Corporate board members expect major changes

What keeps corporate directors awake at night? Advances that could upend a successful business model, rapidly shifting global economies, and cyberattacks, to name a few.

The list of concerns and worries came from a survey released Thursday by the US National Association of Corporate Directors, and asked 587 board members from 520 publicly traded companies about the challenges their companies will face over the next year. Most of those surveyed were based in the US.

The group of board directors, who sit in unique positions to observe companies’ inner workings, indicated that next year’s challenges will include grappling with significant industry changes (58%), business model disruptions (46%), global economy shifts (46%), cybersecurity threats (38%), and competition for top talent (36%).

The annual NACD survey gives glimpses into the trends that top business leaders are eyeing, as well as how board directors are shifting their interactions with company leadership in an increasingly complex business environment.

Here are some more takeaways from the NACD’s 2017–18 Public Company Governance Survey:

Upending industries. One of the most consistent concerns that surveyed directors identified was the possibility that their various industries could undergo rapid transformation, and individual companies may struggle to keep up.

The NACD survey found that 58% of corporate directors believe major industry changes will affect their companies in the next year.

When pressed, the directors listed technology advances, consolidation of industries, and shifting regulations as the sources of change.

Outside pressures. Headlines about several social controversies aren’t necessarily translating to consternation on most boards, the survey showed.

Only 6% of corporate directors identified climate change as a top concern in 2018, and only 2% saw the changing role of business in society as something that would affect their companies in the next year.

But there are lingering concerns about the business effects of the polarised political environment in the US, with 35% of respondents identifying it as a challenge to be dealt with in 2018.

Short-term focus. Many directors (74%) felt the long-term goals of companies were being undercut by corporate leadership’s push to deliver short-term results. This was especially heightened as a worry on boards dealing with activist shareholders, according to the NACD survey.

Of those that had been approached by an activist over the last year, 85% said they felt management was too focused on short-term results and set aside more strategic goals. That response was largely absent in respondents who hadn’t been dealing with activist shareholders.

Finding time for the bigger picture. Board members want to step up and be more involved with company strategy, the survey found. More than half of those surveyed felt the board wasn’t dedicating adequate time to have in-depth discussion about strategy, while 71% said board members need to have a better understanding of their companies’ risks and opportunities.

On top of that, 67% said the boards they sit on need to do better at participating in strategic business plans and monitoring how long-term strategies are met.

CEO ability to handle change. Confidence in executive leadership isn’t absolute. A little more than half (54%) of those surveyed were confident that the corporate leadership at their companies could weather major changes in geopolitical spheres.

Finding new leaders. Another top priority identified in the survey was a need to have a plan in place to replace executive leadership. Nearly 60% of directors wanted to make CEO-succession planning a priority in 2018, a jump from last year, when 47% wanted a plan in place.

—Sarah Ovaska-Few is a US-based freelance writer. To comment on this article, contact Neil Amato, a CGMA Magazine senior editor.