A survey from PwC of around 800 corporate directors found that 47% believe a fellow director on their board should be replaced, and of those almost one-fifth (18%) believe multiple directors should leave.
This level of disagreement would be a risk for a corporate board and its ability to steer a company through an uncertain future. But stronger mechanisms for feedback and accountability for board members on an individual basis can help, according to Maria Moats, governance insights center leader at PwC.
“Board assessments need to be more rigorous,” Moats told Fortune. She added that individual directors need to be evaluated against their contributions to company priorities and pointed out that 52% of directors surveyed said their assessments were a “check the box” exercise.
The consulting firm’s annual survey of corporate directors also covered the strategic priorities of boards today, noting ESG, executive pay, digital transformation, talent, and diversity as key issues.
For the first time in the PwC survey’s history, talent strategy was the top priority needing more time and attention. Separate research from the National Association of Corporate Directors and Heidrick & Struggles shows that boards are increasingly looking for HR expertise and that the need for different professional backgrounds is also driving board diversity forward.
“Ten years ago, you would have seen a lot more in terms of board priorities around strategy and risk mitigation…and strategies related to the operations of the business,” Moats said.
Sixty-four percent of directors said ESG is linked to company strategy, but just 25% believe their company has a firm grasp of the risks.
“If you make a commitment, you have to be able to have a way to track progress towards that goal,” Moats said, explaining the risks. “As a board, you need to understand how management is going to track progress towards that goal, because depending on what happens, you might need to make additional disclosures about that commitment.”
Opinions on diversity have also changed. In the 2020 survey, 71% of directors believed board diversity did not require action, that it would “take care of itself.” That figure dropped 38 percentage points to 33% in 2021. This highlights the extent to which senior-most corporate leaders are aware of the global DEI problem.
This change was accompanied by a 13-point increase in support of tying executive pay to D&I goals, now up to 52%. Female directors are significantly more likely to support tying DEI goals to executive compensation, at 74%, compared with men, at 44%.
The most common actions taken to address DEI on the board were replacing a retiring director with a diverse candidate (69%) and disclosing information about board diversity in the company’s proxy statement (54%).
Nearly a third of companies (31%) are engaged with shareholders on the topic of board diversity, and 33% increased the size of their board in order to add a diverse director. Over 80% are making sure they interview a diverse slate of candidates and discuss diverse candidates with their search firm.
The main barriers to diversity, in the eyes of the directors surveyed, are a lack of qualified candidates (45%) and long-serving board members’ reluctance to retire (39%), while 38% said directors still rely on their personal network to source candidates for board openings. Male board members were more likely than women to believe in the pipeline problem and less likely to believe the personal network issue.
Around a third of board members also believe that diversity initiatives lead to “unneeded” or unqualified candidates. The report noted that male directors were significantly more likely to have those feelings.
“The more women and diverse individuals do get on boards, the more I think that they will support accountability,” Moats said.
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