Imagine a boardroom not just filled with financial gurus and industry veterans, but also seasoned bureaucrats, policy minds, and even social impact leaders. These are the changemakers, the thought leaders, the public figures who bring more to the table than just financial and business acumen.

Yes, many companies are keen on inducting such people in their boards, who are popularly known as influencers, as a capital to leverage their reputation, network, and expertise of non-traditional board members to gain an edge in areas like stakeholder engagement, navigating complex social issues, etc. Influencers inject diverse viewpoints and experiences into the boardroom, fostering out-of-the-box thinking and creative problem-solving.

Potential benefits

The potential benefits of having influencers in the board are significant. For instance, often bureaucrats, preferably retired, are sought after because of their regulatory savvy nature. Bureaucrats offer deep government and regulatory knowledge, helping companies to navigate the complex compliance and dealing with government policy matters.

Further, influencer capital provides a boost to the company’s brand image and attract investors. Having an esteemed scientist on the board of a biotech company could probably boost consumer confidence in its research and development practices. In addition to that it might also enhance the stakeholder confidence and legitimacy.

Public figures especially social impact leaders often boast extensive networks within specific industries or communities. These connections could open the doors for companies seeking to enter new markets, forge strategic partnerships and build community trust.

A human rights lawyer joining a fashion company board could encourage ethical sourcing practices, and innovative ways to empower workers. Influencers’ insights help companies adapt to changing societal values, mitigate reputational risks, and capitalise on new opportunities.

In an era of heightened awareness of corporate social responsibility such influencers bring fresh perspectives and expertise to address complex social issues. Having diverse board certainly helps to break group thinking and silos within the boardroom. This leads to more informed decision-making and better risk assessment. Further it helps in strengthening stakeholder engagement.

The downsides

Just like any powerful tool, influencer capital comes with potential downsides. The lines between influence and expertise could blur sometimes. Revolving doors between government and corporations could raise concerns about regulatory capture and conflicts of interest.

Sometimes, companies might be tempted to appoint trophy board members with impressive titles who may have little relevant expertise. This could be a form of greenwashing, aimed at appeasing stakeholders without meaningful change. Smaller companies might not have the resources to attract high-profile influencer figures, potentially exacerbating existing competitive inequalities.

So, how could companies harness the power of influencer capital while mitigating the risks? Here are some key considerations. Focus on expertise, not just titles. Prioritise board members with relevant experience and knowledge, not just impressive names.

Implement clear conflict of interest policies and ensure transparency in board member selection and compensation. Avoid homogenous boards and seek diverse perspectives, including traditional industry experts alongside influencers.

Influencers as a capital, when used judiciously, could be a powerful force for good, propelling companies towards better performance, stronger governance, and a more positive impact on society.

However, vigilance and ethical frameworks are crucial to keep a check on influencers. This will help companies to unlock the potential of this double-edged sword.

Saravanan is a professor of finance and accounting at IIM Tiruchirappalli and Williams is an analyst at Sernova Financial