Experience and expertise needs
Discussions about board composition and diversity include a growing focus on whether or to what extent boards need skills in certain areas – notably non-traditional areas such as ESG and cyber-security.
Respondents were asked to rate the importance of having at least one board member with specific experience of or expertise in a variety of areas. They used a scale where one represents ‘not at all important’ and five is ‘extremely important’.
Overall, respondents – unsurprisingly – rate corporate governance as being the most important area for having expertise or experience on the board, with an average score of 4.1, which equates to a rating above ‘very important’. The topics of next-highest importance are ESG and executive compensation, each of which attracts an average score of 3.9 and both of which are facing increased investor scrutiny.
These are followed by compliance/regulation, cyber-security and ethics (3.8 each), then board diversity (3.6). Average scores then fall to 3.2 each for litigation issues facing the company, geopolitics and domestic political issues.
Respondents at bigger companies tend to rate ESG issues more highly. Those at small caps on average rate the topic at 3.6, rising to 3.8 among those at mid-caps and 4.1 among those at both large caps and mega-caps.
Similarly, respondents at small-cap companies rate the importance of having at least one board member with specific experience of or expertise in geopolitics at 2.9. This rises to 3.3, 3.4 and 3.7 among those at mid-caps, large caps and mega-cap firms, respectively.
Respondents in Europe give a higher score to the importance of ESG issues than their peers in North America (4.1 to 3.7). The same applies in terms of the importance of litigation issues facing the company (on average 3.5 among those in Europe and 3 among those in North America), geopolitics (3.5 to 3), domestic political issues (3.4 to 3) and ethics (4 to 3.7).
