A Report by Financial Times
The April, 2024 edition of the Hub is highlighting a survey report from Financial Times which reveals how directors are embracing the evolution in their role and responsibilities.
It concludes that the role of the board director is undergoing profound change. Individual and collective expectations are rising. The way that directors are recruited, trained and developed is being reshaped. And the composition of the board and the breadth of its expertise is under intense scrutiny.
RISK, REWARD AND RESPONSIBLE BUSINESS
The referred research was carried out in the long shadow of Covid-19, so it comes as no surprise that disruption and uncertainty weighed heavily on the minds of board directors. The pandemic required many businesses to change their strategies almost overnight, which placed more responsibility, scrutiny and pressure on board process and procedure.
- Progressive boards ask unpopular questions - The changing social and business context of the past year is reflected strongly in how respondents see the evolving role of the board.
- The new metrics of success - The traditional indicator of a board’s success — company profit — still comes out on the top as respondents’ most effective performance measure. But other indicators are becoming increasingly important: company values and the quality of the leadership team are cited by nearly half of respondents, and two out of five say that effective corporate governance is a key measure.
- Climate change hits home - For many boards, it is global supply chain disruption that has brought the importance of ESG into sharp focus. The recent vote by ExxonMobil’s shareholders to change its board and the instruction for Royal Dutch Shell to cut its emissions faster are just two examples.
- The new board: younger, broader minded, more accountable? - Younger execs are keen because they are passionate about ESG, diversity and governance, and believe they can have an influence.
GREATEST CHANGES TO BOARD GOVERNANCE
More than half (54 percent) express that there will be a greater focus on the performance of individual board members. Other areas of likely change include more frequent reporting to the board on a wider range of topics, and more emphasis on appointing board members from outside the organisation’s sector.
DIVERSITY — A WORK IN PROGRESS
Nearly half of respondents (45 percent) agree that their boards have been successful in appointing members from a wide variety of professional and personal backgrounds, but 40 percent say their boards need much greater diversity among their members. When it comes to gender, the research finds that 40 percent of respondents think that greater gender diversity of boards improves performance. One of the barriers to diversity on boards is the way that directors are recruited. Even if companies are successful in appointing directors from a breadth of backgrounds, they still have to work hard on creating the right culture and dynamics in the room.
THE BOARD PROFESSION
As the nature and make-up of boards change, so do the demands placed on their members. The research highlights a number of areas where board directors feel they need to improve their knowledge.
- Knowledge of digital technologies
- Knowledge of emerging competitors
- New workforce models
- Risk management frameworks
- ESG metrics/disclosures
- Geopolitical trends
BUILDING BETTER BOARDS
The way that board directors think, operate and collaborate is changing. Their remit is growing, but so is interest in the art and science of directorship. As boards continue to evolve at pace, there are a number of focus areas for directors and senior leaders to consider.
Click here to access the original survey report
(Note: IICA duly acknowledge the ownership / authorship of the survey report and is republishing the same only for educational purpose.)
