NACD ANNUAL PUBLIC COMPANY SURVEY REVEALS KEY BOARDROOM TRENDS FOR 2022

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National Association of Corporate Directors

Jun 21, 2022, 10:53 ET

Competition for Talent Tops the List of Issues of Concern, Followed by Growing Inflation, the Uncertain Pace of the Economic Recovery, the Increasing Pace of Digital Transformation, and Changing Cybersecurity Threats

WASHINGTON, June 21, 2022 /PRNewswire/ -- The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 23,000 board members, released findings from the 2022 NACD Public Company Board Practices and Oversight Survey report today.

Despite many pressing economic and political challenges, the competition for talent remains at the top of many directors' lists of key trends for the next 12 months.

The increased competition for talent tops the list of issues of concern for responding public company directors for the second year in a row, even amid growing concerns about the economy. The next two highest-ranking issues, "growing inflation" and the "uncertain pace of the economic recovery," highlight these growing economic concerns.

"Each year, our Board Practices and Oversight Survey reveals trends that are driving public company directors," said NACD president and CEO Peter R. Gleason. "The changes companies have endured this year have had broad impacts on board members. The disruption in the workplace has created pressure on management, which has resulted in more time and oversight required from boards."

Key Trends from the 2022 Public Company Board Practices and Oversight Survey :

Boards get organized and formalize their oversight of human capital.

Human capital is a growing point of focus on the boardroom agenda, and many boards have begun to formalize their governance structure, processes, and practices to oversee this critical asset.

A majority of boards now discuss an enterprise-wide talent development strategy (68%) and a majority of respondents indicate that their board discusses human capital strategy on a more regular basis, as a recurring agenda item (57%).
These discussions are perhaps a precursor to more targeted practices adopted by leading boards, such as delegating human capital oversight to relevant committees (43%) or communicating reporting expectations to management (45%).
Human capital oversight is most likely to find its home in compensation committees (57%), which is increasingly transformed into a human capital committee with oversight over a much broader array of talent-related concerns.

Faced with increasing cybersecurity risk, directors warm to the idea of adding a cybersecurity-savvy director.

Eighty-three percent of respondents indicate that their board's understanding of cyber risk has significantly improved compared with two years ago. Yet, amid the growing speed and sophistication of cyber threats, as well as the increased scrutiny of regulators, directors increasingly see a benefit in adding a cybersecurity-savvy director.
Forty-two percent of respondents indicate that recruiting a cybersecurity-savvy director would benefit their board, compared to 36 percent of public company respondents last year.

ESG oversight is forming and norming at most boards, yet challenges remain.

This includes efforts to improve board reporting (70%) and delegating ESG oversight tasks to specific committees (64%). Yet developing clear ESG priorities presents a major barrier for boards and management teams.
Forty-four percent of directors indicate that the lack of uniform disclosure standards presents the greatest challenge to the oversight of ESG issues.
Feeling the pain of their management teams, boards find themselves grappling with defining what the E, the S, and the G mean for their company. Respondents indicate that defining scope (23 %) and materiality (9%) are among the most challenging aspects of ESG oversight.

A majority of directors indicate improvement in their board's understanding of DE&I issues.

Nearly 3 in 4 boards (74%) now receive key DE&I metrics from management and 69 percent hold discussions on the organization's DE&I priorities.
These practices enhance the understanding many boards have of DE&I within their organization, but much work remains.
Fifty-eight percent of respondents indicate that their board's understanding of DE&I issues has significantly improved compared to two years ago when the social justice movement sparked by the murder of George Floyd intensified rising societal and investor expectations.
Similarly, 59 percent of respondents agree that their board understands how DE&I is connected to other board issues such as strategy, human capital, and technology.
Only 29 percent of respondents have moved beyond traditional human capital issues to discuss DE&I issues in relation to vendor selection, supply chains, and corporate purpose.

Discussion of climate change has increased at most public company boards.

Fifty-four percent of public company respondents indicate that the frequency of climate change discussions increased on the board agenda in the last two years.

For 37 percent of those indicating discussions have increased, the main factor prompting increased discussion was the perceived relevance of climate change to the long-term growth prospects of the business.
Twenty-five percent stated that its disclosure requirements were the primary driver.

As director awareness of issues related to climate change increases, and as it is featured in more board discussions, it is likely to become more of a key consideration in strategy, risk management, executive pay, accounting, and reporting of performance.

Quality of board discussions is seen as the most important driver of board performance.

More than half of public company directors rate the quality of board discussion (57%) as the most observable indication of board performance.
Quality input from management was the most widely selected key driver of exceptional board performance, identified by 59 percent of respondents.

Read the full report released by NACD.

About the Survey

Data Collection

Leveraging its proprietary member database as a sample frame, NACD sent email invitations to directors and others who serve on boards asking them to participate in the 2022 Board Practices & Oversight survey. The survey was in the field from March 28 to April 21, 2022, and the questionnaire was administered electronically. Respondents were instructed to respond on behalf of one of the boards on which they serve.

Analysis

Percentages are based on the total number of responses specific to each question. For example, if a question received responses from only 100 out of 372 total respondents, and 75 respondents answered "yes" while 25 answered "no," the result is reported as 75 percent affirmative. In some cases, survey responses totaling fewer than five percent are not represented in graphs for the sake of clarity.

About NACD

For more than 40 years, NACD has been on the leading edge of corporate governance, setting standards of excellence that have elevated board performance. NACD arms today's directors with insights and education that drive their mission forward, while preparing a new generation of boardroom leaders to meet tomorrow's biggest challenges. NACD is a community of more than 23,000 directors driven by a common purpose: to be trusted catalysts of economic opportunity and positive change—in businesses and in the communities they serve. To learn more about NACD, visit nacdonline.org.

CONTACT:

Shannon Bernauer
[email protected]

Susan Oliver
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703-216-4078

SOURCE National Association of Corporate Directors