A Call to Action for Boards

The inaugural Global Board Governance Survey conducted by Protiviti, BoardProspects and Broadridge — a study believed to be the first of its kind — summarises the views of more than 1,000 directors and C-suite executives worldwide on the role and effectiveness of the board. It provides insights regarding the board’s priorities and performance as well as the differing perspectives of directors and C-suite leaders.

It also offers opportunities to improve board governance and performance:

Address underperforming directors. Only 58% of directors and 36% of C-suite leaders agree that board members falling short of expectations are addressed in a constructive manner, suggesting a need for improvement in evaluating or offboarding underperforming directors.

Focus on obstacles to organisational growth. The survey suggests that more time is needed to address the most important obstacles to organisational growth over the next three years: access to capital and/or liquidity; recruiting, retention and skilling talent; economic uncertainty around central bank monetary policy, inflation and rising labor costs; rapid change from disruptive innovation; and new and emerging technologies. The survey also noted that digital transformation and organisational culture are two additional areas requiring more board time and attention.

Sharpen the focus on crisis management. The survey results indicate a need for a stronger board focus on crisis management. As the coming year unfolds, new and existing geopolitical, economic, environmental, social and cyber-related crises could arise and/or conflagrate.

Do not overlook cybersecurity issues. Another area identified by our survey that requires additional board time and attention is cybersecurity. The ever-changing cyber-threat landscape and growing geopolitical tensions are likely the reasons for this finding.

Ensure the board is aligned with management on organisational resilience. The survey notes that the board’s assessment of the organisation’s preparedness for a number of potential threats is significantly more favorable than management’s — a potential disconnect in the boardroom. Thus, directors should seek to understand the concerns of senior leaders, particularly if those leaders are requesting more resources and support to meet expectations.

Emphasise director preparedness and engagement. Our survey noted that C-suite respondents are less likely to agree that board members come prepared for each meeting and are constructively engaged during meetings. But the street runs two ways. Information overload can contribute to a perceived lack of director preparedness.

Engage directors in shaping the board agenda. Board members agree less frequently than C-suite leaders that they are given an opportunity to influence the agenda in advance of formal board meetings. So, when planning future meetings, the board chair or lead director should consider involving board members in setting the agenda.

Self-assess board performance. At least annually, the board should conduct a robust self-assessment of the performance of the full board, each board committee and each individual member of the board to determine whether they are functioning effectively.

Periodically evaluate composition and onboarding criteria. Our survey results suggest several attributes that boards are primarily looking for as they evaluate new director candidates. While this finding is not intended to suggest a one-size-fits-all approach, it nonetheless points to a need to assess whether the currency, experience and diversity of thinking in the boardroom are sufficient in view of the company’s current and expected future needs. Any gaps should be considered when evaluating new director candidates.

This issue of Board Perspectives elaborates on the above call to action.

(Board Perspectives — Issue 174)

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