In order to benefit from emerging technologies such as automation,
robotics, cognitive computing, and artificial intelligence (AI), companies will
be required to leverage a critical resource: data. Given that reality, it’s not
surprising that big data ranks as a top disruptor for boards—a recent
survey finds that a whopping 63 percent of directors around the world view it
as the biggest technological disruptor.
To help the public understand how directors globally view business
risks and governance issues, the Global Network of Director Institutes—an
international network of 21 corporate director institutes, that includes
founding member NACD—produced the 2018
Global Director Survey Report. The association represents
130,000 individual members globally and seeks to enhance director
professionalism through research and education. This first-of-its-kind survey
reflects the perspective of roughly 2,000 public and private company directors
from Africa, the Middle East, the Americas, Asia-Pacific, and Europe. The
results provide important insights into the challenges and priorities of board
members around the world.
and economic issues are top of mind for this group of directors?
Boards across the globe are increasingly finding social issues on
their radar. When asked which key social and economic challenges are facing
their countries, participants’ responses largely coalesced around three issues:
poverty and income inequality, taxation and government spending, and the cost
of health care. That said, there were some regional differences in directors’
ranking of these issues. Survey participants from European companies are more concerned
with the cost of health care than their American counterparts, who point to
taxation and government spending as a key priority for their countries. For
their part, Middle Eastern and African directors worry most about poverty and
How do boards
Conventional wisdom holds that what gets measured gets managed.
In an effort to enhance governance, assessing directors individually and the
board collectively is critical to ensuring that the board’s composition aligns
with the company’s long-term strategy. The survey found that the majority of
respondents (80%) conduct evaluations. However, out of those who conduct
evaluations, the highest percentage of directors (46%) said their boards
evaluate performance via informal discussions. This is compared to 42 percent
whose assessments are done using formalized discussions and processes. The
Americas led the group in using formal evaluations (57%).
How do directors view
the impact of ESG issues on their companies?
Despite investor calls for more robust oversight of environmental
risks, these issues continue to be lower priorities for boards. When asked
about the relevance of select risks to the strategy and operations of their
organizations, nearly half (42%) of respondents said the depletion of fossil
fuels was not at all relevant; 38 percent said the same about measuring carbon
emissions and their carbon footprint. Climate change fared slightly better,
with 30 percent of directors saying it was irrelevant to the company’s strategy
Issues involving personnel, however, ranked fairly high for directors: 72 percent believe ethical behavior is critical to company strategy and operations, compared with 65 percent for employee health and safety, and 57 percent for employee relations and engagement. Given the tight labor market in the United States, human-capital management is likely to become a more pressing issue on board agendas. In fact, employee engagement was slightly more important to American directors (62%) than their European counterparts (45%). This concern also underlines the growing focus on culture as an enabler of company strategy and success.
Culture can have wide-ranging repercussions for an organization—both beneficial and detrimental—and, therefore, the board should dedicate adequate time to oversight of organizational culture. As noted in the Report of the NACD Blue Commission on Culture as a Corporate Asset, “a healthy culture serves as a unifying force for the organization and reinforces the elements of the strategy and business model in a productive way,” while a “dysfunctional [one] has the potential to undermine the business model and create significant risk for the company.”
confident in their board’s ability to oversee technology?
Technology can either catapult an organization to unexpected
success or so effectively disrupt its business model that the organization
becomes virtually or actually insolvent. And directors believe that big data
and AI are likely to disrupt their companies, with a majority (63%) selecting
big data as the top potential disruptor, closely followed by AI (60%). The
application of emerging technologies is likely to change the ways in which companies
across industries do business; however, it also represents unpredictable risks.
Even if their companies are not early adopters or first movers in their
industries or sectors, directors should ensure their companies are well
positioned to capitalize on the changes these technologies may usher in.
GNDI also recently issued guidance for boards across the globe to strengthen their oversight of increasingly complex and advanced use of data. These data governance guidelines can be adapted to meet the needs of individual boards.
Directors of any company type—regardless of its corporate domicile—are
charged with creating long-term value for their companies. As the global
business landscape continues to evolve, directors must ensure their board is
keeping up with the skill sets and practices necessary for effective oversight.
That said, understanding the answers to the above questions, and how those
answers may vary from region to region, will be increasingly important as more
companies extend their cross-border operations.
For more insight into how varying governance approaches may impact your company’s global operations, download the full 2018 Global Director Survey Report.