Opening our conversation, we ask McCarthy for his thoughts on the key challenges facing boards. \u201cIt\u2019s a fairly simple sort of response\u201d, he concedes, \u201cbut I\u2019ve been saying for probably two years now, that the list of things that boards are worried about is getting longer\u201d.<\/p>\n\n\n\n
This is particularly true for geopolitical concerns. \u201c[Boards are] worried about black swan events, they\u2019re worried about the global economy, they\u2019re worried about global trade and tariffs, about energy security\u201d, he explains. \u201cCompared to where we were 10 or 15 years ago, the list is worryingly unrecognizable. And fundamentally, board members are having to cope with issues they didn\u2019t grow up with or have formal training in\u201d.<\/p>\n\n\n\n
\u201cThere is a really interesting paradox here, though\u201d, McCarthy says. While the number of issues causing concern among boards continues to increase, individual companies – particularly in Ireland – have been doing better.<\/p>\n\n\n\n
We put to McCarthy why that might be. \u201cIt depends on what time frame you want to go to\u201d, he responds. \u201cI think the environment post-financial crisis had a large part to play in it.\u201d<\/p>\n\n\n\n
\u201cThere was a lot of determination to recover, which has fueled a lot of individual performance across corporates. There\u2019s also a lot of corporate memory where people got burnt.\u201d<\/p>\n\n\n\n
This, he suggests, has built a certain \u201cresilience\u201d in the corporate world, bolstered in recent years by low interest rates and significant government support, through crises such as COVID. \u201cThe amount of cash transferring from government to companies and individuals was phenomenal\u201d, McCarthy remarks.<\/p>\n\n\n\n
\u201cYou join all these things together\u201d, he says, \u201cand you can paint a picture\u201d of why companies have been broadly successful in Western Europe over the last decade, despite geopolitical uncertainty.<\/p>\n\n\n\n
McCarthy does, however, warn of a broader underlying risk. With record levels of government and corporate debt, the \u201creality\u201d, he concludes, is that a major debt event is looming. \u201cEven if you as a corporate, are pretty well-hedged, have good diversity of scale, good political and geographical diversity, there will be a triggering event that will happen pretty quickly.\u201d<\/p>\n\n\n\n
So, what can boards do?<\/p>\n\n\n\n
So, how can boards position themselves to adapt and thrive within a rapidly changing environment? McCarthy approaches it in two halves: \u201cThere are two key things to consider. On one hand, how management is ready, and on the other, how boards are ready.\u201d<\/p>\n\n\n\n
McCarthy again refers to the legacy of the 2008 crash. \u201cWe see a certain demographic within the management class who are prepared for anything now\u201d, having been through hugely impactful events like the financial crisis, COVID, Brexit, and the Russian invasion of Ukraine.<\/p>\n\n\n\n
\u201cFrom many companies’ perspectives, it’s having people who have the developed drive and resilience – they know that something’s going to happen, and they’ve got the muscle memory to say, \u2018okay, we can cope with this\u2019.\u201d<\/p>\n\n\n\n
But resilience must be underpinned by strong fundamentals, McCarthy explains – or the \u201cbasics\u201d. \u201cIn a lot of cases, it\u2019s pretty simple. It\u2019s good, timely information. It\u2019s a single source of truth. It\u2019s good data, good people, and a willingness to take action promptly. It\u2019s things like diversification and scale.\u201d<\/p>\n\n\n\n
\u201cI would say there\u2019s not really much rocket science in any of it,\u201d he remarks.<\/p>\n\n\n\n
These foundations, McCarthy adds, are \u201cmirrored” by boards who see and align with them and supplemented by members with a track record of handling crises. \u201cHaving board members who’ve handled worse stuff than most is a key determinant.<\/p>\n\n\n\n
Beyond resilience<\/p>\n\n\n\n
Resilience is, of course, just one key trait among many in a boardroom. We asked McCarthy why diversity of experience, skills and thought was so important for executive teams.<\/p>\n\n\n\n
\u201cI’m heavily influenced at a formative stage in my career, by how the global financial crisis hit Ireland. With the benefit of hindsight, as a country, we were in an echo chamber, for seven or eight years pre financial crisis, and we thought nothing bad could happen,\u201d McCarthy concedes.<\/p>\n\n\n\n
\u201cWe thought we were bulletproof.\u201d<\/p>\n\n\n\n
Breaking free of that insularity, he argues, requires an openness to diversity in the boardroom. A key question since then has been, \u201ccan we have more people on our teams – or boards – who bring different perspectives?\u201d<\/p>\n\n\n\n
In Ireland, though, this is complicated by a smaller business community, but McCarthy nonetheless sees progress. \u201cThe discussions we have had on diversity over the last five to ten years, have been good,\u201d he notes, though achieving diversity of background and experience remains challenging. Effectively mixing these \u201cinvisible\u201d aspects is where the evolution of diversity needs to go, he argues.<\/p>\n\n\n\n
Cutting corners?<\/p>\n\n\n\n
\u201cSometimes, there is a somewhat lazy shortcut,\u201d McCarthy says, \u201cwhich is youth\u201d.<\/p>\n\n\n\n
\u201cIf you analyse the FTSE 100 or Fortune 500 boards, you will seldom see young people. There\u2019s definitely a gap.\u201d<\/p>\n\n\n\n
While keen to note that youth isn\u2019t a catch-all solution, McCarthy argues younger members bring valuable perspectives. \u201cThere\u2019s simply a different way of thinking [among younger generations]. Some corporates in this part of the world have missed that entirely right now.\u201d<\/p>\n\n\n\n
McCarthy does acknowledge the \u201cnatural tension and inconsistency\u201d between emphasising the need for resilience and experience on the one hand, and encouraging the recruitment of younger, less experienced individuals on the other. \u201cBut,\u201d he asserts, \u201cif you want to be brave and build a modern, contemporary, high-performing board\u201d, that is a risk worth considering.<\/p>\n\n\n\n
In addition to youth as a consideration in broadening perspectives, McCarthy suggests that looking at genuinely international experience and expertise. \u201cThe reality is that boards in Ireland can be drawn from a relatively homogeneous pool of people with similar backgrounds and experience\u201d says McCarthy, who whilst acknowledging the practical challenges, says consideration could be given to looking to the UK or continental Europe to \u201cbroaden and deepen the boards perspectives\u201d.<\/p>\n\n\n\n
McCarthy also emphasises the importance of boards reflecting – at least in some form – their client base. He recalls a client whose median user was aged under 30, yet not a single member of their board was below 45. With the pace of technological change, risk and opportunity growing at what seems like an exponential rate, McCarthy believes that boards are in danger of being blindsided. This is a \u201cnatural mismatch\u201d, he states, advocating instead for \u201chaving people feed into the business who have a true understanding of consumers.\u201d<\/p>\n\n\n\n
In addition, McCarthy believes that the exponential pace of technology change and the impact of geopolitics should drive the search for board members from other sectors to a greater extent than is currently the case. \u201cIt seems somewhat simplistic, but boards need to have a very clear understanding of the drivers of change impacting their business. Disruption and risk can come from outside the current boards area of experience and expertise. If you fish in the same pool as everyone else, don\u2019t be surprised if you miss something\u201d.<\/p>\n\n\n\n
Workplace feedback<\/p>\n\n\n\n
The conversation then moved onto intra-board dynamics. Is there a place for a wide-ranging system of workplace feedback – both as a means of strengthening dynamics between individuals and enabling continuous collective improvement?<\/p>\n\n\n\n
\u201cHonestly, yes and no\u201d, McCarthy says plainly. \u201cYes – as to operate in any type of high-performance culture without feedback loops makes no sense\u201d.<\/p>\n\n\n\n
\u201cBut also no, because even in the highest performing boards that I\u2019ve seen, where there is genuine candor and honesty, I think boards can be a bit polite about themselves. An effective feedback system can be challenging to get right for the collective.\u201d<\/p>\n\n\n\n
\u201cI\u2019m saying yes in principle, but in practice I see how that might be tricky to pull off.\u201d<\/p>\n\n\n\n
\u201cBut, equally, you cannot have a high-performing anything without feedback. You just can\u2019t. And that should go beyond the functional board evaluation processes that most boards do annually.\u201d<\/p>\n\n\n\n
Artificial Intelligence<\/p>\n\n\n\n
As AI expands its footprint in virtually every industry, we ask McCarthy about the opportunities – or drawbacks – that AI could offer to boards.<\/p>\n\n\n\n
\u201cI have two thoughts on that\u201d, he begins. \u201cThe first goes back to that diversity of thought point of view. There’s a gap there. Secondly, I\u2019m not sure boards are being fully briefed \u2013 regularly enough \u2013 about what AI might mean for the individual companies.\u201d<\/p>\n\n\n\n
McCarthy suggests that boards have a \u201cfairly easy opportunity\u201d to bring that capability onto the board – or \u201cas a minimum, into the room on a regular basis\u201d, as a means of educating and informing board members on AI progression and its business implications.<\/p>\n\n\n\n
\u201cThere’s a more interesting question\u201d, he continues, \u201c[around] what AI can do for board performance\u201d – particularly in grappling with the issue of information overload versus the information gap.<\/p>\n\n\n\n
\u201cIs there a role for AI in terms of extracting key information, from company information, to give boards?\u201d McCarthy asks, or \u201cfor filtering through real time information from existing company management systems?\u201d. \u201cPerhaps\u201d, he continues, there might be a role for AI \u201cfrom a regulatory perspective, for example using it with annual reports, to confirm whether all the regulatory aspects are complete?\u201d.<\/p>\n\n\n\n
Interestingly, though, he acknowledges that he is not aware of many boards \u201chaving that type of discussion.\u201d<\/p>\n\n\n\n
Lessons<\/p>\n\n\n\n
\u201cBoards by their nature should and do try to drive company and management teams\u2019 performance better,\u201d McCarthy observes. \u201cI\u2019m not sure though\u201d, he continues, \u201cwhether boards challenge themselves enough in terms of their own performance.\u201d<\/p>\n\n\n\n
\u201cI think that\u2019s different from feedback\u201d, McCarthy says, and more about deeper introspection. Asking yourself, for example, \u201cwhat does a high performing, modern board look like? What are its characteristics? What are the types of skills on it?\u201d<\/p>\n\n\n\n
In some of these areas, McCarthy laments, internal conversations at board level are lacking. Asking themselves how to \u201cdrive better-quality discussions and in turn better-quality decisions\u201d is essential for any board truly looking to succeed.<\/p>\n\n\n\n
Our conversation with Ryan McCarthy highlights the critical need for boards to adapt to rapidly changing landscapes, by embracing cognitive diversity, leveraging technology, and challenging entrenched practices. With mounting external pressures and evolving expectations, McCarthy calls for a forward-looking approach that ensures boards are not only equipped to guide their companies but are also continually refining their own effectiveness.<\/p>\n","protected":false},"excerpt":{"rendered":"
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