Deloitte survey finds increase in number of boards on which women account for one quarter to one half of seats
Increasingly corporate boards are saying it’s time for change -- not only in terms of top managers at the companies they serve, but also within their own ranks.
According to the 2014 Board Practices Report by Deloitte’s Center for Corporate Governance and the Society of Corporate Secretaries and Governance Professionals, board refreshment is high on the must-do list for 2015. In fact, it’s already top-of-mind.
Fifty percent of board members of 250 public companies surveyed said a new director has joined their board within the past year. Women and ethnic minorities have been the biggest beneficiaries of recent board turnover. Minorities made gains on the boards of financial services companies, rising 9 percent from 2012. Eighteen percent of those polled said their boards added more women and the portion of companies surveyed that say between one quarter to one half of their board seats are currently occupied by women, is nearly 25 percent, compared with 18 percent two years ago. Among recent high-profile women board appointees are YouTube CEO Susan Wojcicki, who joined Salesforce.com’s board on December 5, and Nina Vaca, CEO of Pinnacle Technical Resources, who replaced Roger Staubach on Cinemark Holdings’ board on November 13.
However, the makeovers don’t seem to include youth. The survey found very few directors of ages 40 and below, and more than half the respondents say those they consider youngsters on their boards aren’t younger than 50. There seem to be greater opportunities for younger people to join the boards of small-cap companies. Of the respondents from small-caps, 15 percent say their board includes a director between the age of 26 and 40. The trend going forward, however, is expected to be that younger directors will be seen as advantage, particularly as boards try harder to recruit tech-savvy members.
While board turnover is largely attributed to age limits and director retirement, boards are getting the message from activist shareholders, organizations such as Catalyst and the 30 Percent Coalition, consumers and the media that the same old, same old isn’t going to cut it any more. Fifty-five percent of boards have discussed how to prepare for an activist shareholder, including presumably being more nimble when it comes to board composition.
Given that, it’s not surprising that 85 percent of those polled said the top priority for boards next year is strategy. Uncertainties in the global economy persist, while regulatory and compliance issues continue to increase. The survey finds that 52 percent of respondents say their boards are discussing strategy at every board meeting and 83 percent note that the amount of information about strategic risks that is provided to the board has increased over the last 12 months. Risk oversight is the second most portant priority among respondents.
Boards are paying more attention not only to their own composition, but that of their companies’ senior management teams. CEO succession planning is expected to get more scrutiny in 2015, as will cyber-security with media reports of data breaches becoming much more common.
What does all this mean for corporations? Management needs to step up to the plate. ‘Management teams are best positioned to help support the board in its oversight function and can do so through a number of means, including ensuring that there are open lines of communication, providing opportunities for access to management, clarifying the delineation of duties and responsibilities between management and the board, and through effective and timely reporting,’ says Maureen Bujno, director at the Deloitte Center for Corporate Governance.
As for boards, next year much ado will be about board composition. ‘Boards should strive to have effective, current, and active processes and policies in place with regard to board refreshment,’ says Bujno. ‘[That] may include a board skills matrix and robust board and individual assessment, to continually ascertain whether the board has the right mix of skills, experiences, and perspectives to oversee strategy, risk, cyber, consumer awareness.’
The bottom line: much work will be required of companies and boards to bring about change that more stakeholders are now clamoring for.
