What’s the Status? A Look into the Year’s Boardroom Trends and Practices
After two years of a pandemic and associated economic shocks, 91 percent of directors report that their boards have overseen the COVID-19 crisis effectively without overburdening management. Throughout 2021, NACD engaged with its membership to gain this understanding of how the American boardroom has fared during the pandemic, what practices have changed, and what expectations there are for governance in the year ahead. A panel of experts and directors will discuss these takeaways on Feb. 16 during the virtual State of the American Boardroom event.
These member perspectives were captured in a variety of separate reports. The size, shape, and structure of boards and director refreshment are reported in Inside the Private Company Boardroom and Inside the Public Company Boardroom. In the 2021 Board Practices and Oversight Survey, directors provided unique insights into boardroom practices in emerging areas of oversight, such as climate; diversity, equity, and inclusion; virtual meetings; and boardroom dynamics.
While many NACD members believe that the state of the boardroom is strong, navigating through this challenging operating environment has not been without difficulty. Several findings from the above survey efforts stand out.
Virtual meetings are here to stay. Not long ago, virtual board and committee meeting attendance was looked down upon by nearly every stakeholder group. Some argued that attending meetings virtually displayed a lack of commitment while others bemoaned the lack of subtle nonverbal communication that can be important in an in-person meeting. Now, most directors view virtual meetings as another tool in their tool kits. Many plan to shift at least some of their board work to virtual meetings for the foreseeable future, with directors reporting in the 2021 Board Practices and Oversight Survey that 38.3 percent of board meetings and 52.9 percent of committee meetings are likely to be virtual this year.
Momentum continues to build to create diverse and inclusive boardrooms. When asked to report the most observable benefit of board diversity and inclusion, directors pointed to the improved quality of discussions. Directors also report that it leads to better decisions and a better understanding of key issues. It is imperative to remember that it is not enough to have a diverse boardroom. All members of the board must be active, included participants in board activities to realize the benefits each board member can bring to the table.
This is good news because directors report that great boards are boards that have great discussions. This is perhaps no surprise, but given changes wrought by the pandemic—a challenging business environment, remote work, and virtual board meetings, to name a few—it may take a more sustained effort on the part of board leaders to ensure high-level discussions among directors.
Cyber threats continue to be a top risk in the near term, while digital transformation and its effect on talent is the top risk for the coming decade. These and other findings from a survey by the NC State University Enterprise Risk Management Initiative and Protiviti, with whom we partnered to understand NACD members’ perceptions of risks their organizations face in 2022 and over the next decade, also point to more immediate pandemic-related challenges in the short term.
For a deeper dive into these trends and their implications, tune into the State of the American Boardroom event on Feb. 16. We will be joined by Frank Kurre, global account management leader and managing director at Protiviti; Tonya Jackson, senior vice president and chief product delivery officer for Lexmark International and a director at Hooker Furniture, and David Rodriguez, a board member at American Woodmark and former Marriott executive vice president and global chief human resources officer, will share their perspectives as directors.
Barton Edgerton is associate director of governance analytics at NACD.