Over the last five years, corporate directors’ criticism of board performance has not driven much change to board composition, even though nearly half feel that another board member should be replaced.
While 45% of respondents suggest there are inefficiencies in the boardroom, 39% of directors say no change has been made as a result of their last board assessment, according to PwC’s 2023 Annual Corporate Directors Survey. Both new and long-tenured directors see room for improvement in board effectiveness.
“This year, 75% of directors express confidence that their boards could effectively remove underperforming directors,” the report said. “Yet refreshment remains a challenge. Not surprisingly, the directors who think their board’s assessment processes are ineffective are more likely to desire change.”
The report, based on responses from US board members, notes that there are mixed feelings from directors on the efficiency of their board’s core practices. More than eight out of ten directors say they have sufficient time to prepare for meetings and for committee responsibilities, but directors with tenure of less than two years are more likely to see room for improvement in certain board practices, the report said.
Mixed view on crisis management
While a large majority (96%) say their board is prepared to guide the company through a crisis, about one third (32%) haven’t defined board leadership’s role in a crisis, and nearly half (48%) “haven’t agreed upon a written escalation plan”.
Additionally, 70% of board members say they have not participated in a tabletop exercise, which is essentially scenario planning for crisis management.
With board agendas growing in complexity, continuing education of members is an area that requires more attention. The report advises boards to do the following to improve their effectiveness:
- Cultivate relationships with the management team supporting directors; invite them to present or to join the board for broader social events outside of formal board meetings.
- Revisit committee read-outs — provide committee chairs with sufficient time to report on critical matters.
- Build in education sessions to board agendas. Have management take the lead in identifying programs that could be beneficial to directors’ ongoing development.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.
