Boards need to improve

The latest Annual Corporate Directors Survey by PwC US provides insights into the boards of large, public companies in the US. The focus is on the composition and cooperation of these boards. A total of 638 board members (exclusively non-executives) from several industries took part in the survey.

More than half of those surveyed (55 percent) believe that at least one member of their board should be replaced. The main reasons: no meaningful contributions to discussions (41 percent), diminished performance due to long tenure (34 percent), lack of necessary expertise for the role (21 percent), and negative impact on the dynamics of the board due to the interaction style (20 percent).

Despite the recognized need for change, boards are reluctant to act. The most common reasons cited by 25 percent of respondents are collegiality and personal relationships within the board, 21 percent cite the time required to find a replacement, and 19 percent cite the fact that the members concerned will soon reach the mandatory retirement age.

Eighty-eight percent of respondents believe that they can personally take measures to increase the effectiveness of the board—for example, by acquiring additional qualifications, strengthening their relationships with other members, encouraging more diverse viewpoints or innovation, or participating more actively in discussions.

When looking for new members, familiar areas are still preferred: industry knowledge (34 percent), financial acumen (27 percent), and operational experience (22 percent). In contrast, only 8 percent plan to add members with international experience to their board in the near future, even though, according to another study, many executives believe this would be necessary (see study on board efficiency).

On the subject of self-assessment, 78 percent of survey participants believe that it does not comprehensively capture the overall performance of the board and therefore does not provide meaningful insights. The survey also reveals the reasons for this: half of the respondents (51 percent) observe a lack of commitment on the part of the board in the self-assessment process, and almost three-quarters (73 percent) state that no individual assessments take place at all.

Those who seek external support for self-assessment sound more optimistic. Of these, 81 percent rate the self-assessment as effective. However, only 22 percent currently make use of this option.

Further information and details on the Annual Corporate Directors Survey can be found here.