Board Benchmarking Reports
As regulators’ and investors’ expectations of boards continue to increase and as the business environment continues to change rapidly, directors are seeking affirmation that their governance practices are effective, fit for purpose, and clearly communicated to stakeholders. It is therefore no surprise that more than a thousand directors and executives participate annually in our surveys. Because the topics making their way onto boardroom agendas are more varied than ever before, staying informed is key to success. As boards tackle this growing list of items, directors find value in benchmarking their approach to issues that range from board composition to cyber-risk oversight.
This year’s survey offers great insight into how directors and boards view the next 12 months. Which major business trends do they expect will have the greatest impact on their companies? What are the areas where they hope to improve board performance next year? Which topics are the ones on which directors want to spend more time during board meetings? In addition, we assess how boards are currently engaging with management on the increasingly complex challenge of formulating strategy and drill down on the growing board imperative of corporate-culture oversight.
Study: Industry Disruption Has Directors Most ConcernedDirectors&Boards
There Is Growing Concern Over Industry Disruption, Though ESG Matters Less
Respondents report that significant industry changes are likely to have the greatest impact on their companies in the coming year, with many citing technology disruption, industry consolidation, and shifting regulations as key drivers of change. However, very few boards consider social and environmental issues as top trends that will impact business performance in the next 12 months. This suggests that most boards continue to see these challenges as peripheral to near-term business success.
What five trends do you foresee having the greatest effect on your company over the next 12 months? Five trends could be selected by respondents from a list of 17. Bars represent the percentage of respondents selecting a trend. Only the top and bottom three trends are shown below.
Shareholder Activism Exacerbates the Short-Term Performance Pressure
The impact of short-term performance pressure continues to be acutely felt by boards and management teams. This year’s survey reveals that companies which feel the heat of activist investors are more likely to report that short-term pressure compromised their long-term strategic goals compared to organizations that did not receive activist attention.
At your organization, to what extent has short-term pressure from external sources compromised your board’s focus on long-term strategic goals?
The Board’s Understanding of Corporate Culture is Primarily Shaped by the C-Suite
Roughly 9 in 10 directors report that they have a good understanding of their companies’ tone at the top, but this number drops significantly when looking at the mood at the middle and on the front lines—those levels in the organization where culture can have enormous impact in driving the wrong or right employee behaviors. Given that only a minority of boards proactively seek out information about the health of corporate culture, it is not surprising that directors disproportionately continue to rely on the CEO for assessments of corporate culture.
How would you rate your board’s understanding of the health of the organizational culture at each of the following levels?
External Volatility and Uncertainty Continue to Drive Deeper Board Engagement With Strategy
Economic and political uncertainty continue to pose a challenge for corporate directors and their companies. Boards question whether their executive teams are prepared to lead their companies through significant turbulence in the operating environment. Directors themselves also admit that they need to do a better job in contributing to strategy; they report that their boards must not only better understand the risks and opportunities that affect performance and drive strategic choices, but also improve their contribution to the development of the strategy.
For your board, how important are improvements in the following areas over the next 12 months? (Top 10 most important board improvement areas based on % ranking improvement over the next year as “important” or “very important”)
NACD annually surveys its membership community on key board governance practices and major business trends. We analyze our rich survey data to deliver insights on the state of board governance for public and private companies in a wide range of areas, including board structure, composition, recruitment, diversity, strategy, risk oversight, and shareholder engagement. We also offer custom benchmarking support for members who want to assess how their approach in specific governance areas compares to their peers. Click here to learn more about our board benchmarking services.