Boards – Geopolitical challenges & Diversity

Geopolitical dynamics have evolved recently and will continue to grow more complex, with even more impact in the foreseeable future.

Geopolitical dynamics have evolved recently and will continue to grow more complex, with even more impact in the foreseeable future. Companies operating in more than one jurisdiction are particularly vulnerable to geopolitical risks, although these can also present opportunities. Can boards afford to steer clear, or is the boardroom the best place to build resilience and pave the way to opportunity?

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discuss geopolitical challenges with Nassib Abou-Kahlil, named one of the 20 top corporate legal officers by the Financial Times in June 2021. Nassib held senior legal roles at Yahoo!, GE Oil & Gas, Etisalat, and TMF Netherlands and, most recently, as Chief Legal Officer at Nokia. His work on equity, inclusion and Diversity was recognised by the Minority Corporate Counsel Association, which named Nokia “Employer of Choice” in 2019 and presented him with an award for outstanding contributions to Diversity and inclusion in 2022. He was also included in the top 2019, 2020 and 2021 OUTstanding LGBT+ role model lists.

Some of the key takeaways of the conversation include:

“Keep an open mind; the world is extremely diverse”

Nassib opens by observing that the complexity around Geopolitics is enormous but not insurmountable. In his mind, it is vital to keep an open mind and assume you know nothing. He relates his experiences with new challenges and working in numerous jurisdictions, involving managing complex laws and accommodating values and reconciling contradictions, whether cultural, legal, or between values in the multi-jurisdictional environment. This is a delicate exercise in understanding, foreseeing, mitigating and managing. In Nassib’s opinion, the fundamental premise is to start by understanding all the perspectives and engaging in constructive dialogue, allowing sharing and exchanging of experiences and opinions.

“There is no one size fits all”

Nassib explains that he believes there is no ‘one size fits all’ approach, so whatever approach is taken needs to be well adapted to the specific business and relevant circumstances. This must be taken into account when assessing the impact of a particular development and is achieved through utilising regulators and other geopolitical experts and analysts. For this, he believes boards play a critical role. Therefore, conversations and understandings at the board and organisational levels are essential. Multi-stakeholder engagement is also necessary for gaining understanding, knowledge and insights into external matters.

Secondly, Nassib describes how insights alone neither help solve nor achieve anything, so mitigation is necessary, generally achieved through a mix of tools, policies and in-house expertise. Policies might include human rights policies, codes of conduct, whistle-blower policies, procedures, etc. In-house expertise within the legal team could include various areas such as trade compliance, human rights or corporate governance. External expertise could involve government affairs experts, ESG experts etc, as well as stakeholders. Stakeholder involvement is very important, he advises, and expertise is not enough; involving the right people in the decision-making process is critical.

“Yes, this is a board-level discussion… …not in every detail, but at a strategic level”

In Nassib’s view, it is essential for geopolitical issues to be a board-level conversation, and the board is potentially one of the bodies best placed for future-proofing organisations. He explains that one of the most important tasks of the board in this context is weighing in on the strategy of a company, assessing and deciding how a company addresses its geopolitical risks. The geopolitical footprint is a crucial part of the development of the overall strategy of a company because there are real trade-offs, business choices and legal risks. Management and employees often find themselves conflicted between immediate gains and long-term value creation for stakeholders. Nassib feels that boards are better placed to make these decisions, removed from day-to-day operations and the pressures of immediate financial delivery. He feels the discussion should be at the board level and strategic, not operational.

“Lack of diversity and diverse perspectives, and challenges in perspective is potentially one of the greatest red flags”

Nassib believes that the biggest threat to boards and future-proofing is the lack of Diversity on the board. In his experience, the power of diverse perspectives invariably leads to better decision-making and broader insights. Lack of Diversity and diverse perspectives is a huge red flag, he believes, in an increasingly global environment, and with the complexity of managing globalisation becoming greater and greater. The best and most efficient way of managing this is ensuring that many voices and perspectives are heard around the table – and he cautions this must be true and genuine Diversity.

He advocates a different approach to staffing boards, as recruiting for experience is both a big risk and a big threat. He suggests focusing on potential rather than experience because experiences are confined or aligned to a certain way of thinking. In contrast, those with potential could have a broader and more diverse perspective.

“The biggest risk in diversity is defining diversity narrowly”

Nassim relates how he has always thought of Diversity in the broadest sense of the word, including cultural experience, racial Diversity, social mobility, and other aspects of Diversity. Many companies operate in an extremely diverse environment, yet their boards do not reflect this. He believes that nationalism is potentially not conducive to Diversity. Hence, companies need to make a conscious decision to move away from the nationalistic approach to build the composition of their board. The broader the definition of Diversity, the greater the voices around the table and the greater the perspectives shared. He advocates ensuring a diverse pipeline for every recruitment, mitigating the risk of not having sufficient Diversity on the board.

 

The three top takeaways from our conversation are:

• Geopolitical dynamics are here to stay, so keep in mind that today’s decisions may come back to haunt you tomorrow. If you exit a country today because of the geopolitical dynamics, this doesn’t mean that you won’t want to re-enter it later, and people will remember your actions.
• Focus on Diversity, looking for potential and not experience, defining Diversity in the broadest sense and committing to it.
• Build awareness, including self-awareness, by understanding your geopolitical dependencies your footprint and your operations.

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