-equal board.  

 —Board members who have defied normal human age limits were among the seven traits of shell companies that Moody’s Analytics recently identified as red flags for financial shenanigans. The company found 2,220 suspect shell firms with directors aged 120 and above.