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Are Expectations on Board Members Too High? Most Directors Think So.

Wednesday, October 19, 2016   (0 Comments)

Are Expectations on Board Members Too High? Most Directors Think So.

 

Global Survey of 4000+ Directors Reveals Common Boardroom Attitudes and Processes

 

NEW YORK – October 20, 2016 – Sixty percent (60%) of directors say that there is a gap between the expectations placed on boards and the reality of the board’s ability to oversee a company, according to the 2016 Global Board of Directors Survey, released from Professor Boris Groysberg and Yo-Jud Cheng of Harvard Business School, Spencer Stuart, the WomenCorporateDirectors (WCD) Foundation, and researcher Deborah Bell.

 

“Directors themselves may be more qualified than ever, but they are facing higher expectations than ever,” says Julie Hembrock Daum, head of Spencer Stuart’s North American Board Practice. “These expectations are coming from multiple stakeholders – investors, consumers, regulatory bodies, the media – in a climate of unprecedented demands for transparency and accountability. We see directors seeking to stay ahead of these demands and devoting more time to board prep and information gathering.”

 

And board leaders are the ones who are the key drivers in creating the right composition: “Our research on corporate governance suggests that more diverse and inclusive boards are impossible to build without board leadership playing a major role in attracting and appointing diverse board members,” says Professor Groysberg.

 

The survey – which polled directors on issues ranging from the economy to quotas to director skills – captured responses from more than 4,000 male and female directors in 60 countries around the world, and is one of the largest board surveys ever. Additional data from the survey was released earlier this year, including findings around the issues of cybersecurity, diversity, and the need for attracting and retaining top talent.

 

Key Findings around Board Skills, Processes, and Priorities

 

·       Disconnect between expectations and reality around board’s true oversight ability. Of the 60% of directors who see a gap between the expectations placed on boards and the reality of the board’s ability to oversee a company, 64% believe expectations moderately exceeded reality. Strikingly, 25% believed expectations far exceeded reality.

 

·       Boards are seeking out apt skills for new directors. For the most part, boards appear to be adequately matching the skills that they consider most important for board service to the skills that they aimed to acquire in their most recent board appointment. Industry knowledge and financial/audit skills were 2 of the top 3 skills cited as “most important for board service today” and were also sought after in recent board candidates.

 

·       But strategy experience may be getting overlooked. In one notable exception to the finding above, 67% of respondents cited strategy as one of the most important areas of expertise for directors today – the highest of all skills named – but only 33% of respondents said that strategy expertise was among the skills the board most wanted to acquire with its most recent appointment.

 

·       Other skills in demand on boards. Behind the “top 3” of strategy and financial/audit expertise and specific industry knowledge, directors also cited risk management and international/global expertise as most important to board service today. Areas named least frequently as important were sales and marketing, and compensation and succession planning expertise.

 

·       Measuring performance – with consequences. As greater regulatory requirements have put board performance under a microscope, many boards have instituted evaluations as part of their structure. Indeed, the survey revealed that more than two-thirds of boards conduct performance evaluations of directors. One-third of respondents have served on a board where evaluations were used to remove a director, showing that the evaluations do have teeth.

 

·       Networking is a priority for both men and women directors. Showing the value directors see in networking – which increases opportunities for both gaining knowledge and recruiting new board candidates – directors are spending an average of 9.4 hours/month on networking with peers. Women are investing a bit more time in this activity (10.1 hours vs. 9.1 hours average) and in planning/strategizing about their career than men (4 hours/month vs. 2.9 hours/month).

 

·       Diversity on boards should be driven by board leadership. Both male and female directors feel that board leaders’ serving as champions of board diversity is the #1 way to build diverse corporate boards. They rated this board leadership support as a far more important factor in building diversity than setting diversity targets or requirements or shareholders’ demanding diversity.

 

·       How much time is spent in full boardroom meetings? Directors report an average of 6.6 full meetings per year, with a high attendance rate (95%). Boards for companies based in Australia & New Zealand meet most frequently (9.3 meetings/year), compared to just 4.9 meetings/year for firms based in Africa. North American directors reported an average of 5.8 meetings/year, and those in Western Europe reported 7.5 meetings/year.

 

·       Directors more satisfied with CEO compensation levels than with their own. Most directors think that current compensation levels are set appropriately, but are more likely to think director compensation is too low. While 80% of respondents believed that compensation level of the CEO at their company was “about right” and only 12% believed it was too low, only 65% of directors felt that the compensation of directors on their board was “about right” and 32% believed it was too low.

 

 

For more information about the 2016 Global Board of Directors Survey, please contact Suzanne Oaks Brownstein or Trang Mar at Temin and Company at news@teminandco.com or 212.588.8788.

 

About WomenCorporateDirectors Education and Development Foundation, Inc.

The WomenCorporateDirectors Education and Development Foundation, Inc. (WCD Foundation) is the only global membership organization and community of women corporate directors. A 501(c)(3) not-for-profit organization, the WCD Foundation has 74 chapters around the world, including recent launches in South Korea, Puerto Rico, and Uruguay. The aggregate market capitalization of public companies on whose boards WCD Foundation members serve is over $8 trillion. In addition, WCD Foundation members serve on numerous boards of large private and family-run companies globally. For more information visit www.womencorporatedirectors.com or follow us on Twitter @WomenCorpDirs, #WCDboards.

 

About Spencer Stuart

At Spencer Stuart, we know how much leadership matters. We are trusted by organizations around the world to help them make the senior-level leadership decisions that have a lasting impact on their enterprises. Through our executive search, board and leadership advisory services, we help build and enhance high-performing teams for select clients ranging from major multinationals to emerging companies to nonprofit institutions.

 

Privately held since 1956, we focus on delivering knowledge, insight and results through the collaborative efforts of a team of experts – now spanning 56 offices, 30 countries and more than 50 practice specialties. Boards and leaders consistently turn to Spencer Stuart to help address their evolving leadership needs in areas such as senior-level executive search, board recruitment, board effectiveness, succession planning, in-depth senior management assessment and many other facets of organizational effectiveness. For more information on Spencer Stuart (Twitter: @SpencerStuart), please visit www.spencerstuart.com.

 

Boris Groysberg

Boris Groysberg is the Richard P. Chapman Professor of Business Administration at Harvard Business School. Professor Groysberg’s work examines how a firm can be systematic in achieving a sustainable competitive advantage by leveraging its talent at all levels of the organization. He is the coauthor, with Michael Slind, of the book Talk Inc. (Harvard Business Review Press, 2012). Follow him on Twitter @bgroysberg.

 

Deborah Bell

Deborah Bell is an independent researcher of organizational behavior whose work focuses on leadership, drivers of success, and organizational effectiveness and dynamics, especially at the board level.

 

Yo-Jud Cheng

Yo-Jud Cheng is a doctoral candidate at Harvard Business School whose research focuses on CEO succession, top management teams, and corporate governance issues.

 

Methodology

This survey was conducted through a partnership between Professor Boris Groysberg and Yo-Jud Cheng from Harvard Business School; WomenCorporateDirectors Foundation, led by Susan Stautberg; Spencer Stuart, led by Julie Hembrock Daum; and independent researcher Deborah Bell.

 

About 4,000 board members of companies headquartered in 60 countries (U.S. boards made up 48% of the sample) responded to the survey. Results are based on all responses submitted between October 12 and December 1, 2015. The data were analyzed along several dimensions including gender, company ownership, geography, and industry (not all respondents provided information on these dimensions). Boris Groysberg and Yo-Jud Cheng are continuing to work with Harvard Business School’s Global Research Centers to increase the response rate in certain countries and regions.

 

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