Are Boardrooms Ready for the New Geopolitical Reality?

Kurt Nickish hosts a discussion on the intersection of geopolitics and corporate governance with experts Ruth Aguilera Brodsky, Kevin McGovern, and Roy Shapira. They explore how geopolitical risks, such as trade wars and supply chain disruptions, are reshaping boardroom strategies. The panel emphasizes the importance of boards being proactive in risk management, maintaining consistent messaging, and aligning corporate actions with core values. They also discuss the challenges of balancing short-term and long-term risks, the role of AI in governance, and the impact of geopolitical shifts on corporate decisions, highlighting the need for resilience and adaptability in governance.

• Geopolitics is reshaping global business operations by influencing trade, tariffs, and global value chains.
• Companies must adapt to geopolitical changes, including rebalancing alliances and navigating trade wars and supply chain disruptions.
• The mobility of human talent and access to resources are critical factors impacted by geopolitical shifts.

"Geopolitics is how geography affects politics, and we're thinking about how that affects businesses like global trade and tariffs, sanctions, quotas."

• This quote highlights the fundamental impact of geopolitics on business operations, emphasizing the interconnectedness of geography and politics in shaping trade and regulatory environments.

• Boards face multiple simultaneous challenges: talent availability, market access, and supply chain stability.
• The complexity of managing these issues concurrently is unprecedented and requires comprehensive oversight.
• Boards must be proactive in addressing these challenges to mitigate potential risks.

"All of these are happening right now. At once. And I don't think that's happened in a very long time for most companies."

• This quote underscores the unique and simultaneous nature of current global challenges, emphasizing the need for boards to address multiple issues at once.

• Boards are responsible for risk oversight and can be held liable for failing to anticipate and mitigate risks.
• The Boeing 737 Max crisis exemplifies the consequences of inadequate oversight and risk management.
• Boards must ensure systems are in place to identify and escalate risks and respond appropriately.

"The board of directors is the organ in charge of risk oversight in a company."

• This quote emphasizes the critical role of boards in overseeing and managing risks, highlighting their accountability in ensuring company resilience.

• Effective crisis management requires predefined roles and responsibilities within the board and management.
• Practicing crisis scenarios, such as cyberattacks or geopolitical disruptions, is essential for preparedness.
• Consistent messaging and stakeholder identification are crucial during crises to maintain company integrity and trust.

"You need to have a consistent message. You need to be very much aligned about what the company is about."

• This quote highlights the importance of clear communication and alignment with company values during crises, ensuring stakeholder confidence and clarity.

• Board dynamics and culture are tested during crises, impacting decision-making and company response.
• The pandemic illustrated the geopolitical implications of global events, stressing the importance of board-management relationships.
• Boards are tasked with balancing numerous responsibilities, including geopolitical tensions, cybersecurity, climate issues, and traditional governance duties.

"The biggest problem is board bandwidth, because we ask boards so much."

• This quote highlights the extensive demands placed on boards, emphasizing the challenge of managing diverse and complex issues within limited time and resources.

• Boards are not responsible for managing geopolitical risks directly but must ensure management is prepared.
• Their role is to question and verify management's readiness for geopolitical events, rather than directly intervening.
• The principle of "noses in, fingers out" reflects the balance between oversight and management autonomy.

"Noses in, fingers out. That's often the board credo."

• This quote captures the essence of the board's role in oversight, emphasizing the importance of inquiry and verification without direct management involvement.

• Boards must continually ask difficult questions to ensure the company is prepared for any eventuality.
• The board's role includes acting as a fiduciary and ensuring the company is aligned with its core mission and values.
• Boards face dilemmas in navigating geopolitical tensions and political stances, impacting corporate governance.

"But you've got to do that. That is the board's job as a fiduciary of the organization."

• Emphasizes the board's duty to maintain oversight and preparedness for potential challenges.

• Companies face pressure to make geopolitical decisions, such as withdrawing from certain markets during conflicts.
• Corporations need a clear and consistent message regarding their geopolitical actions.
• Certain sectors like semiconductors, defense, and AI are especially sensitive to geopolitical influences.

"But you definitely need to do as a corporation is and from the board is to have a clear message again on what are you doing and why you are doing it."

• Highlights the necessity for companies to articulate their geopolitical decisions clearly.

• Political tensions are increasingly a part of corporate governance, influencing firms beyond traditional lobbying.
• Companies and CEOs are taking stances on issues unrelated to their core business, leading to potential legal, reputational, and financial risks.
• Some boards conclude that neutrality or sticking to core business values may be the best approach.

"Some of them are reaching the conclusion that maybe the best solution is neutrality or to be more precise. Just stick to what you are as a company."

• Suggests that maintaining focus on core business values can help navigate complex political landscapes.

• There is skepticism about the effectiveness of having subject matter experts on boards for specific issues.
• Boards should focus on training to achieve proficiency rather than relying on narrow expertise.
• The goal is to enable boards to ask pertinent questions and provide oversight without micromanaging.

"It's better to do through training, through education, and to bring in experts on specific topics."

• Advocates for broad education and training for board members to enhance their oversight capabilities.

• Companies operating in multiple regions must manage differing regulatory expectations, such as ESG regulations in Europe.
• Boards need to ensure compliance across entire supply chains, acting almost as global regulators.
• The challenge is to integrate these regulatory demands into the broader corporate strategy.

"They still need to comply with these regulations, meaning they need to monitor and prevent and remediate a host of numerous ESG issues."

• Illustrates the complexity of managing compliance across various regulatory frameworks.

• Companies must define their identity, vision, and strategy to effectively manage external pressures.
• Some companies use frameworks to decide when to speak out on issues, balancing the need for public statements with strategic alignment.
• Boards must assess risks and opportunities, determining relevance to the company's strategic goals.

"What companies have to do and the board is responsible for is keeping the management team on track as to who are we, what is our vision, what is our strategy as an organization."

• Underlines the importance of a clear strategic framework for managing external pressures.

• Legal risks are minimal when boards speak out, but reputational risks are significant.
• Boards must rationalize their public statements in terms of long-term company value and stakeholder interests.
• Incongruence between statements and actions can damage a company's reputation.

"It's mostly the reputational aspect. You can draw attention. You could be seen as doing something just like Kevin's colleague did, not incongruence with what your company stands for."

• Emphasizes the potential reputational consequences of misaligned corporate statements.

• Boards must determine their risk tolerance and assess the relevance of issues to the company's strategy.
• Decisions to speak out or remain silent should be based on the alignment with strategic objectives.
• Effective risk assessment systems are crucial for navigating complex decision-making landscapes.

"The main responsibility of the board is to assess the risk and also decide what is the risk tolerance of the board."

• Highlights the board's role in evaluating risk and aligning actions with strategic goals.

• Companies need a consistent communication strategy to manage geopolitical risks, particularly due to the influence of social media and digital platforms.
• The role of a Chief Communications Officer is crucial for managing the message and ensuring board approval in communication strategies.
• Misinformation and disinformation are significant areas of geopolitical risk that need to be managed carefully.

"You need to be consistent in your message. It's not only like you need to have a strategy for communications."

• Consistency in messaging is essential for companies to manage their reputation effectively.

"That's why most companies now they have a chief communications officer and there is so many resources devoted to communication because it's social media, it is so many other things, digital platforms."

• The increasing complexity of communication channels necessitates dedicated resources and roles for managing corporate communication.

• Reputational risk is more challenging to manage compared to other risks as it is not insurable and is unpredictable.
• Emotional and fast-moving nature of reputational risks makes them hard to manage, especially in different cultural contexts.
• Companies should remain true to their core values and facts to manage reputational risks effectively.

"The reputational fallout is not insurable. And when we speak about geopolitics, it's also not predictable. It's based on emotion and it's fast moving."

• Reputational risks are unique due to their unpredictability and emotional nature, making them difficult to manage.

"The best way for you to manage it is just to stay grounded to who you are as a company, how you present yourself as a company to the facts."

• Staying true to company values and facts is the recommended approach for managing reputational risks.

• A global finance institution in Wuhan exemplified adherence to corporate values by treating all employees equally during the pandemic.
• Companies faced dilemmas during the Russia-Ukraine war, weighing short-term asset write-offs against long-term reputational gains.
• Decisions on geopolitical issues, such as market exits, can have significant long-term impacts on public reputation and stock market performance.

"Their corporate values were around. We're all one company. We're a global organization. We have people all over the world, we have offices all over the world."

• Adhering to corporate values in crisis situations can reinforce a company's global identity and reputation.

"Studies show that on average the gains, long term gains to your public reputation and the stock market reactions outweigh the short term hit."

• Long-term reputational gains can surpass short-term financial losses in geopolitical decision-making.

• Companies may face geopolitical risks within the same country, as seen in the Catalonia independence referendum.
• Legal and economic environments, such as the "Delaware exit," influence corporate decisions on where to incorporate.
• Shifts in global value chains, like the US-China tensions, lead companies to diversify and consider other emerging markets.

"Many Companies left Catalonia and moved to Valencia and Madrid."

• Political shifts within a country can prompt companies to relocate to more stable regions.

"US-China current tension has also allowed for other countries that were more in the peripher to really blossom, like Indonesia, Vietnam."

• Geopolitical tensions can create opportunities for emerging markets to integrate into global value chains.

• China's significant role in global trade and imports makes it a major factor in corporate governance discussions.
• The US and EU face challenges in balancing trade relations with China while addressing regulatory and governance standards.
• China's strategic adaptations in trade wars, such as embracing green and human rights standards, aim to strengthen its global trade position.

"China imports so much here, there is so much trade, so we source so much from China."

• China's trade significance makes it a crucial consideration in corporate governance and strategic planning.

"China is doing, and if China is much easier because a lot of the companies have some state influence."

• China's state influence on companies allows it to adapt quickly to global trade dynamics and governance standards.

• Corporate governance has evolved, with sustainability becoming a routine aspect rather than a standalone issue.
• There are misconceptions about the extent and impact of corporate governance practices and their integration into daily operations.

"Five years ago it was sustainability. Now sustainability is incorporated in the daily."

• Sustainability has become a standard component of corporate governance, reflecting its integration into everyday business practices.

• The governance of AI in corporations is evolving, with a structure emerging that includes board-level or executive committees providing overarching governance policies.
• A working group within the organization, composed of executives from both tech and business sides, oversees the day-to-day governance of AI activities.
• There is ongoing debate about the extent to which AI should be used in HR processes, such as performance evaluations, to maintain the human element.

"The governance around AI is still evolving, but I would say that what's starting to settle in is a governance structure that looks something like this..."

• The quote explains the emerging governance structure for AI, highlighting the layered approach from board-level committees to working groups.

"Some companies have adopted that, but there's a lot who haven't yet because they're still waiting to see does this actually work."

• This quote emphasizes the cautious approach companies are taking towards integrating AI into critical processes, pending further validation of its efficacy.

• Some companies are experimenting with AI directors, like "Aidan," who offer opinions on board decisions without having voting power.
• The concept of AI directors raises questions about fiduciary duties, legal responsibilities, and the potential for biases.

"One of those companies... decided that this Aiden would be a combination of three brains: Mark Zuckerman, Warren Buffett, and an institutional investor like from BlackRock."

• This quote illustrates the innovative approach of using AI to simulate the expertise of renowned figures in decision-making processes.

"At the moment Aidan is not voting yet, and we should discuss what are the fiduciary duties, the legal responsibilities..."

• Highlights the legal and ethical considerations that come with integrating AI into decision-making roles within corporations.

• The structure of executive compensation is more crucial than the level of pay, as it influences decision-making incentives.
• Political climates can affect compensation structures, with European companies typically offering more moderate packages compared to the U.S.

"The level of pay is more salient, is more sexy to talk about in the news media. But what matters is what they get their money for."

• Emphasizes the importance of how compensation structures drive executive behavior and decision-making.

"In Europe, usually these compensation packages are a lot more moderate... whereas here in the United States it can be a lot more exuberant."

• Points out the differences in compensation practices between Europe and the U.S., influenced by political and cultural factors.

• Business school students should be equipped to manage geopolitical risks, as these are becoming critical components of corporate governance.
• Staying informed about global news and understanding corporate governance structures are essential for future business leaders.

"In a world like today, 2025, where geopolitical tensions are becoming a critical corporate governance component."

• Underlines the increasing importance of geopolitical awareness in corporate governance.

"Constantly keep up with the news outside of the United States and in the United States... you need to be completely prepared."

• Stresses the necessity for business leaders to remain informed about global events to make well-rounded decisions.

• The focus of corporate governance will shift towards resilience and complexity, with an emphasis on diversifying decision-making and pressure-testing supply chains.
• The digital world will further intertwine various aspects of business, increasing the complexity of corporate governance.

"Boards will be more about resilience, governance. Making sure maybe you diversify decision-making center, maybe you pressure test your supply chain."

• Highlights the anticipated focus on resilience within corporate governance to withstand geopolitical and market challenges.

"Everything is going to be more intertwined. All the different pillars are going to affect each other, especially in the digital world."

• Predicts an increase in complexity as digital interconnections grow, affecting all aspects of corporate governance.