Anxiety in the Boardroom as Retail and Fashion Reset

Corporate boards usually wield a kind of quiet power — weighing in on long-term strategy, signing off on big-dollar investments and keeping chief executive officers on their toes. 

But the oversight has suddenly become overt as last year’s rush melted into a muddle of sky-high inflation, a supply chain slog and the threat of recession. 

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At companies facing challenges both within and without, there’s been a slew of CEOs suddenly out the door — from Sonia Syngal at Gap Inc. to Julie Wainwright at The RealReal Inc. and Patrik Frisk at Under Armour Inc. 

While each CEO was said to “step down” and thanked for their efforts, it’s an exodus that suggests boards have found their voice. 

Now directors are looking hard at what’s ahead and, just like everyone else, they’re seeing a future filled with question marks. 

That is a very uncomfortable spot for most. 

Boards are not only made of people prone to all of the faults of humanity, but of business veterans who often got to the top by knowing just how to move through the business landscape and up the corporate later. 

Now fashion and retail are in uncharted territory, having gone through pandemic lockdowns, an online boom that’s in retreat and contending with consumers who, at least on the lower end, are choosing between food and fashion.

Just look at retail giant Walmart Inc., which slashed its annual profit projections this week and said it was marking down fashion to move goods, sending Wall Street tumbling and retail recalculating. Higher-end consumers are holding on, but given the stock market declines and the rest of it, how long can they hold out?

Consultant Sean Ryan, partner and consumer products group practice leader at Kearney, said: “When you get uncertainty… you begin to see adoption of the conservative principle, which is: Do no harm, postpone, delay unless there is a kind of overwhelmingly obvious outcome.”

Ryan estimated that two-thirds of the decisions coming before boards are no-brainers, with easy “yes” or “no” answers. 

The other third of decisions that get kicked all the way to the top of the corporate org chart — not so much. 

“Those are the tension points,” Ryan said. 

They will be different from company to company, but the stakes are always high. 

“Recessions can be looked at as purifying moments,” Ryan said. “The company that is well governed by a strong and effective board is going to survive and, if not prosper, at least be very well positioned for when we move out of recession.”

To a certain extent, the board, the C-suite and everyone else just has to hold on and ride out 2022, hoping they’ve done their jobs.

“It’s about trying to distinguish between the part of the business that you can have control of from the part of the business you are unable to control,” Ryan said. 

The list of uncontrollables is long today.

Jill Standish, senior managing director and global lead, retail at Accenture, said: “Leaders now have to major in running a business and then they have to minor in foreign affairs and environmental issues, what’s going on in public policy, what’s happening around social issues. It’s not enough to just run a business.” 

As boards and C-suites think about all these moving parts, they’re contending with a kind of fast and furious change that hasn’t been seen in at least a generation. 

“The pandemic happened to them,” Standish said. “There was no debate, it was, ‘just do it.’ The speed at which they’re making decisions has sped up.”

For at least some boards, that included big decisions on areas of the business that were not always fully appreciated. 

“In apparel, I’m not sure boards understood how fragmented supply chains were — buttons come from this country, raw materials are coming from this farm. Did we ever expose boards to that?” Standish said. 

And the future is still coming on fast with more changes in store.

“What I’m seeing is a lot of requests to educate boards,” Standish said. “Let’s demystify the metaverse, demystifying things is a great word. We need to bring them along on the journey.” 

She said there are five big forces sweeping through the industry — the metaverse, changes in talent, technology, sustainability and general reinvention. 

“Every company is striving to reinvent, HR is going to be different, legal’s going to be different, store operations are going to be different,” she said. “Total enterprise reinvention. Every company is thinking, ‘How fast can I change?’” 

That’s because change is no longer a “nice to have,” making for a busy boardroom. 

Les Berglass, CEO of executive search firm Berglass + Associates, said: “This is a wonderful time to embrace change. Business as usual is a death sentence and not a path to the future. 

“The second most important ‘must have’ on a board’s list, after profitable growth, is predictability — boards hate surprise,” Berglass said. “They look to their CEO to deliver that predictability. Harry Truman was right, ‘The buck stops here.'”

Even if the corner officer comes with lots of perks, from multimillion-dollar paydays to prestige and power, that pressure takes a toll.  

As a result, there could be more than a little C-suite fatigue.

“It’s been a really tough two-and-a-half years to be a retail CEO,” said Joel Bines, global co-head of the retail practice at AlixPartners. “A lot of the people who are changing out have been in the role — if not the CEO, at least a C-something — for quite a while.

“Retail executives are exhausted and when you’re staring into the abyss of a potential global recession after two-and-a-half years of battling [COVID-19]…maybe it’s a little more more mutual than it looks,” Bines said. “‘It’s not you, it’s me,’ that sort of breakup.

“It’s rare that a board fires a CEO,” he said. “Most often what happens is the board and CEO relationship becomes passive-aggressive. Board members make snide comments or send snide emails. The CEO is tired and being passive-aggressive. The board is being passive-aggressive. Everybody comes to the same conclusion.

“Remember the game that goes on, CEOs manage their boards or think they’re managing their boards. And boards think they’re managing their CEOs. And neither of these is true. Most people are just managing themselves. People like to be on boards. And, in general, people like to be on boards with people who don’t make their lives miserable.

“The board is playing a governance role, but the CEO is playing a leadership role and sometimes you see those relationships get blurred,” Bines said. 

And when everything is changing up and down the business, that blurriness can simply be too much for all involved.