A New Look for Boards in 2022
Corporate boards are paying more attention to tech and talent this year. Association leaders should take heed.
Boards are thinking about the future, and they see three concerns: talent, tech, and what they need in a CEO.
That’s the takeaway from two recent reports from the National Association of Corporate Directors on the state of governance in 2022. According to NACD’s Inside the Public Company Boardroom Report, boards are making strides in recruiting more tech-savvy leaders. For instance, a larger proportion of incoming board members have technology skills (35 percent, compared to 30 percent in 2020). There are also more finance smarts: 53 percent of incoming board members come with finance expertise, compared to 43 percent the prior year.
Moreover, while gender balance on boards remains a work in progress, it’s substantially improved: According to NACD, men outnumber women on boards three to one, compared to 2018, when women represented less than one in five corporate directors.
So it seems that boards (at least in the corporate arena) are internalizing some of the needs that have starkly emerged during the COVID-19 era: a closer eye on finances, an ability to be more flexible with technology, and a responsibility to create more representative environments.
There’s a good lesson there for association boards, not just because those corporate leaders often run the companies that make up association membership. It’s also because this shift in attention may help boards see some of the concerns that are on the horizon.
Chief among them, according to NACD’s 2022 Governance Outlook, is talent: 70 percent of survey respondents from a pool of 250 corporate directors said that “competition for talent” is the top concern for their organizations. This far outpaces the second concern, the “increasing pace of digital transformation.” But as the report notes, the two issues are related—they speak to the changing ways that people are working now and their increased comfort level with changing jobs. As the report puts it, “a variety of factors affecting the way that work (more remote, more virtual, and with more digital tools) gets done now are likely to impact not only how organizations operate but also the discussions that boards have.”
And because these are high-level challenges, there are higher expectations for CEOs to manage them. Survey respondents cited succession planning as one of their most critical tasks. It’s more important than ever, according to the report, to have succession plans that meet the organization’s evolving needs.
According to Barton Edgerton, associate director of content at NACD and the lead author of the report, the pandemic and a focus on diversity have both prompted boards to look for a broader range of abilities from the potential CEO pool, now that they’re more closely scrutinizing talent and digital transformation. “They now consider a variety of skills that reside outside of the traditional CEO profile,” he says. “Board and CEO succession planning likely requires candidates from outside the traditional pool or current and former CEOs whose skills may be centered on financial expertise, strategy, and general management.”
Indeed, general strategy and management skills are somewhat on the wane, according to the survey: Outgoing directors were more focused on those abilities than the incoming members are. The tradeoff is that boards now have more tech smarts, and that’s important. But going forward, successful organizations will need to balance new needs with traditional ones.
“The pandemic has altered the trajectory of many organizations, meaning that plans set just two years ago may be obsolete,” Edgerton says. “If the strategy of the firm has changed, the board should work to ensure that its members, the executive team, and their succession plans are fit for purpose to ensure that the organization can meet its new short- and long-term goals.”
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