Corporate governance remains in focus given recent events like leadership shakeups at OpenAI and Elon Musk's X acquisition, formerly known as Twitter. Diligent CEO Brian Stafford says governance evolution has "changed quite materially," intensifying in the past five years.

Regarding OpenAI specifically, Stafford suggests the situation showed risks when investors back companies lacking established oversight systems. He emphasizes properly composed, functional boards with governance controls provide stability that shareholders value.

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Video Transcript

JOSH LIPTON: We are taking a closer look at leadership and corporate governance, not just about Elon Musk, the recent saga at OpenAI also, of course, highlighting the importance of governance. Joining us now is Diligent CEO Brian Stafford. So Brian, thank you so much for joining us. I actually want to start maybe, Brian, kind of high level before we get into the specific names. I'm interested, Brian-- and this is a world you know so well. When you think about corporate governance, as we wrap up 2023, we head into 2024, how much has that actually changed? How much has it evolved, Brian, over, let's say, the last 5, 10 years? Because we business sure has evolved.

BRIAN STAFFORD: Yeah. It's a great question, Josh. Over the course of the last, I'd say, five years governance has changed quite materially across the corporate landscape. And by that, I mean everything has come faster and faster and faster at boards and leadership teams. And so from a governance perspective, you see more conversations, more intensity, and more rigor evolving the way that large companies focus on governance.

We work with 25,000 companies, 700,000 board members. And each and every one of you-- one of them would tell you that governance has gotten way more intense over the course of the last five years.

JULIE HYMAN: And yet we still get our big stories that we cover here, Brian, don't we, about these kinds of blow-ups, you know, about what happened at OpenAI for example, and the sort of what effectively was a fight within the boardroom, it seems, for the future of that organization. How does that sort of play out, you know, not just when it comes to a head but even earlier in the process when they're choosing people for the boards, when they're vetting people for the boards, et cetera?

BRIAN STAFFORD: Well, I mean, I think the OpenAI situation showed us what other situations have within tech, where sometimes investors run and leap into investing in companies that don't have proper governance. I think what you're finding in each of these situations are making sure that you have proper governance, making sure you have proper controls, making sure you have the right board composition is a material thing that impacts how companies operate but also impacts the way investors think about returns, investors think about stability. And in the case of OpenAI, even someone like a Microsoft thought about building a platform, building technology around a company that had a shaky, shaky governance.

JOSH LIPTON: I'm interested, too, about-- when you think about board members today, has that changed at all in terms of who should be serving on these boards? Should companies be looking for different resumes, different backgrounds, different skill sets than maybe, let's say, five years ago?

BRIAN STAFFORD: Yeah. I think that's absolutely correct. I think if you look over the course of the last five years, to your point, governance really is an exercise in risk oversight or risk management. And if you look at the different risks that have come across companies over the course of the last five years, it has grown, whether it's climate as a risk, whether it's talent diversity, whether it's geopolitics, whether it is the pandemic and health issues and now even AI. And having your board members just be composed of people, who are former CFOs or even CEOs, leaves most companies at maybe lacking the expertise to quickly deal with and address some of the risks that exist today.