A recent survey of C-Suite executives and CEOs offers some sobering criticism of corporate directors with a mix of encouraging insights about the relationship between boards of directors and their management teams. This new data suggests areas that boards and management teams may need to work on to improve their ability to work together as they face ongoing corporate governance challenges.
According to The 2024 Board Effectiveness Survey conducted by PwC and the Conference Board polled 600 executives on a variety of topics related to corporate governance. The findings that were most positive include:
- 76% of executives trust their boards to engage with shareholders, up from 68% in 2022.
- 68% trust their boards to make decisions consistent with the company’s purpose and values, up from 50% in 2022.
- 84% of executives don’t think their boards overstep their oversight role.
- Most executives say boards have a strong understanding of core oversight areas—80% say boards have a strong understanding of corporate strategy; 71% say boards have a strong understanding of Key business risks and opportunities, and 70% say boards have a strong understanding of executive compensation.
This data suggests the trust between management and corporate boards is growing in several areas. Unfortunately, in spite of the positive findings, the survey also revealed some negative trends:
- Only 30% of executives rate their boards’ overall performance as excellent or good.
- Only 40% of executives say they don’t think their boards effectively understand their role of oversight versus that of management.
- 69% of executives trust their boards to prioritize board diversity, but only 19% think their boards are diverse enough
- 69% of executives think some of their directors are overboarded, compared to only 7% of directors.
- 92% of executives say one or more directors on their boards should be replaced.
USE SURVEY FINDINGS TO ASK QUESTIONS
These types of surveys can illuminate starting points of discussion that can build greater trust and efficiency between boards and management. There is value in high level executives and board directors being willing to engage each other with constructive criticism and alternate ideas about how to do things in the spirit of creating greater value for shareholders and stakeholders.
For example, the fact that management appears to show greater trust that boards can effectively engage with shareholders as well as can make decisions consistent with the company’s purpose and values over the last year might inspire both sides to discuss in more detail why the trust in those areas has grown. Directors might ask:
• “What did management find more appealing or effective regarding how the board interacted with shareholders in the past 12 months?”
• “Which board decisions regarding the company’s purpose and values were particularly useful to management, and why?”
Focusing on what worked well could give rise to other positive steps both management and the board can take to improve board effectiveness.
Additionally, conversations about some of the negative trends could lead to major improvements in the interaction between the board and management team. For example, as the responsibilities of corporate directors continue to expand and evolve, an internal survey to determine what each director and member of the management team felt constitutes overboarding might be constructive. Trying to determine why each director and member of the management team might believe a director needed to be replaced might also help clarify the type of contributions the company needs to accelerate growth. While these are difficult issues to navigate, companies that deal with them upfront will likely benefit more in the long run.
