In uncertain economic times, public-company boards have taken a more hands-on approach to shaping company strategy, according to a new survey by the National Association of Corporate Directors. Half of the 631 respondents said becoming proactively involved in the development of long-term strategy is among their top improvement priorities for 2017.
Sixty percent of the public-company directors surveyed said global economic uncertainty — likely stemming from the fallout from the Brexit vote and the aftermath of the U.S. presidential election, according to the report — will significantly affect their companies over the next year. Increased regulatory burden (58%) and significant changes in industry (53%) round out the top three.
To combat such uncertainties, board members are becoming increasingly compelled to oversee the development of future company goals by examining underlying assumptions, competitive dynamics, and alternatives.
“Boards are rightly focused on becoming strategic assets to their companies in the face of growing economic uncertainty and significant short-term pressure,” said Ken Daly, chief executive of the NACD.
However, transforming into board strategists doesn’t come easily. Three-quarters of respondents said external pressures to meet short-term goals are stronger than ever and are now undermining management’s ability to achieve long-term objectives. Moreover, 29% said a focus on the short term directly impacts the board’s ability to effectively oversee long-term strategy.
“Directors acknowledge that this shift in the board’s role in strategy oversight faces significant barriers,” the report said.
The move away from a more traditional review-and-approve process has proved a heavy burden for many boards of directors. Forty-four percent of respondents said there’s not enough time during board meetings for in-depth discussion about strategy, while 43% percent said pressure-testing the validity of uncertain assumptions underlying strategy has become increasingly challenging.
In fact, more than a third of respondents indicated that their board allocates too little time for addressing many key factors, including CEO succession, cyber-risk oversight, sustainability, and board succession.
Directors also say they need better data, not simply more of it. Almost half of those surveyed want to see improvements in the quality of the information they receive. Forty-nine percent want to see better dialogue with the executive team, and 46% expect the quality of information presented to the board to improve.
The most common complaint was a lack of transparency, meaning directors want management to cut to the chase.
“When asked about the drivers of dissatisfaction … the largest proportion of respondents indicated the information doesn’t provide sufficient transparency into performance issues,” the report said. “In other words, they find it difficult to identify the bad news.”
Fifty-six percent of respondents said boards devote too little time educating themselves on relevant topics like cybersecurity and new technologies. Directors said they spend on average of roughly 18.5 hours on education annually, a level that has stayed relatively flat in recent years. Managing executive talent (38%) and cyber-risk oversight (37%) are also areas that boards feel need more attention.
The Public Company Governance survey polled mostly independent directors and their general counsel from companies with market capitalizations of $2 billion or more.