Fridays for Future in boardrooms

Joe Kaeser, CEO of Siemens AG, just offered Luisa Neubauer, a 23 three-year old climate activist, a position on the board of the planned spin-off firm Siemens Energy AG (she rejected the offer). Luisa Neubauer is a geography student and the German face of the Fridays for Future movement. She is a member of the Green Party in Germany and has several years of experience in working in sustainability-related non-profit organizations. Recently, she fiercely attacked Joe Kaeser for a controversial coal-mining project in Australia. Offering the board position was part of Joe Kaeser’s response to this attack. With the appointment, he claimed that he wanted to offer the young generation a chance to participate and help resolve the generation conflict.

As a corporate governance researcher, I see several arguments supporting board appointments of young-generation climate activists.

(1) It would send a signal to firm stakeholders such as employees, society, and investors: involving a climate representative on the highest level of corporate decision making signals the interest in and the priorities for the topic.

(2) It would provide more knowledge on climate change and generation topics to boards. Board members with such complementing experience enlarge the overall knowledge pool that the board can make use of to make decisions.

(3) It increases the overall diversity in the boardroom. This diversity can encourage more controversial discussions and lead to more fundamental decisions.

On the other hand, I also see several risks.

(1) Since board size is limited, a decision for a climate activist on board usually means a decision against another candidate. Hence, firms might face the risk to miss out on other important knowledge needed in the boardroom.

(2) The missing corporate experience, the young age (and unfortunately also female gender as current research shows) may result in other board members perceiving the new board member to be of lower status. This can result in the board not paying enough respect to the climate activist and not taking him/her seriously. Hence, despite being represented in the boardroom, climate perspectives may not effectively impact decision making.

(3) Controversial discussions due to board diversity are not always beneficial for the board. Especially if they are not constructive and solution-oriented, they bear the particular risk that decision-making is delayed or even stopped. Hence, the increased diversity could also paralyze boards’ effectiveness.

In consequence, firms like Siemens, which think about appointing young generation climate activists to their boards, should consider the following aspects:

(1) All areas of expertise that are required to fulfil all board tasks should be covered in the boardroom. The climate activist should not replace important financial, strategic, and legal experts.

(2) The candidate should get the chance to prove his/her effectiveness. Boards should let her/him take part in decision making by including her/him in relevant board committees.

(3) The candidate should be knowledgeable about general board work. Although a lack of long-term business expertise can be an advantage and can help the climate activist make unbiased decisions in the interest of the environment, the general understanding of board work and dynamics is crucial. Such knowledge empowers the candidate to have an impact on the board by focusing on firm-specific solutions instead of merely raising overarching problems. Such knowledge also increases the candidates’ status perceived by board members and hence, her/his ability to have a true impact on decision making.

Our one-week Board Dynamics program at the University of Groningen Business School is an excellent opportunity to build such knowledge. For more information, see Boardroom Dynamics

Jana Oehmichen