AMPLIFY  VOL. 38, NO. 4
  

Historically, the frame of reference for corporate governance decision-making was largely defined by shareholder primacy, emphasizing the need to maximize returns for investors. Over the past decade, this perspective has evolved as the responsibilities of boards, and the expectations placed on them, have expanded to encompass a broader range of stakeholders.

In 2019, it became clear just how mainstream this change had become when the Business Roundtable (a lobby group of over 200 CEOs of some of the largest companies in the world, known for decades as a staunch supporter of shareholder capitalism) issued a revised statement on the purpose of a corporation. The group noted that, for years, its official policy held that corporations exist primarily to serve their shareholders.¹ In its revised statement, it said there is a need to shift from the traditional shareholder-first model to a perspective of corporate responsibility, equating the needs of employees, customers, suppliers, and communities with those of shareholders.

Simultaneously, societal, regulatory, and investor expectations regarding environmental, social, and governance (ESG) factors have reshaped corporate decision-making, emphasizing sustainability, ethical leadership, and long-term value creation over short-term profits. Prompted and supported by the United Nations’s Principles for Responsible Investment (PRI), ESG has become a force through which many institutional investors have been able to influence the actions of corporate boards, not only by investing in firms that meet the PRI but by urging them to incorporate ESG considerations into their strategies.²

Corporate governance plays a fundamental role in ensuring that organizations operate within the PRI through a board’s fulfillment of its fiduciary duty. This duty is not merely a function of regulatory compliance or financial expertise. Rather, it is profoundly influenced by the character of board members. Leader character, which includes virtues such as integrity, accountability, humility, and courage, directly affects how boards oversee management, mitigate risks, and uphold shareholder and stakeholder interests to meet ESG expectations.

This article explores how leader character enhances corporate boards’ decision-making ability to better fulfill their fiduciary duty in a governance landscape due to stakeholder ESG expectations, which increasingly require the ability to look beyond shareholder primacy and be more cognizant of the many stakeholder concerns within their complex operating environments. The article also examines how boards can cultivate leader character to align with evolving stakeholder and investor expectations.

The Leader Character Framework

The Leader Character Framework, developed by Mary Crossan, Gerard Seijts, and Jeffrey Gandz of the Ivey Business School, identifies interconnected dimensions with judgment at the center.³ This research sought to bridge the gap between instrumental competencies and the often-overlooked role of character in effective leadership.

Traditional leadership models emphasize competencies; these researchers found that leader character plays a fundamental role in decision-making, ethical behavior, and long-term organizational success. Their findings were informed by interviews with senior executives, empirical studies on leadership failures, and insights from disciplines such as philosophy, psychology, and management science.

The 11 dimensions of leader character are:

1. Integrity — acting honestly and consistently with personal ethical principles

2. Humility — being open to feedback and learning, recognizing limitations, acknowledging mistakes, and valuing diverse perspectives

3. Courage — standing up for ethical principles despite opposition to “doing the right thing”

4. Accountability — taking ownership of and responsibility for decisions and actions

5. Drive — demonstrating determination, perseverance, and initiative

6. Temperance — exercising self-control and composure under pressure

7. Collaboration — valuing teamwork and positive relationships

8. Justice — ensuring fairness and minimization of personal biases

9. Transcendence — having a sense of purpose as well as a commitment to it

10. Humanity — demonstrating empathy and compassion toward others

11. Judgment — making sound decisions in a timely manner based on relevant information and critical analysis of facts

Judgment serves as the integrating factor of all the leader character dimensions. Through judgment, leader character–informed decision-making is manifested and operationalized. Without strong judgment, even well-intended leaders may struggle to balance competing interests and navigate ethical dilemmas effectively.

The concepts represented in this framework provide a guide for boards to embed leader character into all decision-making processes and are particularly salient as they strive to meet their fiduciary duty in today’s governance environment.

Fiduciary Duty

Boards of directors’ decision-making must be guided by adherence to their fiduciary duty. A board’s fiduciary duty represents its overarching legal and ethical obligation to act in the best interests of the corporation. This duty is grounded in principles of loyalty, good faith, and care, ensuring that directors prioritize the corporation’s long-term success rather than personal interests when making decisions. In the past, courts and regulators have interpreted fiduciary duty as requiring directors to make informed, prudent, and disinterested decisions that align with the company’s objectives and long-term viability to maximize shareholder wealth.

In recent years, as ESG and PRI expectations have been incorporated into boards’ decision-making contexts, the concept of fiduciary duty has been extended beyond compliance with legal requirements and shareholder primacy to encompass ethical governance, strategic oversight, and (increasingly) accountability to a broader set of stakeholders, such as the environment, the community, and customers. As such, boards now must possess traits and abilities beyond instrumental skills like financial acumen and strategic planning.

The notion of possessing the leader character traits needed to make decisions beyond the narrow aspect of shareholder primacy directly relates to a new aspect of duty of care. Within fiduciary duty, duty of care is a specific requirement that directors be able to act diligently, prudently, and competently when making decisions on behalf of the corporation. This means board members must not only actively engage in corporate affairs, thoroughly review materials, seek expert advice when necessary, and critically assess risks and opportunities, they must also possess the capabilities to make informed decisions.

A failure to uphold duty of care (e.g., failing to adequately oversee executive decisions, ignoring warning signs of financial or ethical misconduct, or rubber-stamping management proposals) due to a lack of the skills required to provide such oversight can expose directors and the corporation to liability and reputational damage.

The bottom line is that stakeholder ESG expectations mean that boards only possessing instrumental skills may not be able to meet the changing definition of duty of care.

Boards Under Fire

In today’s governance landscape, the extent to which judgment is exercised by boards with respect to decision-making is increasingly questioned. Board members are expected to exercise sound judgment when making decisions (which ultimately translate into corporate strategy and operations) while balancing the ESG perspectives of stakeholders with diverse interests.

This is difficult because the expectations of non-shareholders may counter the notion of shareholder wealth maximization. Corporate directors are legally and ethically obligated to act in the best interests of the corporation. The fiduciary duty they bear requires a commitment to principles of loyalty, good faith, and integrity. Embracing and following the tenants of leader character can play a critical role in helping boards uphold these obligations while considering the firm’s societal obligations to ensure ethical governance and its long-term viability.

Courage empowers boards to make difficult but necessary decisions and to accept responsibility for the outcome. Courage-backed decision-making combined with justice and humanity, plays a key role with respect to boards addressing ESG and PRI concerns, as directors must challenge outdated norms and advocate for sustainable business practices, even when faced with resistance.

Speaking out against unethical management practices or pushing for long-term ESG commitments in the face of short-term financial pressures requires both moral and intellectual courage. Board members who demonstrate transcendence and courage understand their purpose in fulfilling their fiduciary duty such that their organizations remain on the right path, even in the face of external pressures or internal disagreements. For example, Unilever, long known for its sustainability initiatives, effectively doubled down on its efforts by restructuring and more deeply integrating sustainability goals into all aspects of its operations (despite anti-ESG pressure) to stay true to its purpose.⁴

Accountability ensures that board members take responsibility for their actions, uphold their commitments, and act transparently. Research shows the importance of accountability in fostering a culture of responsible leadership.⁵ When boards emphasize accountability, they promote governance practices that discourage unethical behavior and create an environment of trust and reliability. Transparency further strengthens governance by ensuring that board members disclose potential conflicts of interest and maintain open communication with stakeholders.

The stakeholder-centric approach promoted by the Business Roundtable also necessitates intellectual humility from board members. Directors must recognize the complexity of modern corporate governance and be open to diverse perspectives from various stakeholders. This shift challenges traditional business assumptions, requiring leaders to embrace adaptability and ongoing learning. Leader character experts emphasize that intellectual humility, humanity, and a learning orientation contribute to adaptive governance, enabling boards to make informed and forward-thinking decisions.⁶ Humility fosters openness to diverse perspectives and continuous learning to ensure that board members strive for continuous improvement of their own skills and knowledge while seeking to learn and implement governance best practices to better fulfill their duty of care.

Temperance is another crucial component of leader character, allowing board members to exercise restraint and self-regulation when making decisions. By maintaining a balanced perspective and avoiding impulsive actions, directors can navigate ethical dilemmas with composure and integrity. Leader character experts emphasize that temperance contributes to effective decision-making, enabling board members to act with fairness and impartiality.⁷

Diligence is a foundational element of the duty of care. Board members must actively engage in corporate affairs, attend meetings regularly, and thoroughly review financial reports and strategic plans. Directors who demonstrate diligence are more likely to challenge management assumptions, assess risks thoroughly, and contribute to effective decision-making. Experts argue that leader character traits such as drive and collaboration enhance diligence and therefore board effectiveness by fostering an environment where directors actively participate in discussions and work together to achieve corporate objectives.⁸ For example, a collaborative mindset was integral to Microsoft CEO Satya Nadella’s push into cloud computing with the Azure platform. He and the board worked together to shift the firm’s priorities, turning the firm into an early mover and creating an industry-leading product.⁹

Integrity is perhaps the most essential aspect of leader character with respect to board decision-making, as it helps board members make ethical decisions, adhere to corporate policies, and resist pressures that might lead to self-serving behavior. Corporate scandals such as those at Enron and WorldCom serve as cautionary tales of what happens when board members and executives lack integrity. In these cases, compromised ethical standards led to fraudulent financial reporting, significant investor losses, and corporate collapses.

The shift toward ESG-focused governance further reinforces the importance of judgment, as directors must navigate complex trade-offs and long-term considerations. Investor pressure for initiatives such as greater transparency in sustainability reporting or ethical supply chain management requires boards to integrate ESG concerns into corporate strategy. By demonstrating leader character–informed judgment, board members can effectively respond to evolving investor expectations and maintain corporate credibility in the marketplace.

Judgment is particularly important in crisis situations, when boards must remain composed and proactive in addressing challenges. Whether facing a financial downturn, a cybersecurity threat, or a corporate scandal, directors must be capable of making good decisions. Poor decision-making during crises, as seen in the 2015 Volkswagen emissions scandal, often results from a failure to exercise strong leader character traits.¹⁰

Developing Leader Character in Boards

Leader character is a patterned behavior that can be developed within board members and the board as a whole. It is a concept that involves a combination of personal traits and group dynamics. Each director possesses some level of instrumental skills and leader character dimensions. The key to ensuring character-informed decision-making is to create an environment where this is fostered. In other words, the behavior becomes entrenched by deciding to do it, doing it, checking that it is being done, and looking for ways to keep getting better at doing it.

Incumbent directors can reinforce character-informed decision-making by creating an environment that promotes self-reflection and open discussions about ethical dilemmas and character-related challenges. Regular self-evaluations and peer reviews focusing on leader character dimensions can help identify areas for improvement and reinforce desired behaviors. Directors must be vigilant in ensuring they behave in accordance with leader character principles and embrace a notion of continuous improvement (part of the dimension of humility) to recognize that they can and should try to be better.

Boards must be proactive in seeking out leader character traits in their director succession planning and candidate evaluation processes. Boards can ensure that new directors’ traits go beyond instrumental skills (financial acumen and strategic planning) to include those of leader character. Discussions with references regarding past behavior, evaluation tools from third-party consultants, and case-based interviews are good ways to evaluate a candidate’s leader character traits.

Experienced board members and chairs play a pivotal role in shaping the character of newer directors through mentorship and as exemplars of leader character–based decision-making. Observational learning, in which less experienced members emulate the dimensions of leader character–based decision-making demonstrated by seasoned directors, is a powerful tool as it sets explicit and implicit behavioral norms.

These behaviors can be codified into committee and board terms of reference, policies, and codes of conduct. These documents can also be published so that stakeholders can see that boards embrace leader character as fundamental to their decision-making. Duly informed of boards’ own leader-character-based behavioral expectations, stakeholders can better hold boards accountable, increasing the likelihood of better and more ethical governance.

Conclusion

Taking a purely shareholder-centric view is no longer acceptable in today’s ESG environment. To fulfill their fiduciary duty, boards of directors must consider business imperatives while maintaining a clear understanding of the needs and requirements of multiple stakeholders that, due to the nature of their diversity, may themselves be in conflict.

Boards must use judgment that is informed by more than the instrumental skills most often used as board membership criteria, embedding leader character into their governance practices and perspectives.

Boards that display leader character have the courage, drive, and humility to strive to be better. With notions of justice, humanity, and temperance, they are given a sense of purpose to fulfill their fiduciary duty with integrity. If accepted as the key criteria for board membership and the framework from which governance activities spring, decisions and outcomes that lead to better firm and social performance will greatly increase.

References

¹ “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans.’” Business Roundtable, 19 August 2019.

² “What Are the Principles for Responsible Investment?” Principles for Responsible Investment (PRI), accessed 2025.

³ Crossan, Mary, Gerard Seijts, and Jeffrey Gandz. Developing Leadership Character. Routledge, 2015.

⁴ Kaur, Dashveenjit. “Unilever Redefines Corporate Sustainability Leadership Structure.” Sustainability News, 7 January 2025.

⁵ Seijts, Gerard, et al. “Learning from Boardroom Perspectives on Leader Character.” Ivey Business Journal, January/February 2015.

⁶ Seijts et al. (see 5).

⁷ Seijts et al. (see 5).

⁸ Seijts et al. (see 5).

⁹ O’Brien, Matt. “Microsoft CEO Satya Nadella Caps a Decade of Change and Tremendous Growth.” Tech Xplore, 3 February 2024.

¹⁰ “Learn About Volkswagen Violations.” US Environmental Protection Agency (EPA), 19 March 2025.