Board Dissatisfaction with Fellow Directors On the Rise

The number of directors who want peers on the board replaced has never been higher, according to PwC’s latest corporate director poll. The study found that 49% of directors think at least one board member should be replaced, and 25% believe two or more should be replaced – and often, those same discontented directors perceive their board assessment practices as a mere “check the box” activity.

A few salient themes:

Board assessments lack teeth:

• Of those who claim a fellow board member should be replaced, 73% said there are inherent limitations to being frank in the assessment practices. The board’s unwillingness to have tough conversations, the prevalence of personal ties with peers and not enough time spent on refreshment were to blame.

Suggested action: Consider individual assessments, third-party experts and clear accountability action plans to improve the assessment process. PwC provides resources in the study.

Social topics still taboo:

• 84% of large company directors are concerned with political divisiveness, but only 57% said their boards have discussed positions on issues like politics, immigration and economic inequality.

Suggested action: Directors should at least understand whether management has analyzed the potential impact of social issues and how the decision to respond (or not) is made. PwC suggests that boards ask management to summarize stakeholder expectations regarding company positions on social issues, too.

ESG fatigue:

• Just over half (52%) of large company directors said ESG is consistently understood by the board and only 32% felt ESG makes a difference to the bottom line.
  
  
• Still, it’s not going away as a topic, so management’s job is to clarify the tie to strategy and the roles different committees play in environmental, social or governance oversight.

Suggested action: Boards should get crystal clear on the strategy and grasp of how resources are allocated to their priorities. For help, see the Center’s new detailed guide to simplifying board oversight of ESG.