Mending The Disconnect Between Executives And Their Boards

Survey findings paint a picture for how boards and executive teams can align and work better together moving forward.

It’s rare for corporate directors to receive candid feedback from their company’s management teams. The nature of the board of directors’ oversight role makes it an uncomfortable proposition. But the view of the boardroom from the C-suite can be illuminating, surprising—and most importantly—useful. Our newly released Executive Survey, published in coordination with The Conference Board, shines a light on what the C-suite thinks of their boards’ overall effectiveness, and where they need improvement. Although this report highlights a disconnect between executive teams and their boards, it also helps paint a picture for how boards and executive teams can align and work better together moving forward.

Let’s start with what executives told us. Virtually all executives surveyed (89%) said at least one director on their board should be replaced, and 74% said two or more directors should step down. From the vantage point of executives, it’s safe to say they feel there is much room for improvement. Here are a few of our top findings from the survey:

• Executives are dissatisfied with board performance. Even though executives praise directors for their strong grasp of core oversight areas, independence and use of sound judgment to hold management accountable, the majority (71%) of executives still rate their board’s overall performance as fair or poor.

• While experience can be an asset, many executives are concerned about over-committed and long-serving directors’ impact in the boardroom. A majority (60%) of executives view long-serving directors’ unwillingness to retire as the biggest hurdle to more diverse boards. More than half (53%) of those surveyed said their board includes members whose long tenure has contributed to declining performance. Giving extra weight to a veteran director’s opinion, dismissing what others have to say seems to be part of the problem. When we asked directors to identify unproductive dynamics they’ve observed in their boardroom, the top choice among executives was excessive deference to long-tenured directors (42%).

• Director preparedness falls short. Many executives see directors’ preparation and time spent in their role as insufficient. When asked, fewer than one in four executives (23%) said their board is fully prepared for meetings, and only 27% said directors spend enough time on their duties.

• Executives believe directors lack sufficient understanding of crucial emerging topics like cybersecurity and ESG. A majority of executives (70%) rate their boards’ ESG expertise as fair or poor, the lowest scores for any subject matter that we asked about. In addition, 64% of executives said their directors lack cybersecurity acumen. The grades were even worse from those who know the most about it—three quarters (75%) of respondents in the technology and IT functions rate their boards’ cybersecurity expertise as fair or poor.

Bridging the gap: Working together to strengthen oversight

Effective corporate governance requires collaboration between boards and management teams. Though the duty of oversight belongs to the board, the onus can’t all be on the directors themselves. Executives have an active role to play as well. Executives can help directors stay prepared and informed and doing so can benefit companies in the long run. Working together will be key. So where do we go from here?

For executives:

• Help the board stay prepared. Directors need to remain informed to be effective in their roles. When providing data or other information to the board, make sure management is striking the right balance—it can be just as difficult for directors to have too much information as too little.

• Foster connections between executives and directors. It can be helpful for board members to not only hear directly from executives who are dealing with high-priority areas on the front lines, but also to have the chance to build relationships with them. It builds trust while also keeping directors informed.

• Understand that board education is a shared responsibility – and an ongoing opportunity. Corporate directors don’t have day-to-day involvement in company affairs and aren’t subject matter experts in every topic that comes before the board. Ensure that enough time is devoted to bringing directors up to speed on rapidly evolving areas that are priorities for the company and its stakeholders, such as data security and privacy, carbon emissions, and diversity and inclusion.

• Play an active role in director onboarding. Executives have a role to play in making sure new directors understand the essentials of the business from day one—and making connections with relevant management functions is a good place to start. Whether one-on-one discussions happen virtually or in-person, it’s important for new board members to develop rapport with the CEO’s direct reports to become fully immersed in the company’s culture and operations.

For directors:

• Take full advantage of annual board and committee self-assessments. Findings from our recent Annual Corporate Directors Survey showed that 88% of directors say their board has an effective assessment process. Yet more than half (52%) say it’s too much of a “check-the-box” exercise. It still isn’t uniformly expected that boards perform individual director assessments, but this is something to consider. Honest and thorough feedback that leads to action is a gift and can pay dividends in the long run.

• Don’t shy away from director succession planning. For many boards, the search for new directors doesn’t truly get underway until a vacancy is imminent. Building a pipeline of qualified, diverse board candidates can make it easier to add the right skills and attributes needed to not only fill an empty chair, but help the board get ready for what’s next.

• Embrace continuous learning. While almost two-thirds (64%) of directors say they are now linking ESG to their company’s strategy, only 25% say their boards understand ESG risk very well. As I mentioned earlier, executives also rate directors’ ESG expertise poorly. When it comes to emerging topics such as this, it’s a good idea to go deeper and reach out to management to arrange briefings—or look to outside experts to get a fresh perspective.

• While boardrooms are becoming more diverse, shareholder and investor expectations are on the rise. Getting serious about increasing boardroom diversity is critical in today’s environment, but executives feel directors rely too heavily on their own professional networks to achieve sufficient board diversity. Reaching out to direct search firms and other consultants every time there’s an opening can be a great way to connect your board with diverse candidates.

The findings from this survey give directors a glimpse into the areas that executives feel require more attention—and their concerns have validity. Efforts aimed at advancing D&I and improving director expertise and board effectiveness may not yield immediate results. These are challenging topics and require tough, continued conversations. If executives and directors are willing to put in the time and effort to bridge their differences and align their thinking, they may ultimately have what they need to prepare the company to tackle future challenges.