{"id":16727,"date":"2023-10-08T12:20:16","date_gmt":"2023-10-08T12:20:16","guid":{"rendered":"https:\/\/mysourcefunding.com\/leadership\/more-directors-with-business-strategy-experience-for-corporate-board-service\/"},"modified":"2023-10-08T12:20:18","modified_gmt":"2023-10-08T12:20:18","slug":"more-directors-with-business-strategy-experience-for-corporate-board-service","status":"publish","type":"post","link":"https:\/\/mysourcefunding.com\/?p=16727","title":{"rendered":"More Directors With Business Strategy Experience For Corporate Board Service"},"content":{"rendered":"
\n

As if they don\u2019t already have enough on their plates, board nominating committees may now need to confront what a new report describes as a pronounced and alarming decline in the share of board members who possess business strategy experience.<\/p>\n

That\u2019s one of the key takeaways from the new report, \u201cTaking a Long-Term Approach to Board Composition,\u201d from the prominent business research group The Conference Board in partnership with ESGAUGE, the data mining and analytics firm. The report also addresses several other board composition trends and observations of interest to boards, including those related to board size and director refreshment.<\/p>\n

But it\u2019s the strategic experience element of board composition that\u2019s likely to attract the most attention.<\/p>\n

According to data drawn from disclosures made by US public companies, the share of board directors who are reported as having business strategy experience has dropped significantly over the last five years. In particular, the share declined from 70 percent in 2018 to 59 percent in 2023 in the S&P 500, and from 68 percent to 55 percent in the Russell 3000.<\/p>\n

According to the report, the decline is most pronounced amongst new directors, and arises at a time when companies are reporting higher levels of experience amongst directors in several ESG areas. For both the S&P 500 and the Russell 3000, the decline approached 20%. In comparison to all directors, however, new directors are reporting higher levels of experience in environment\/climate (12 percent of new S&P 500 directors and 6 percent of new Russell 3000 directors), ESG (15 and 11 percent), and human capital (38 and 24 percent).<\/p>\n

<\/fbs-ad><\/p>\n

Those are big numbers. The Conference Board\/ESGAUGE report appropriately describes this decline as a \u201cred flag,\u201d in deference to the importance historically attributed to business strategy experience on the board. After all, as the report notes, approving the overall strategic direction of the company is a basic board responsibility.<\/p>\n

Strategic experience allows the director to \u201csee the whole field\u201d; to examine an opportunity or a problem in terms of its strategic, as opposed to its tactical, implications. Directors with strategic vision typically exercise their oversight and decision-making duties from the broader, long term perspective rather than from the perspective of a specific moment in time.<\/p>\n

A shared level of business strategy experience enables those directors to communicate more effectively and collaborate more efficiently. The ability to apply a strategic lens to the evaluation of business opportunities and risks also positions boards to maintain a consistent course amidst an unsteady environment. We\u2019re talking about directors who\u2019ve \u201cbeen there\/done that\u201d, and who may have actually run companies.<\/p>\n

The report contrasts the \u201cworrisome\u201d decrease in the level of board-level business strategy experience with what it observes as a significant recent increase in the number of directors identifying themselves as having functional experience in ESG and other areas.<\/p>\n

For the S&P 500, directors with reported experience increased in governance (from 23 percent in 2018 to 38 percent in 2023), environment\/climate (from 0 to 10 percent), ESG (from 0 to 13 percent), human capital (from 17 to 34 percent), and cybersecurity (from 8 to 20 percent). The Russell 3000 experience reflected similar declines – if not at the exact same rates.<\/p>\n

The report appropriately notes that decline in business strategy experience may be attributable to the underreporting of such experience (including the process that companies typically use to decide what skills and experience to disclose) as well as a shift in director recruitment practices. Regardless of what’s driving the trend, however, it’s concerning from a governance perspective.<\/p>\n

The governance and nominating committee may thus have a new challenge-to adopt a long-term approach to board composition, ensuring that the board has critical core competencies for long-term performance regardless of the challenges of the day. This is on top of responsibilities to enhance boardroom culture, which the new Blue Ribbon Commission report from the National Association of Corporate Directors would assign to that committee.<\/p>\n

Responding to that challenge may mean emphasizing crucial director qualifications, such as business strategy experience, as part of the director nomination qualifications matrix. It doesn\u2019t mean giving way to a focus on functional expertise in ESG and other areas, such as climate and cybersecurity. At the same time, the report doesn\u2019t suggest abandoning focus on directors with functional experience, either.<\/p>\n

In essence, the Conference Board\/ESGAUGE report suggests that companies should think about returning to the basics with a greater focus on strategic business experience in their board recruitment and retention practices. For while \u201c[h]aving directors with functional experience in ESG areas can be beneficial, it should not be a substitute for core business competence.\u201d<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

As if they don\u2019t already have enough on their plates, board nominating committees may now need to confront what a new report describes as a pronounced and alarming decline in the share of board members who possess business strategy experience. That\u2019s one of the key takeaways from the new report, \u201cTaking a Long-Term Approach to […]<\/p>\n","protected":false},"author":1,"featured_media":16728,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[76],"tags":[],"class_list":{"0":"post-16727","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-leadership"},"yoast_head":"\nMore Directors With Business Strategy Experience For Corporate Board Service | Brandiary<\/title>\n<meta name=\"description\" content=\"As if they don\u2019t already have enough on their plates, board nominating committees may now need to confront what a new report describes as a pronounced and\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/mysourcefunding.com\/?p=16727\" \/>\n<meta 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