The future of board time and priorities has been saved
The future of board time and priorities
How are boards navigating this complex environment?
Business volatility is becoming more common. How is it affecting board time and priorities?
Board members may be reconsidering certain aspects of how they operate
A multitude of crises in recent years—a global pandemic, wildfires, severe weather events, social unrest, supply chain upheaval, talent shifts, inflation and other economic issues, and the war in Ukraine—has created turmoil in business, governments, and society. It’s hard to imagine any company or organization that was untouched by at least a few of the dramatic events that have unfolded. It’s almost as if turmoil is the new norm.
How is the critical inflection point we are now facing helping boards identify opportunities to improve the way they operate and define their priorities? How are boards spending their time fulfilling their oversight roles? What is more important for boards today than it was five or 10 years ago?
To help answer these questions, Deloitte’s Center for Board Effectiveness and the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School have collaborated on an initiative to determine how boards and individual board members may be shifting their priorities as well as how this shift may be affecting the way they allocate their time.
In a series of roundtable discussions, we explored how board members may be reconsidering certain aspects of how they operate. Participants signaled a recalibration with respect to how they apportion their time on matters such as monitoring activities, providing resources to the organization, and providing stewardship. They also may be rebalancing how they prioritize their focus on critical issues such as financial performance, risk, strategy, talent, and governance.
Boards were already beginning to shift in response to a broad call for corporations to reconsider their historic focus on shareholder primacy. Many boards have expanded their focus to consider the interests of customers, employees, suppliers, and other stakeholders while also focusing on generating long-term value for shareholders.
Oversight is, of course, a primary responsibility of the board. However, as turmoil and uncertainty persist over time, some board members may be finding ways to add greater value by employing their deep operational experience in various areas to drive management’s thinking on strategy. Board members can provide valued perspectives to management and serve as resources to bring alternative points of view and help promote engagement among a wide variety of stakeholders in strategy discussions.
Our initial analysis of an ongoing survey of board members is providing us with corroborating signals. We see indications that many board members are ready to lend their considerable topical knowledge as an asset to be leveraged when companies are navigating uncharted waters.
On a clear day
We began our discussions by asking board members, corporate secretaries, and general counsel to reflect on the role of a director “on a clear day,” or at a time when the company is humming along under what it considers to be normal operating conditions. We asked them to consider how a director’s role might be balanced under these conditions among three critical board roles:
- Monitoring—providing management oversight
- Resource provision—providing insight or contacts to management
- Stewardship—acting as a representative voice for the company’s diverse stakeholders, such as shareholders, employees, customers, vendors, and communities
If each of these three domains—monitoring, resource provision, and stewardship—represented a corner of an equilateral triangle, where might the director’s role land in relation to each of these three corners?
Most board members placed themselves somewhere near the center of the triangle, perhaps leaning partially or fully toward a mix of monitoring and resource provision with less emphasis on stewardship. A few board members landed decidedly in the monitoring corner, regarding oversight to be their primary role almost to the exclusion of providing resources or stewardship. Only a few leaned toward the stewardship corner, and those that did tended to lean toward spaces between stewardship and monitoring.
We followed the “clear day” scenario by then asking roundtable participants to consider what primary role boards play when the company is suddenly facing a crisis.
The majority of participants considering this situation shifted their responses—some significantly, some only moderately—away from monitoring or providing oversight to management. They saw the board’s role as shifting more toward providing counsel or resources to management and acting as stewards on behalf of shareholders.
Board members seemed to signal that providing resources to management was a more worthy endeavor in a time of crisis than when the company is operating under normal conditions.
How are board priorities shifting?
To better understand how boards are setting their priorities and allocating their time as their agendas comprise a growing number and variety of critical topics, we asked roundtable participants to share their insights on how they divide their time and attention with respect to five key issues: financial performance, risk, strategy, talent, and governance.
In the discussion accompanying this exercise, we heard some common themes:
Whether it does so explicitly or more indirectly, strategy underpins virtually every boardroom discussion. It is an evergreen focus for board members, although some boards appear to be more intentional than others in their consideration of and focus on strategy.
Boards appear to be at a crossroads in considering their governance model and structure. A growing number of issues are being assigned to various board committees for deeper analysis as boards face an increasingly complex array of issues that are evolving rapidly into strategic risks.
As turmoil may become the new norm, the roundtable participants we encountered are giving deep thought to how they can best contribute their time and talent to meet organizational objectives in these five critical areas:
Participants generally agreed that financial performance is a high priority for boards, although some appear to spend more time on this topic than others. A majority of participants indicated their boards spend approximately one-third of their time either in board meetings or committee meetings discussing financial performance or outside of meetings reviewing financial reports. A smaller number of participants indicated financial performance occupies more than half of board time.
Strategy is a broad topic for many boards, touching on virtually all areas of corporate purpose, activity, and performance. Strategy interrelates with operating and financial performance, talent and compensation, risk, sustainability, governance, regulation, technology, and other areas that are on board agendas.
Roundtable participants generally agreed that strategy is a high-priority focus for their boards, yet many also tend to agree that their boards don’t spend as much time on strategy as they might like. Some discuss strategy at every meeting, and some have entire meetings devoted solely to strategy, so approaches vary widely.
Roundtable participants generally agreed that risk is a high-priority topic that boards spend approximately one-fifth to one-third of their time discussing. Boards appear to have different approaches for addressing risk at the board level. To some extent, varied approaches may reflect differences in risk landscape, which may vary by company type, size, sector, geography, and other factors. These appear to be important considerations for how boards prioritize and manage risk oversight.
Risk management oversight is frequently assigned to a committee, usually the audit committee, so that would suggest audit committee members spend more time discussing or focusing on risk than the full board.
Talent has become an increasingly important topic for board agendas over recent years. The pandemic's effect on the labor market, digital and technology shifts driving different skills, and a growing focus on diversity, equity, and inclusion have led to deeper discussions of talent in many corporate boardrooms. These discussions often focus on employment practices, safety considerations, compensation, skills development, succession planning, well-being, and hybrid work arrangements, among other talent-related issues.
For some participants in our discussions, talent is another topic that is highly interrelated with strategy, risk, performance, and governance. Some boards appear to rely on their compensation committee to take a leading position on many talent matters. In practice, we even see some boards changing the name of the committee to reflect a broader focus on talent or human capital issues.
Participants in our roundtable discussions generally indicated their boards place a lower priority on governance matters compared with financial performance, strategy, talent, and risk, and they spend less of their time on governance as well. There appear to be several reasons for this reaction.
Some indicated governance is not typically a focal point during a crisis, especially when an emergency or an unexpected event arises from external forces. Boards may also lean on their nominating and governance committee to address the majority of governance matters, which likely reduces the time required on the board’s part for addressing governance.
In our interaction with board members, corporate secretaries, and general counsel, it became readily apparent that their boards take their fiduciary responsibilities very seriously in times of crisis. It is clear that boards are addressing a steadily rising number of important topics in an increasingly complex global landscape.
It seems natural that boards would regard this as an inflection point—where it might be helpful to take a step back and evaluate board governance with a focus on how they set their priorities, manage their time, delegate responsibilities, and engage with management. There are no ready playbooks for how boards can activate to help their companies navigate a complexity, but boards likely could benefit from spending some time reflecting on how they’ve contributed to crisis management to date and how they can bring the greatest value to their companies when unforeseen events unfold.
This discussion might include consideration of how much information board members expect from management in a crisis situation, and how rapidly and in what format they need this information to be delivered. Boards might consider identifying the team they’d like to have on their bench when a crisis takes shape to enable a nimble response. Board members can also evaluate how they can act as resources to senior leaders without impeding corporate actions.
Board discussion about committee structures is likely to continue or perhaps even escalate in the coming months and years as boards consider how to address an expanding scope of interrelated issues. Do boards need to refresh or reconsider their governance structures? Should boards form task forces or subcommittees to perform initial deep dives on emerging issues to help identify appropriate governance approaches? Or should boards expand the agendas of existing committees to take on emerging topics?
Our research continues. Our teams at Deloitte and Columbia continue to collaborate on developing data-driven research that may help illuminate how boards are navigating this increasingly complex environment. We look forward to sharing further insights in the future.