 So, welcome to the second in our series of podcast interviews on the subject of board leadership and governance. I'm Richard Calland. I'm a fellow of the Cambridge Institute for Stability Leadership and a professor of law based at the University of Cape Town. Joining me on the second podcast interview is Philippe Joubert, a good friend, colleague of myself and the Institute, and a founder and CEO of Earth on Board. And I'll be discussing in this interview with Philippe why he founded this organization Earth on Board. Philippe is a fellow like me of the Institute for Sustainability Leadership. He has an extraordinary history of eminent positions in business, both on the executive side and more recently on the board side. He was president of Alstom Power, Deputy Chief Executive Officer of the Alstom Group and now serves as a special envoy for the energy and climate for the WBCSD, the World Business Council for Sustainable Development. So with that extraordinary background of expertise and perspectives and as Philippe will tell us in a few minutes, the boards that he serves on have an extraordinary geographical footprint all around the world. And he and I have been collaborating in a series of direct board engagements, including a special program for directors of companies that are publicly listed in Singapore. We had an online offering for those non-executive directors that serve on those boards in Singapore. Philippe Joubert, thank you very much for joining me for the second in the series of podcasts, interviews and discussions about board leadership and governance. Well, I don't know if I have an understanding yet of the role of the board, but we can share a few. I think it started a few years ago when I was proposed to be finance director and then CEO of a listed company in Brazil that was a joint venture between a French and a German company. And I think that I started to understand what the role of a board was, because when you are a young CEO and thrown into a difficult market, you start to appreciate that you have experienced older guys to calm you down and to give you some right advice and show you some direction and tell you that you can solve it. So that was my first experience. The second one was when I came back to France as to be the worldwide CEO of Alstom Power. And then I saw that governance is quite important, the relationship with stock exchange. How damageable can be some wrong decision from a board that at the time was really triggered by a shareholder primacy interest and make some probably some difficult decision. And now, after all this, I try to have one board membership in each continent to try to understand better the problematic of the board. And I think probably Paris Agreement and the role of business triggered a few deeper reflections that we can share later if you want. That's wonderful, Philippe. What you just said there has triggered the follow up questions. Let me start with this one. Your first description from your Brazil days of the board made it sound like the wise uncle looking over the shoulder of the CEO of his executive team and providing guidance where needed. That probably is an old model, is it not, that the board now has to be much more assertive and anticipatory in its role. Would you agree? I think what I will say, if you focus a little more on the sustainability issue, let's say business as usual, I will say that 2015 will be a year that have probably changed the full content of duties of the board. In 2015, really, business, I think, took a different position in the economic panorama and business is seen as a solution more than only a problem. And to do that, it has to change its business model and to do that, you need a board. And this is probably what I will say to refer to your question. In 2015, the old world has changed to a new world with a new responsibility for the governance and for the board. So on that point, Philippe, I've had the great privilege of working with you on faculty and running various programs for the Institute. And one of your many powerful presentations is the one that says business as usual is dead. And you make the case so powerfully in that presentation. Just explain why you think that the role of the board is so critical when it comes to company escaping from business as usual. Just a bit of context, I say business as usual is dead, not for the fun and for the sound of the sentence, but because I really think we have reached the planet boundaries. And the way we have been doing business, I have been doing business for years was to take nature for granted and unlimited. This kind of business as usual is dead. That's what I am saying. And certainly when you look at the duties, the main duties of the board, which is to take care of the interest of the company and the long term interest of the company to exercise care and diligence, to supervise and be responsible for external communication and disclosure of the number of the company. The main duties have changed dramatically with 2015. That's why I say that business as usual is dead. First, because what was free and unlimited is no longer free and unlimited. Second, because the number of risks that we have triggered now, physical risk, legal risk, reputation risk, transition risk are accumulating. And all this is pure board duty. And that's why the board is absolutely related to this. The third one that we mentioned, the disclosure is also completely changed for plenty of reasons, by the way, that are interesting and that materialize recently. First, because you have to consider what I said, the new risk, but also because we will be victim of our own success. If we say that finance is moving in the right direction, so green finance is moving in the right direction. The number of people that are making decision of investment on criteria of green, let's say, are increasing. So the legislator or the regulator is more and more taking care of what you say. And the board is responsible of what we say. And you have seen recently, a big bank, Goldman Sachs, is now caught into the net of the SEC because of what they declare is not exactly what is in the paper they have sent to investors. So this kind of new situation is now increasing and the board is the center of this change. And so in a sense, what you're describing is a shift in legal responsibility where in the old days it was very much focused on the executive and what the executive and management did or didn't do. And now it's kind of crept up the food chain, as it were, to the board and so that legal set of responsibilities on the board is much greater. Is that your argument? Yes, and you have proof of this now because again, go back to 2015, 2015, a lot of countries have taken the Paris agreement, put that in the ordinary. Then despite all what we think becomes a kind of locally binding agreement and not just an agreement for people look at it. And this law is changing the legal responsibility of the environment, of the context of business, as you like to say, when the context of business is changing, the legal responsibility is also changing. And now you have case of country being sued because the country are not respecting the proper agreement that they have put in their law. So you have case for Netherlands, but last month you had France that has to redo the budget because the budget is not in line with what they said. Then I will challenge a little what you say it was the management responsible. Not really what we have been seen sued before was the company more than the management. Now it's moving to who is leading the company and that's the board. And for the first time you have seen Shell board is challenged because some people rightly, I think, think that they have not given the right direction to the company to fulfill its own obligation. And interestingly enough, the people that are suing the board are the shareholders, some of the shareholders because they say you don't even are able to protect the value of the shareholders. It's very interesting. And of course, what in governance terms you described there is of course the situation where the shareholder decides who the directors are. And the shareholder is raising its expectations about what the directors should be doing on behalf of them and the company in terms of long term value. What you've described is very, very interesting. I think your geographical spread and your ability to see what's going on around the world is really interesting. I mean, where do you think regionally boards are getting it in the way that you described is now needed? It's difficult to do a geographical analysis. I will be more comfortable to do a type of company analysis. And for example, we discussed this once the big difference between a listed company belonging to private equity and the family owned company. Because in reality, we quickly reached the point that this is the long term view or the short term view, which makes a big difference into type of governance. And also, I will say the way we evaluate performance, the type of who cost, who value, we can come back to this because I think this is one of the essential things that is changing more than the country. Obviously, and I recognize your lawyer bias here, obviously you change depending on the legal environment that you have to follow. And this is fully geographical, I agree. And of course, the law may vary slightly from jurisdiction to jurisdiction. But what you're describing is a set of overriding legal principles that should govern a board in thinking about risk and responsibility. As you know, I like to talk about this in terms of direction, oversight and accountability. And you've talked about now the new kind of frontier of accountability that a board is being held to. We're on direction and oversight. When it comes to sustainability, how assertive do you think now a board needs to be in directing the organization? I think you touched a central point. I think if we come back to our first analogy of the board of the past and the board after 2015, which I think is still very important. This is when, by the way, I decided to create a board because this is when I thought that something was missing in the offering to awareness and education. We were very good at educating CEOs and high executive, top executive. And we've just forgotten that on top of all this, there is a few guys there that have the responsibility, ultimate responsibility to guide the company. And they must be educated. And what I thought that before 2015, I will say it was like if the board had the responsibility, but they were not aware really that they had the responsibility or they were fearing to exercise their responsibility. And they were behaving as if they were just, as you just mentioned, a kind of chamber of registration of the decision already taken by the CEO. So if I have to say something now, I will say, hey guys, read the small letter, you are legally responsible of this one, two, three main responsibility. You will be all responsible for this and you better give the right direction. And there is no other way to say, go back to the purpose of the company. Make sure that you challenge the purpose of the company. Are you sure that you are at the right level of purpose? Second, forget shoulder primacy. This is dead already. We don't want to see that dead because this is so easy for the people at the moment, holding the money and obviously directing the flow where they wish. But this is finished. If we say that we are going from crisis to crisis now, and this is unfortunately what we can discuss that for two hours, how many crises we are seeing already, then the best will survive. And the best are not the ones that have the strongest cash flow. They are the ones that are the more useful for society. We have to come back now. We have to reconsider the purpose why we exist. What are the stakeholders that we are impacting and serving? Are they understanding this? Are we exchanging this enough? Are we putting them in the center of our decision? And for me, this will be the number one responsibility of the board for sure. Thank you. When it comes to direction, the close relationship with purpose, I think is a really important point. Direction comes from the board being very clear about its understanding of the purpose of the organization and helping the executives to recognize what that purpose is. Because I guess even the most experienced executives will be very much head down focused on kind of short term performance unless someone is making them lift their eyesight and see a different perspective, a longer term perspective. I wanted to ask about earth on board and you kind of partly answered the question. I wanted to ask you why you set it up. You've explained that you felt that boards weren't, in a sense, getting the support and training they needed. Probably because board members traditionally have been kind of people of yours and mine, the kind of age and generation, you know, towards the end of their career, much experience and all of that. But I remember once really putting you on the spot in the faculty we were working together, where I asked you about the composition of boards and on gender and you answered it and circled back to a really interesting dimension around age. You ended with a really fascinating point that day that actually generational kind of balance or representation is really important for a board. And that moves very far away from that idea of having older experience, grey bearded and grey-haired people on the board. I have good news for you also that for the first time I am seeing a small signal as when we discuss about strategy, we look at weak signals, the small signal that you have to look at to make sure that you are seeing the big trends. I am seeing now some consideration about how can we make sure that the nature or communities are represented at the board level. You said something interesting just before. You say that the directors are chosen by the shareholders but they should not only represent the interests of the shareholders but the interests of the company to defend the whole stakeholder affected and impacted by the company. And we have a little the same thing now for nature. It started in New Zealand with the river getting the kind of legal existence. We are fundamentally against this. They said this will be more detrimental than positive. But I will say this is a good question about your question of diversity. If now I will have to answer your question six months ago or something like this, I will say, OK Richard, gender is important. Let's go. But generation for me is much more important because now we are really taking decision to build a world with the opportunity which will not be here hopefully to see. And this guy will be. So they have some skin in the game that we have to respect which doesn't mean that we have to give them the key of the truck. We also have to put them where they are more efficient. So perhaps to help us to understand the world which they want but not to make the technical decision or managerial decision that they have not yet the skills or the experience to have. But I will go a little further in Germany for me at least. This is the country where the employees are the most present at the board level and they have some difficulty. But with the time they have reached certain level of behavior not to defend the employees at any cost. They always look at the interest of the company and make sure that the voice of the employees are being listened to when the decision is to be made. So I will say the same now for nature and communities. I sit at the board of a company in Brazil which is one of the world leaders in pulp and paper and they have understood that the best way to defend their assets is to have a good dialogue and a fruitful dialogue with the communities that are defending the forest because this is their life and this is also the business of the company I am in. So when you can build this kind of relationship and I'm sure you have fabulous example in South Africa for this but when you can build this kind of relationship then you are really successful in the diversity of the opinion you listen. Philippe, fascinating. You're describing it seems to me during the course of this conversation a double paradigm shift for boards. On the one hand their legal responsibilities and duties are completely different and increased. On the other hand therefore the need to have different types of skills and people on the board is also very, very different and that's why I think your argument that boards need help is very important. In the old days the eminence gris characters would come on the board and they wouldn't need training because they were experienced old-time businessmen. We're talking about highly increased responsibilities in a complex world and probably a much more diverse board of the future and that does make the case I think for the kind of training and guidance that your organisation Earth on Board and the Institute for Sustainability at Cambridge are trying to provide. Do you think boards will be open to that? Do they have the self-awareness to recognise that they may be lacking? This is a good question. I will say when we started in 2015 the first pictures I made in front of the board were really difficult with boards saying what are you talking about? This is not our business, this is the CEO business. We don't come to this. But then when we start to look at then it comes with the legal duties we have seen nothing on this field at the moment but as you may know better than me justice is slow and what is under the radar screen at the moment in terms of number of cases of just asking the board why they have taken this decision is increasing, is exponential and obviously the legal framework is also exponentially growing so this will come. So I will say this will be one of the levers to increase the action of board and also because this is becoming so complex now because of all these reputational issues because of the speed of the reaction of the market this is quite important that you have at the top somebody really caring for reputation for long-term view so I think this is increasing now really, really increasing. Last question, earlier in the conversation you talked about the moment when you were CEO of Ostrom and your perspective then changed in terms of what you expected from the board do you think the CEOs of this world understand what a good board should be providing to them or do you think part of the transition we're going through now is also to educate the executive team and the chief executive to understand that it's their interest to have the kind of empowered skillful board that's willing to step up to the legal state. It's a very good point, I will say absolutely yes and you have seen recently some very specific case where either because the guy was chair and CEO which for me is really a call for problems but there are still people that say no, no, no, I want to be chair and CEO I prefer to be the head of the two people having to talk with but that's okay you also have some very good example of board for example saving a company to take over because the board say no you are not the shareholder the company needs which when you think at this sentence for a board saying this it's a revolution this is something that is the last piece of iron on the coffin of shareholder primacy because it means that somebody really takes the interest of the company and then defend the company over the short-term interest of the shareholders. So there is something I will insist as the last point on this interaction between the board and companies we have as you know tools in the 11 questions to the CEO that the board should ask instead of receiving the document at the last minute and saying yes or no to the decision presented by the CEO but one of the last questions I put in that's the way we recognize performance is in line with what you want to build for the company which is what I call the syndrome of the counterfeiter because as we are not using the right cost to put in the machine delivering the profit I defend the idea that the profit on which we are based we are putting the distribution of dividends or the distribution of bonus are not right they are just false and we are not taking into account the real cost so we are counterfeiter and this is not because we are not putting price on abusing nature that there is not a cost for this the only difference we were talking intergenerational that we are sending the bill for the next generation and we are not paying so this is the first responsibility of the board and this generally in the conversation wake them up because they realize that this is their first responsibility a board go to jail if the number are not right and I am not saying what they are doing is not legal at the moment this is perfectly inside the law but I will say this could change very quickly so this could be an interesting ground where CEO and board has to reconvene now and put the right number and the right profit on the table we are going through a revolution clearly and boards need to be at the centre of it and if they are to play that leadership role they need to use your words need to wake up to their new opportunities as well as the new opportunities thank you very much for joining me for this interview it was a fascinating conversation and I am very grateful to you thank you very much