How to prepare your board to navigate constant change

How are boards of directors of major companies coping in 2021 with the increasing expectations of so many stakeholders? How can directors help companies manage their way through myriad changes in the competitive environment, advances in technology, and new mandates from government and regulators? And how are boards able to oversee critical non-financial issues like corporate culture, ethics, cybersecurity and ESG? In this episode of the Principled Podcast, David Greenberg—LRN’s former CEO and now special advisor—continues the conversation about board engagement with Jonathan Day, CEO of Tapestry Networks. Listen in as David and Jonathan discuss the current issues facing boards of directors and how they impact board oversight of corporate culture, ethics, and compliance.

Intro: Welcome to the Principled Podcast brought to you by LRN. The Principled Podcast brings together the collective wisdom on ethics, business, and compliance, transformative stories of leadership, and inspiring workplace culture. Listen in to discover valuable strategies from our community of business leaders and workplace change makers. 

David Greenberg: How are boards of directors, of major companies coping with the increasing expectations of so many stakeholders? How can directors help companies manage their way through myriad changes in the competitive environment, advances in technology, and new mandates from government and regulators? And how are boards able to oversee critical non-financial issues like corporate culture, ethics, cybersecurity, and ESG? Hello, and welcome to another episode of LRN' Principled Podcast. I'm your host, David Greenberg, LRN's former CEO and now special advisor. And today I'm joined by Jonathan Day, CEO of Tapestry Networks, which is at the center of many important discussions on boards of directors and the issues confronting them. Jonathan and I have been working together on a major initiative related to board oversight of corporate culture, corporate ethics, and corporate compliance. So I'm really looking forward to digging in on the subject of boards. Jonathan is a real expert in this space based on his leadership of Tapestry and past work with McKinsey, Heidrick & Struggles, and Monitor. Jonathan, thanks so much for coming on the Principled Podcast. 

Jonathan Day: Thanks, David. It's great to be here. 

David Greenberg: So Jonathan, first, tell our listeners about the core of what Tapestry Networks is about. 

Jonathan Day: Well, we're here to help the women and men who lead the world's most complex companies, do their work better and do their work with more confidence. And most of that involves working with non-executive directors whose roles have become really complex in the last few years. We do all of this through peer learning. So the leaders are learning from one another, rather than from professors, or consultants, or us. It's an unusual model, but it works. Now just to make this concrete, in 2020, we conducted about 130 meetings, most of them virtual, and we held around 500 very confidential director conversations individually, in small groups, in large groups. And these are directors of companies like JP Morgan, Walmart, Microsoft, BlackRock, GM, Apple, Facebook, Nestle, Zeeman's, SAP, large complex global companies. And all of this has given us a view of the anthropology of the modern boardroom. 

David Greenberg: Terrific. In that regard, Jonathan Tapestry and LRN just wrapped up a major study and summit meeting on board oversight of ethics, culture, and compliance. What to you are the major takeaways from this effort? 

Jonathan Day: Well, the study was a lot of fun. We talked to many directors, many chief ethics and compliance officers, and the companies involved had a combined capitalization of just under $5 trillion and they operate on six continents. What I think makes this study different is that you could say it offers the voice of the director. Even those chief ethics and compliance officers were also directors of other companies. So these are perspectives straight from the boardroom. And David, for me, there were three big findings. First, boards can see the critical importance of culture and they are taking responsibility for shaping it and for shaping compliance in their companies. This is not easy. Walmart, for example, has 2.3 million workers around the world. Their board has a total of 12 members, and yet their boards are taking on this challenge. Of course, they rely on the CEO and the top management to drive a lot of the work, but they themselves feel responsible and the world is holding them responsible when violations occur. 

That's the first finding. The second is that many directors don't feel that they're in a very good position to sort of re-culture or to give management practical guidance and moving it in the right direction. They get lots and lots of data, but they often struggle to filter out that clear signal from noisy data. One director said culture is harder. You know it when you see it. You can use surveys, but they're not as helpful as actually knowing people. And another director said, we need a more direct pipeline to the workforce and decision makers in the field. As a director, you need to have your ear to the ground. Well, that sounds great, but let's go back to Walmart. Those 2.3 million workers are in 10,500 stores in 24 countries. That's a lot of ground for 24 ears of those 12 directors to cover. 

Third, a big part of this comes down to trust. How can we get to a place where senior management feel very comfortable saying in a board meeting, we have a bad culture or an ethics problem in this part of the company. And here's what we're doing to fix it. There are a lot of incentives for that executive to say everything is just fine. One director in fact said that when she sees a drop in the number of speak up calls, she worries that there's a problem. And equally when management does bring problems forward, does the board say, okay, we're going to work with you to put this right, or is bad news really unwelcomed in the boardroom. 

David Greenberg: Jonathan, let's step back a bit from that. You and colleagues at Tapestry are in dialogue almost every day with dozens and dozens of board members. What are some of the most pressing issues they want to talk about today? 

Jonathan Day: Well, ethics and culture are very high on that list. For example, how to tie compensation to culture, ethics, and compliance. You can do this for safety, deaths on the job leading to bonus cuts or cancellations, but it's not so easy to financially reward executives for creating positive trust filled cultures. You could do this, but it's a subjective judgment and making that judgment requires not only wisdom, but immersion in the culture. A lot of time, maybe a lot of travel. Not so easy these days. Boards are also intensely worried about how they are overseeing cybersecurity, mostly because pretty much every company has become digital, maintaining privacy and security for the millions of customers that a large enterprise can have. This can be a multi-billion dollar task. As airplane controls become entirely digital, as cars become more and more autonomous, as power grids are digitally controlled, lives could be at stake. 

And yet directors of some of the most digitally sophisticated companies in the world tell us, we may be doing a good job in our oversight of digital risk, but we may not. We have no easy way even to tell how well we're doing. Cybersecurity is also a function of culture and trust. Are employees comfortable coming forward to talk about a weakness that they've come across? Do employees trust company policies on cyber and not seek work arounds? So cybersecurity, a big concern for directors. 

And finally, David, you mentioned ESG and this exploding call for companies to deliver financial profitability and great performance on the environmental, social, and governance agenda. Well, this has board members awake at night and working hard. Providing reliable data on financial performance isn't easy, but they know how to do that. They've been practicing it for decades. Providing reliable data on past environmental impact like carbon emissions, that's a lot harder and the standards for doing that are in flux all around the world. But providing trustworthy of how the company is going to transition to zero emissions over the next 20 to 30 years, that's really hard. And I'll just note that every one of these challenges that I mentioned, ethics, cybersecurity, and ESG requires a strong culture, requires trust. Culture is at the root of every one of these challenges. 

David Greenberg: So Jonathan, you've outlined some of the things that are on the minds of board members. What do you think are some of the hardest parts of the job of being a director these days? 

Jonathan Day: So one is this idea that the board can be, as they say, noses and fingers out. Well, if that was ever true, it's dead today. Boards have got to engage very intensely in some cases. And they've got to look for the areas where they're not engaging intensely, but should be. Sometimes you'll even see the word intrusive engagement or intrusive oversight. And yet if the board gets too intrusive, senior management is going to feel maybe correctly that the board doesn't trust them. And they'll start pushing every decision up to the board or they'll act out in some other way. And that's not good. Trust inside the board is also critical. Are board members having the tough conversations they need to have with one another. Second, trust is hard to maintain on the outside. Board members are under intense scrutiny these days. Rating agencies and proxy advisors maintain scorecards on every individual director recommending to institutional investors, whether to vote them in for another year or kick them out. 

And institutional investors are very open that they're willing to vote out directors who are not working in the ways that they think they should. Once upon a time, a director's job was almost entirely private, not really subject to intense scrutiny, no longer. A compensation committee members said the Wall Street Journal knows the conclusion of our meetings even before we get a copy of the minutes. Society expects that transparency and society has ways of getting it and society reacts to what it learns. Consumers vote with their pocket books, talent moves to companies that have purposes beyond profit. And I would say a board member who isn't ready for that intense public exposure is going to have a rough time. 

David Greenberg: Yeah. So that leads to the question from your point of view, is the modern board up to the task of these multiple challenges or maybe better said more positively, what capabilities and experiences are boards most in need of today? 

Jonathan Day: Well, David, the women and men who serve on these boards have my intense admiration. They work very hard. I think in many cases they're not paid enough and they bare more and more risks almost by the week, but they are struggling to balance a massive set of responsibilities against the limits of a group of part-time directors who meet maybe six times a year. That's not much. What I'm about to say is a personal view, but I think we will see more examples of full-time or near full-time board service, non-executive service. The governance pundits in the US talk about the value of separating the chair's role from the CEOs. And they point to countries like the UK, where this is done. Well great, but some of those public company, non-executive chairs in the UK are paid well into seven figures and they work full time often with staff to support them.               

In the financial sector, especially there are audit chairs who are full-time, not even board chairs, but audit chairs are nearly full-time and paid accordingly. So time I think, is the first of the capabilities. I think another capability is a connection with younger employees and customers. In one of our networks, the average age of directors is well into the 70s. Now I've never met a collectively wiser group. They're truly amazing, but in many cases, their customers could be their great grandchildren.               

And so there's a point of connection there that's hard to forge. Boards are working very hard to increase their own diversity, but there's still a long way to go. And the digital universe that's driving many of these companies is evolving so quickly that it's tough for many directors to know even where to begin as they master it. I'm going to add one capability that is just over the horizon, but it's approaching fast. Most of us learned corporate finance based on concepts of the capital markets that took form starting roughly in 1960 and concepts based on assumptions, for example, that all equity shareholders have identical preferences, but most of those assumptions no longer hold. We're driving around a city based on a map that doesn't reflect most of the huge changes made in the last 50 years. And sometimes we're wondering why we're getting lost. And so I think boards need to catch up on these changes as well. 

David Greenberg: I think it would be interesting, Jonathan, for you to talk a little bit about why you say all equity shareholders don't have identical preferences anymore. In other words, I think what you're saying is the theory was all equity shareholders care about the same thing, which is the growth and the value of their shares. 

Jonathan Day: Well, I could drone on about this for much time than we have, but let me give just two examples. When is the time horizon? You have shareholders, if you want to call them shareholders that are really algorithms that are trading in and out of companies, not in hours or minutes, but in fractions of seconds. So they have very, very short term time horizons and traders that are seeking a short-term volatility in the companies.               

And then on the other hand, you have the big index funds and their managers sometimes describe themselves as almost shareholders in perpetuity. So the time horizons for shareholding are all over the map. The second is the simple assumption that what everybody wants is measurable economic value profits, but over and above the risk adjusted cost of capital. It just not the case any longer. You have very sophisticated investment managers that are saying we are prepared to trade some profitability for higher performance on climate, or social goals, or better governance. We talked about ESG. So the simple assumption that all investors have the same preferences are no longer a fact. Those are just two examples, but there are others that we could provide. 

David Greenberg: So one of the consequences of what you're saying really reflects the mushrooming expectations on companies today. They seem to be growing by the day. How do you make sense of that? And what are you hearing about that from directors?

Jonathan Day :   Well, yeah, the expectations are definitely there and there's even this idea out there that governments have become incapable of taking action and making changes and that companies should do it all. And you get this idea both from the left and from the right that companies should solve all the problems of healthcare, and climate change, and inequality. And I would say that no company, no matter how clever, or large, or powerful can set social policy for the world. Jeff Bezos and Elon Musk may have spaceships, but I really don't think we want them to be controlling nuclear missiles or tanks.               

So I think companies need to find ways to work more effectively with governments and with regulators so that each can play its part. The biggest companies really are playing multi-national roles and they have to think about issues like diplomacy and statecraft, and yet they can't step in and displace the governments that ultimately have responsibility for that. So all of this I think is going to require a lot more work on the part of boards. And a lot of that comes right back to culture, and ethics, and trust. 

Can't get away from that. It keeps coming back into the conversation.

David Greenberg: Jonathan, clearly this is a conversation we could be having all day, but we're out of time for now. Jonathan Day of Tapestry Networks, thank you for joining me on this episode. My name is David Greenberg, and I want to thank you all for listening to the Principled Podcast by LRN. 

Outro:   We hope you enjoyed this episode. The Principled Podcast is brought to you by LRN. At LRN, our mission is to inspire principal performance in global organizations, by helping them foster winning ethical cultures rooted in sustainable values. Please visit us at to learn more. And if you enjoyed this episode, subscribe to our podcasts on Apple Podcasts, Stitcher, Google Podcasts, or wherever you listen. And don't forget to leave us a review.


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Jonathan Day

Jonathan Day is an advisor and coach to chairs, CEOs, and heads of major government agencies. He has worked extensively with groups of senior leaders tackling difficult and potentially divisive questions, developing a global reputation for expertise in organization and governance, strategic problem solving, and complex team interventions. He has deep academic experience, including collaborations with top research professors, and is an expert at translating leading-edge theory into practical action programs that build institutions. “I have been exposed to a lot of different academic disciplines: psychology (clinical and cognitive), sociology/anthropology, theology and philosophy, economics and finance, engineering. The broad range has given me an eclectic set of mental tools.”

Before Tapestry, Jonathan was a practice managing partner, EMEA, at Heidrick & Struggles, where he worked in leadership consulting and executive search in the CEO/Board and higher education practices. Prior to joining Heidrick & Struggles, he spent nearly two decades in leading management consulting firms, first as principal at McKinsey & Company from 1990 to 2004 and then as managing director at Monitor Group from 2004 to 2008. “I think the consulting process is much more like a therapeutic process than it is a science or engineering. It means someone is helping the clients, individuals, or groups confront the outside world.” 

Jonathan has a MA in divinity from the University of Chicago, a BA and MA in psychology from Johns Hopkins University, and did PhD studies in cognitive psychology from Stanford University.

Jonathan is married with three children. He speaks, reads, and writes French and enjoys chamber music, sailing, cookery, writing, and travel.

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David Greenberg serves as Chair of the Governance and Risk Assessment Committee and a member of the Audit Committee of International Seaways (NYSE: INSW), one of the largest global crude oil and petroleum tanker companies. Mr. Greenberg’s previous board experience (2006 to 2016) was as the independent director – and member of both the Audit and Compensation Committees --of APCO Worldwide, a private communications and government affairs consultancy and as a director (2013 to 2016) of Clean Tech Group, which creates opportunities for industrial companies to invest in innovative, clean technology. He also served for 5 years as Chairman of the Board of Trustees of The Keystone Center, a Colorado non-profit that brings together oil, chemical and pharmaceutical companies with leading NGOs to find solutions to complex public policy challenges at the federal and state levels.

Greenberg is currently Managing Director of Cortina Partners LLC, a private equity firm that owns companies in the air medical, addiction treatment, bedding, textile and outdoor recreation industries and is CEO of Acqua Recovery, a residential drug and alcohol addiction center. He also advises boards and executive teams on strategy, compliance, leadership and culture as a Special Advisor for LRN Corporation, and from 2008 through the end of 2016 was a member of LRN’s Executive Committee. For 20 years prior to 2008, Mr. Greenberg served in various senior positions overseeing government affairs, corporate affairs, communications and strategy at Altria Group, Inc. – then the parent company of Philip Morris USA, Philip Morris International, Kraft Foods and Miller Brewing – culminating in his role as Senior Vice President, Chief Compliance Officer and a member of the Executive Committee.  As one of five senior vice presidents of the corporation, he served on the Management Committee, which oversaw all strategy and company operations. He was also a principal architect of the company’s very successful efforts to end the ‘tobacco wars’ which threatened the company’s very existence. Earlier in his career, Mr. Greenberg was a partner in the Washington D.C. law firm of Arnold & Porter and also served as Legislative Director and General Counsel of the Consumer Federation of America. He attended Williams College and has JD/MBA degrees from the University of Chicago. 

Greenberg has testified before the U.S. Congress, the European Union, the Israeli Knesset and other governmental bodies over two dozen times and has appeared on ABC Nightline, the CBS Morning News, BBC Morning, and the PBS News Hour, and has spoken at leading events for CEOs and boards.

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