As the history of business has shown, the relationship between a company's executives and board members can be crucial, especially in instances of poor company performance or when questions of the legality or morality of company decisions come under scrutiny. Executives, especially CFOs, can have their leadership challenged by board members. They must learn to operate within the confines of the board and work with directors if they wish to be effective.
But a new survey from PwC and the Conference Board shows executives are lacking confidence in some directors and believe overall their board could be more engaged.
The survey of 600 C-suite executives last fall showed that nearly nine in 10 (89%) wanted at least one of their directors replaced. Others would go further, with 41% of the executives desiring more than two of their board members to be replaced. One-third (34%) would be OK with only two directors leaving. Whether motivated by a desire to see fresh faces, to improve collaboration, or to build a group of directors that includes certain expertise, the survey data showed that those who want change on their board of directors want lots of it.
Expertise and Communication
Among the areas where boards lack understanding, said one-fifth of surveyed executives, was in the intricacies of executive compensation packages and incentives, in which directors have a say.
However, a majority of executives still believed their boards could function well as overseers. According to the PwC-Conference Board survey, about two-thirds (67%) of executives believed their board had strong financial expertise, while just over half (55%) attributed directors with operational expertise. Nine in 10 (90%) executives believed their board of directors understood cybersecurity and data protection at least “somewhat” well.
Data also showed C-suite confidence in boards' ability to communicate with stakeholders, as 68% of executives reported that directors can effectively engage with the company’s shareholders. However, some executives believe the contents of director communications could use improvement. Nearly half (48%) of executives said they weren’t sure if their boards understood the priorities of the company’s shareholders, while almost six in 10 (57%) said their board members don’t understand the concerns of stakeholders like employees, customers, and regulators.
Where Boards Lag Behind
According to executives, board members aren’t as productive as possible. While a majority (82%) said their boards aren’t overstepping their roles, few felt their boards were being sufficiently challenged. Only 33% said their boards ask probing questions, and only 21% believed board members spend sufficient time on their job.
Over a quarter (26%) of executives said one or more directors are consistently unprepared for board meetings.
ESG is one area in which executives believe their boards could do more. Executives reported a lack of attention to both ESG (71%) and climate (65%). In the eyes of executives at large companies, their board members are better positioned to help with ESG: 70% of executives at companies with revenue greater than $5 billion reported their boards understood ESG strategy. For companies with less than $1 billion in revenue, that figure dropped to 59%.