All board members have to add value

Apr 25, 2016Uncategorized0 comments

Boards cannot afford to have directors around the table who aren’t delivering value.

This is according to a new report based on the 2016 Global Board of Directors survey, released by Professor Boris Groysberg and Yo-Jud Cheng of Harvard Business School, Spencer Stuart, the WomenCorporateDirectors (WCD) Foundation, and researcher Deborah Bell.

With greater institutional and activist shareholder activity and stronger concerns about risk and global competitive threats, boards are taking on “a more strategic, dynamic, and responsive role” in their companies, the report states – pushing “issues around board composition and diversity to the fore”.

Capturing responses from more than 4 000 male and female directors from 60 countries around the world, the survey – from WCD, led by CEO Susan Stautberg; Spencer Stuart, spearheaded by Julie Hembrock Daum, head of the firm’s North American Board Practice; and their research colleagues – is one of the largest board surveys ever.

The survey research revealed “a gap between best practice and reality” in boards’ readiness to handle strategic challenges, especially regarding talent issues. While both public and private company directors named “attracting and retaining top talent” as one of the top challenges to their companies’ achieving strategic objectives, respondents gave their own boards relatively low ratings when it came to talent issues such as board diversity, HR/talent management, CEO succession planning, and director evaluations.

Other key findings in the report include:

·         Cybersecurity is one of the top three issues relevant to directors (the economy and regulatory environment being the other two). Across the board, female directors reported a higher level of concern about various risks to a company than their male peers – from concerns about activist investors and cybersecurity to regulatory risk and the supply chain.

·         Directors – especially women – favor tools to trigger board turnover. In an effort to ensure fresh thinking as more demands are placed on boards, the majority of respondents favored director retirement ages and term limits. Female directors were more positive on term limits (in favor: 68% of women versus 56% of men) and mandatory retirement ages (in favor: 57% of women versus 39% of men) than their male peers.

·         Greater scrutiny/spotlight doesn’t always drive greater diversity. Public companies have more independent directors than the private companies whose directors participated in the survey have, but private company directors report similar proportions of female and ethnic minority directors on their boards.

·         Why isn’t the number of women on boards increasing? As the percentage of women on boards stays stagnant, there is both a gender-divide and a generational divide on why this is. Male directors, especially older respondents, said the “lack of qualified female candidates” was the primary reason; women cited most often the fact that diversity is not a priority in board recruiting, while younger male directors (age 55 and under) said that the reason was because traditional networks tend to be male-dominated.

·         Boardroom diversity quotas are not supported overall. Nearly 75% of surveyed directors do not support boardroom diversity quotas. Forty-nine percent of female directors support them, but only 9% of male directors do.

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