We are in an era of seismic change, but if you ask public company board members across the country, you’ll find them holding steady at the wheel, with a stronger-than-ever focus on growth, strategy and performance. For the 20th anniversary of the What Directors Think survey, we take a look into what’s top of mind for America’s corporate directors as we enter 2023—and how directors’ focus and the role of boards have changed in the past 20 years.
Every year since 2002, Corporate Board Member has been surveying public company board members in the United States to take their pulse on the issues that are top of mind, the challenges they face in the year to come and the processes they seek to improve. For our 20th anniversary edition, in a year of continued tumult on many fronts, we partnered with Diligent Institute to see what has changed since SOX was the hot issue and what is on the horizon for the years ahead. Overall, 300 qualifying directors participated in the research. The full findings are below, or you can download the PDF report.
Growing Revenues (60%)
Increasing Profitability (50%)
Directors who say ESG is getting too much attention in the boardroom
With the roles and responsibilities of the board having greatly expanded over the past decades, directors find themselves divided over whether traditional board structures still align with today’s increasing areas of risks and opportunities. Our latest survey found 45 percent believe those structures remain adequate, but a full third question their relevance—and nearly one quarter believe they need to be revisited.
The main sticking point, directors say, is the time they now must spend in meetings due to the proliferation of issues on the agenda. Two-thirds of those polled for this year’s survey said the role of the audit committee has dramatically expanded since Sarbanes-Oxley—and 35 percent say it now rivals that of the full board in terms of complexity and scope. What’s more, three-quarters say the role and responsibilities of the board are going to continue expanding in scope over the next 3-5 years.
of directors say board responsibilities will expand in the next 3-5 years
The trend isn’t entirely new. The hours spent in board meetings have been climbing for a long time, according to our earlier surveys. For instance, in 2002, we found nearly half of directors averaged less than two hours per meeting, and for almost as many, meetings lasted three to four hours. Fewer than 7 percent spent between five and six hours at each meeting, and that’s about as long as all but a very few board meetings ever ran.
Just one year later, the percentage of directors who got away with meetings lasting less than two hours dropped by nearly 90 percent and has been a rarity ever since. Meanwhile, the percentage of those for whom the average meeting lasted a full day rose from less than 5 percent to 25 percent by 2006, and then to 39 percent by 2010.
But directors say though the job is more demanding, they remain highly confident in their ability to tackle the growing agenda. Not one of those participating in the survey this year said they doubted their or their fellow directors’ ability to provide top-level oversight. In contrast, that proportion was 88 percent 10 years ago—still high but with room for error.
Perhaps the difference is that director evaluations were not as prevalent at the time. Twenty years ago, our 2002 What Directors Think survey found just over 33 percent of directors reporting having regular board evaluations. The increasing scrutiny into the oversight process of boards down to their makeup in terms of skill sets and experience may have helped increase confidence on that front.
Nevertheless, despite the creeping time investment, 82 percent of directors feel they are adequately paid for their role—a stark contrast to opinions shared in 2003, where only 20 percent of survey respondents felt that way.
Kim Williams on boards’ continuously expanding agendas
Raj Guptaj on the increasing amount of time required to be a board member
Steve Halverson on being responsible to all stakeholders
There’s been great progress in companies’ efforts to increase diversity at the top, compared to decades ago, and recent research by Corporate Board Member found most directors are now pleased with the level of diversity among their own ranks. So much so that just last year, in our 2022 What Directors Think survey, nearly half of surveyed directors said their board had achieved their diversity goals.
This may explain why, in this year’s survey, only 10 percent of directors listed gender diversity as an attribute for the selection of the next board member, and only 20 percent said the same of racial diversity.
A more important attribute, according to the survey data, is diversity of skills and backgrounds. A quarter of directors said their next board member would need to fill a skills gap at the table.
Contrary to some of the headlines of the past few years, the pressure to further diversify boards isn’t coming from shareholders, either. Only 19 percent of directors surveyed for this year’s report said shareholders had requested to discuss that with the board or management over the past 12 months, despite the proposed diversity requirements at the SEC.
Emily Peterson Alva on making space for directors with specialized skills
Cindi Keith on constant change and the limited ability to add new directors
CEO compensation has always been a controversial issue but perhaps even more so in recent years, with the rise of ESG and pay ratio disclosures. Headline after headline highlight the growing pay gap between the top chief and front-line employees, and boards have been pressured to justify the large bonuses they’re handing out—particularly in times of underperformance and unachieved guidance.
Ten years ago, in 2013, 70 percent of the directors we surveyed told us the SEC’s proposal for disclosure of CEO/median employee pay ratio would be misleading if approved—and 47 percent said it would be extremely difficult, if not impossible, to accurately compile and report. Only 17 percent felt it would provide meaningful information to investors.
Fast-forward to today and our latest survey finds 24 percent of directors who said shareholders had asked to discuss CEO compensation with the board over the past 12 months—placing the issue third on investors’ list of concerns, right after the traditional matters of financial performance and plans for growth.
But the relationship between shareholders and boards on this issue remains fragile, at best. Very few directors have agreed, over the years, that shareholders should have a say in approving CEO compensation packages, though that proportion has risen over time. When we began our What Directors Think franchise 20 years ago, three-quarters of the board members we had then polled said they were against the idea of requiring that the CEO’s total compensation be no more than a reasonable multiple of the least compensated employee.
At the time, there was also much less turnover, and boards weren’t as concerned with a crisis in that area. Our earlier surveys found that most boards used to handle management succession only as the need arose. Of course, that proportion has been decreasing over time and today, 61 percent say their board not only has a CEO succession process, they also have a plan they believe can be deployed without a hitch should the CEO depart suddenly.
While that is progress, it doesn’t mean it’s easy. With 26 percent of the votes, CEO succession now ranks in fourth place among the issues directors find most challenging to oversee today—behind things like cyber and data security or digital transformation, and ahead of thornier matters like M&A and regulatory compliance.
of directors said their boards did not have a CEO succession process
It would be easy to think the priorities of the board have changed in two decades, but the directors we polled for this year’s survey say they are still very much focused on the core duties of any public company board: growing revenues and increasing profitability. Exploring M&A, also a long-time charge of boards, ranks third on the list.
Newer to the board agenda is digital transformation, which 42 percent of polled directors listed as a priority for 2023-24. Just a year prior, in our 2022 survey, only 19 percent of directors had listed digital transformation as an issue that would bear impact on future strategy—and only 16 percent had said it would feature as an important item on the board’s agenda for the year.
Of course, there’s no comparing that to 20 years ago. Digital transformation began appearing in some directors’ responses in our 2016 survey, when it was referred to as disruptive innovation. Yet, it wasn’t until our 2019 edition that we saw digital transformation as a staple of board agendas. That year, 71 percent said they believed their board had the “appropriate resources to move the company forward in a new era of digital transformation and disruption.”
“The digital journey requires us to transform our business model,” said one director in the survey that year. “Our consumer is changing, and we need to be ahead of the curve on this. This is the most critical decision our board, and I suspect boards across industries will need to deal with.”
But in our current economic climate, there is also intense focus on cost containment, 64 percent of directors say. And for now, all eyes are on the Fed, which directors say will have the most significant impact on strategy in 2023-24.
These findings, while telling, are also heavily reliant on sector. We’ve found, for instance, that only 28 percent of directors in the IT sector feel the Fed’s decisions will have a significant impact on their company, compared to 80 percent of directors in Financials. Similarly, the impact of labor (more on that in the next section) appears to be more resounding among Consumer Staples companies, where 80 percent of directors rated it as “significant” vs. 36 percent of those in the Energy sector.
Kim Williams on planning for recession
Steve Halverson on the importance of focusing on capital allocation
Nigel Travis on the biggest change in the boardroom
One area that has seen radical change in the past few years is the relationship—as seen through the lens of the board—between the company and its workforce. Some 64 percent of directors in this year’s survey said talent has gained too much leverage in the current labor market, and of that number a full 25 percent think the dynamic will continue for some time, despite the recession.
The numbers certainly point in that direction. Even as the perceived threats from Covid continue to recede, attitudes about workplace policy and practice that were shaped by the pandemic are outlasting it. Among the directors we surveyed, 87 percent said their companies had adjusted their policies on remote work, and 73 percent said they’d created more flexible hours for their workforce. And of those who’d made changes, an equally large number said they planned on keeping them in place at least through the year to come.
But some other changes—most with hard costs—have proven less malleable, even in the face of the so-called “war for talent.” Just 22 percent of directors said their companies had changed their leave or sick time policies in the face of Covid-19, and the numbers were similar when it came to other benefits like childcare and family support policies (21 percent) or expanded healthcare benefits (17 percent).
But then there’s the predicted rush to downsize the real estate footprint of many companies to cater to this new economy. And at least for those we surveyed, that has not yet materialized, with only 19 percent of directors saying it was a strategy they’d adopted in recent years.
Nigel Travis on solving labor issues
Emily Peterson Alva on mitigating labor risks
ESG-related issues have garnered significant public attention in recent years, but they are starting to be seen as less pressing—at least by the directors we surveyed. “Developing/executing our sustainability strategy” and “enhancing/executing our diversity and inclusion strategy” each garnered just 27 percent of the votes when we asked directors to select the elements most important for 2023-24.
ESG’s gradually lower ranking isn’t surprising. Overall, just 7 percent of all directors surveyed said ESG topics are getting “too little focus” in the boardroom right now, with 50 percent instead saying they are getting too much attention (the remainder say they’re happy with the amount of attention these issues are receiving on their boards).
As the role of the board has expanded and evolved over the past two decades, so has the role of the audit committee. According to two-thirds (66 percent) of our director respondents, in the 20 years since the passage of SOX, the areas of risk overseen by the audit committee have dramatically expanded. Additionally, more than a third (35 percent) of respondents said that the audit committee’s role now rivals that of the full board in terms of complexity and scope.
This has resulted in a greater reliance on the internal audit function at the board level. According to over half of our respondents, the internal audit team has an important or very important role in informing strategic board-level conversations.
Raj Guptaj on the evolving role of the board
Cindi Keith on reviewing committee structure
The increasing focus on climate is also adding new responsibilities to the board. The majority of directors reported having had discussions about what the SEC’s proposed climate disclosure requirements mean for their companies, though most say it’s too early to act— even those in the energy sector, where the majority have so far only consulted with experts on the issue.
We observed a similar picture with respect to the proposed cybersecurity disclosure requirements. What’s interesting in this space, however, is the fact that year after year directors continue to rank cybersecurity as one of the most challenging issues to oversee—that’s been the case since we started noting the issue rising in the ranks of board priorities back in 2014, nearly a decade ago.
Directors are also taking a variety of actions to better prepare for SEC rule changes around climate change disclosures and addressing cybersecurity. Over half of our respondents are bringing in external experts and getting briefings from the legal team on climate disclosures. Meanwhile, 40 percent are engaging in director education programs. Only 8 percent are taking no action to better prepare.
For cybersecurity, nearly 60 percent of respondents are getting briefings from their legal team and nearly half are seeking director education programs. Only 5 percent are taking no action.
“What Directors Think” is an annual survey of public company board members in the United States. The survey is designed by Corporate Board Member, in partnership with leading governance experts, to assess trends, challenges and opportunities across boardrooms and provide corporate directors with up-to-date peer benchmarking insights that can support their agenda discussions and oversight process.
The survey is conducted entirely online, via Qualtrics, and fields for a period of 6 to 8 weeks, from late August to mid-October of each year. Select participating directors are then contacted to help shed more light on key findings as part of a one-on-one interview process led solely by Corporate Board Member. The results of the survey and interviews are used for editorial coverage in the Q1 edition of Corporate Board Member magazine, published in January each year, and for the purpose of this whitepaper, distributed at large to the governance community.
This year’s survey, produced in partnership with Diligent Institute for the third consecutive year, was the 20thedition. It gathered 300 qualified responses—all of which are kept confidential and only used in aggregate as reported in this report.
Corporate Board Member, a division of Chief Executive Group, has been the market leader in board education for 20 years. The quarterly publication provides public company board members, CEOs, general counsel and corporate secretaries decision-making tools to address the wide range of corporate governance, risk oversight and shareholder engagement issues facing their boards. Corporate Board Member further extends its thought leadership through online resources, webinars, timely research, conferences and peer-driven roundtables. The company maintains the most comprehensive database of directors and officers of publicly traded companies listed with NYSE, NYSE Amex and Nasdaq. Learn more at boardmember.com.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
Founded in 2018, Diligent Institute serves as the global corporate governance research arm and think tank of Diligent Corporation, the largest SaaS software company in the Governance, Risk and Compliance (GRC) space. Diligent serves more than 25,000 organizations and over 750,000 corporate leaders in more than 90 countries. Diligent Institute is able to tap into that broad network and highlight the diverse perspectives of corporate leaders from around the world.
Diligent Institute produces original research both on our own and in collaboration with partners, including institutions of higher education and thought leaders in the corporate governance space. We produce over a dozen reports each year, ranging from our monthly “Director Confidence Index,” which measures how corporate directors are feeling about the economy, to in-depth reviews of issues such as ESG (environment, social, governance) practices, to our AI-powered “Corporate Sentiment Tracker” that analyzes data from thousands of public sources to discern what’s on the minds of corporate leaders. Learn more at diligentinstitute.com.