IOD Special Talk - Innovation at the Helm: Empowering Boards for Success

Good Morning Excellencies, Ladies, and Gentlemen.

Welcome to Abu Dhabi and to this 2024 IOD Global Convention.

Also, a warm welcome to the UAE, for all of you who are visiting from overseas.

To introduce myself, I have been living here in the UAE for all of 47 years, but I do confess that, like many other residents, I keep learning new and novel things about this country almost every day. The only thing that does not change is how proud we residents are to witness all the progress made by the UAE over the years.

I am not sure how familiar many of you are with this fine capital, so let me be open with some highlights of our host city. Abu Dhabi has just been ranked first on the world's safest cities list for the 8th consecutive year. Prime Minister Narendra Modi was here last month to inaugurate the BAP Hindu Mandir, which is the largest temple in the UAE and another symbol of its interfaith harmony.

Abu Dhabi is already home to the Abrahamic Family House, with a mosque, a church, and a synagogue sharing its roof as a tribute to coexistence. This city also hosts some of the world's greatest sporting events: the NBA games, the Abu Dhabi Golf Championship, and the Abu Dhabi Grand Prix, to name a few. These and other accomplishments illustrate how Abu Dhabi has transformed its hard-earned oil money into soft power. Last year, the UAE was ranked among the world's top 10 soft power superpowers. One would say it is an art to wield so much soft power and command such great influence on the world stage, but I would say it is a fine art to have achieved all this in a mere 50 years.

My brief today is to talk about future-proofing business against uncertainties and the Board's role in steering this strategy. Let me put this in perspective with an Abu Dhabi story from roughly 50 years ago at a time when these uncertainties were infinitely larger in number and almost incomparably bigger. In the 1960s, when oil was first found in commercial quantities, Abu Dhabi was a small and dusty desert settlement with a population of 46,000, and there was constant warring between various tribes. The brief economic boom of the 1920s and 1930s collapsed when the Japanese invented cultured pearls, and this inflicted dire poverty in the region.

The local tribe chief who took over as ruler of Abu Dhabi in August 1966 had many talents: an intimate knowledge of his people, a clear vision for modernisation, and the ability to identify the right people who would turn his far-ranging plans into reality.

The late Sheikh Zayed bin Sultan Al Nahyan accomplished many feats, including unifying the seven emirates under British protection into a proud Arab nation, incorporating a new country, setting up its first government, and establishing an equal place for women in Emirati society. Incredible greatness of character defines this founder and first president of the UAE.

Creating a country out of thin air in the early 1970s was no easy task and called for extraordinary efforts. Yet, it was effortless for Shaikh Zayed, earning him a place in history as one of the great founding fathers of the world. Among his many undertakings, there is one I would like to emphasise today. Sheikh Zayed's most radical idea was to establish an institution to handle the rapidly increasing surpluses from oil revenues, because he wanted it to benefit future generations. We know it today as the Abu Dhabi Investment Authority, or ADIA, among the world's largest and most respected sovereign wealth funds, with more than 900 billion dollars in assets.

Imagine one man in the desert, one unschooled man in the 1970s, foreseeing how necessary it was to have a structure in place to manage wealth for decades ahead. He had the foresight to see that oil surpluses would accumulate beyond what he could imagine and that it would need careful husbanding. He had a plan to keep it separate from the daily running of the government, making a distinction between Abu Dhabi's operating budget and its reserves. He also had a resolute purpose. He was often quoted as saying, “Future generations will be living in a world that is very different from what we are accustomed to. It is essential that we prepare ourselves and our children for that new world.

Future-proofing a business is daunting, but it is imminent. If you are having trouble getting started, shorten the distance between where you are, and where you focus.

This is a story of future readiness from the very depths of uncertainty. And whichever way we look at it, it is an astonishing success story. Five decades later, how and how much of it can we absorb and apply in the context of a modern board? In the simplest of terms, futurereadiness is about being flexible and adaptable enough for change, whenever it comes and whatever form it takes. On a serious note, being prepared has become a prerequisite for survival. The competitive landscape in every sector is changing rapidly, and in many cases quite dramatically. We are all looking for ways to remain relevant while making compulsory changes to reflect shifts in the economy and society.

Translating this to corporate governance makes the list much longer and a little more intimidating. A future-ready board has to be socially conscious, risk-responsible, digitally literate, embody the concepts of DEI, and uphold the principles of ESG. It must demonstrate a proper balance between immediate shareholder expectations and long-term stakeholder values.

Concurrently, it must continue to instill transparency, responsibility, and more ethical practices and processes within the entire organisation and from outside vendors. Sometimes, it is from my five grandchildren that I learn the simplicity of things. Modern schooling places futurereadiness at its very center. The Japanese and Scandinavian curricula, and most international schools, teach their students future-ready skills in addition to traditional subjects. This list includes critical thinking, problem-solving, digital and cultural literacy, emotional intelligence, communication, and creativity. The important point is that none of these skills are specific to any one industry, but they are essential for success in every job of tomorrow. Future-ready skills simply aim to equip students with the tools they will need to succeed and excel in any chosen career tools that will keep them agile and help them adapt to changing circumstances.

With education as an example, I would like to list four essentials that can strengthen a Board of Directors as they steer a company into the future:

(1.) Broaden the scope: The traditional role of the Board in providing oversight to leadership and management teams is truly limiting. Current-day demands needs a board to get actively involved with a variety of issues like strategy, sustainability, succession planning, risk and resilience, digital transformation, organisational culture, brand and reputation management, and this is just the tip of the iceberg.

(2.) Rethink the composition: Collectively, the Board must have a vast and diverse set of experiences that are relevant to the organisation's strategic direction. Yes, directors are expected to be generalists with helicopter viewpoints, but each member should also have specific areas of expertise which can broaden the Board's perspectives and help bridge societal and economic shifts.

(3.) Embrace inclusion and diversity: Diversity today is a lot more than gender or race. For example, cognitive diversity is the inclusion of people who think differently, have different styles of problem-solving, and have divergent perspectives. Another area that is overlooked is age diversity. Boards typically look for candidates who have significant experience, but younger board members may bring in expertise in new technologies and will have their pulse on best practices and consumer expectations. Just don't ask someone to join your Board to check the diversity box: investors, activists and general public are well aware of tokenism, nepotism and allyship and they will call out a business for such actions.

(4.) Focus on technology and security: Most companies have at least some elements of technology, and as this continues to increase, Board Members must meet a minimum threshold of understanding when it comes to threats like data breaches, phishing scams, cybersecurity or opportunities in AI, digitisation and new technologies. Ignoring them involves serious monetary and reputational risks.

Last month, Dubai hosted the World Government Summit, where our Prime Minister of India was the Guest of Honour. It was concluded at this summit that rapid progress in AI has become a pivotal point in preparing for the future, and they emphasised the necessity of establishing strategies for this transformative wave.

Now, this may seem like an unrelated fact for future-ready boards, but it is not.

Nvidia CEO Jensen Huang said that every country needs to have its own AI infrastructure to take advantage of economic potential while protecting its own culture. He also said that every company should take advantage of the democratised access to AI to take the initiative, build the infrastructure, and activate its potential as fast as possible.

In closing, I would like to return briefly to that futuristic institution founded by Sheikh Zayedand the long-term vision and values he instilled at its inception, which stand the test of time. As a conscious and responsible investor, ADIA continues to build a portfolio that is able to do two things at once: anticipate challenges and capture emerging opportunities. You might be interested to know that in India, ADIA has stakes in Greenko, the first Indian renewable energy company listed on NASDAQ. Last month, ADIA announced plans to set up a $5 billion fund in India's latest special economic zone, Gift City.

We are gathered here to debate best practices for taking companies into the future, not an entire country. Abu Dhabi serves as a sterling example, from desert settlement to 21st-century city with adequate fortification for a very distant future. Future-proofing a business is daunting, but it is imminent. If you are having trouble getting started, shorten the distance between where you are, and where you focus. Marathon runners don't dwell on the end of the race, they focus on getting around the next corner.

Then, the next corner.

Let's ask ourselves this one question: What is the smallest step we can take today to make some progress tomorrow?

Thank you, ladies and gentlemen.