Human capital management becomes a major subject of governance
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April 22, 2021
Sustainable LeadershipLeadershipHuman ResourcesBoard and CEO AdvisoryExecutive Search
DE&I continues to be a leading issue for American businesses with those slow to adapt facing increased pressure from investors and customers.
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L'AGEFI Daily

The L'AGEFI Daily article. "Human capital management becomes a major subject of governance," quoted Russell Reynolds Associates Consultant Phil Jaeger​ on how corporate governance has evolved this past year and features our paper, "2021 Global and Regional Trends in Corporate Governance." A translated excerpt of the article can be found below. 

Executives are obsessed with career development for women and team diversity, notes Russell Reynolds. 

Even more than last year, issues of governance around the world will be primarily linked to climate change, notes the 2021 report by head-hunting firm Russell Reynolds. “Governance is becoming more and more important,” says Paul Jaeger, partner at Russell Reynolds. The Covid crisis has put new pressure on companies to encourage them to transform, giving even more weight to social and environmental issues. Essential criteria for attracting young talent.” 

While the management of climate change is now seen as a long-term financial risk, commitments to zero carbon by 2050 are multiplying, putting pressure on both companies and States. Headhunters will pay particular attention to the increasing importance of “say on sustainability” during general meetings. Like Unilever and Nestlé in Europe, or even Vinci, Atos and Total in France. 

Diversity, equity and inclusion continue to prevail, often under pressure from investors, and are even becoming the number one trend in the United States, with increased demand for racial and ethnic diversity. In terms of appointments resulting from diversity, "France is well placed in Europe", observes Paul Jaeger. 

With the proliferation, but also the convergence, of environmental reporting standards, boards must be prepared to be held more accountable on the communication of sustainability indicators by their stakeholders, anticipates Russell Reynolds. 

Executive profiles more difficult to find 

The management of human capital has been monitored even more closely by investors since the pandemic. In particular on the gender pay gap, turnover, etc. Again, the directors could be held responsible for the lack of information. In Europe, the issue of the mix of executive committees remains a major theme. "We are very cautious about establishing a quota," says Paul Jaeger. Today, all leaders are obsessed with the career development of women and the diversity of teams; but it takes time to build up the breeding ground and build a supportive HR policy up to general management positions ". 

The manager's skills are also evolving. “For sustainable leadership, we are now looking for leaders who have the ability to understand complex multi-level decision systems, work with stakeholders, understand innovation topics and have a long-term vision, continues Paul Jaeger. These profiles are more difficult to find, but are necessary for the implementation of sustainable development strategies ”. 

Articulate the roles of president and CEO 

At the same time, the culture of the CEO in France tends to gradually diminish. “If the CEO can respond to specific corporate cultures or periods of transition, we are more in favor of the separation of powers, the CEO leads and the chairman moderates the board,” explains Paul Jaeger. The stake lies in the articulation of the roles of the president and the chief executive officer with the investors. Appointing a former CFO as chairman is an asset in terms of communication with shareholders, but can be experienced as competition by the CEO. ” 

Russell Reynolds also anticipates a return to activism after the forced 2020 hiatus, even for well-functioning businesses. "This capacity for dialogue - i.e. listening to expectations - with activists, must be verified during the assessment of the board," warns Paul Jaeger. Investors need to be reassured about the quality of governance. " 

As for the transition to hybrid mode, virtual and physical, boards of directors and general meetings, "it has now become commonplace, and is working well," concludes Paul Jaeger. 

To read the full article in French, click here​.