Latest findings from PwC’s Pulse Survey
say they are spending more time on talent and human capital issues
see ESG and sustainability as integral to longer-term planning
are asking for more management reporting on cybersecurity, ESG and human capital issues
These days, companies of all sizes and across every industry are struggling to attract and retain top talent. As the COVID-19 pandemic enters its third year, keeping stores, factories and offices fully staffed remains a challenge. At the same time, more employees than ever are leaving their jobs for new opportunities. It’s little wonder that of all the environmental, social and governance (ESG) issues on corporate directors’ agendas today, human capital is at the top.
Historically, corporate directors’ role in talent oversight was much more focused on the C-suite. That’s no longer the case. Boards’ focus on talent now extends far deeper into the organization, and directors realize they must help their companies remain competitive in an increasingly intense struggle for talent. In our latest Pulse Survey, corporate directors express the importance of hiring and retaining talent acutely, with 88% ranking the issue as very important, 11 percentage points higher than other executives. And nearly four in five directors (77%) say they’re spending more time on talent and human capital issues than they did a year ago.
Confirming the company has the talent it needs is a basic building block for success. Directors are now confronting head-on the talent challenges wrought by the colliding forces of the pandemic, the “Great Resignation,” investor pressure to advance diversity, equity and inclusion (DE&I) efforts and the pace of business and digital change. Just a quarter of board member respondents (24%) think talent shortages are likely to ease by the end of 2022.
The ongoing skills gap and labor shortage, coupled with accelerating inflation, has directors ready to press their management teams to take action. Out of an array of possible investment priorities this year, directors are selecting investments in hiring and retention (78% of respondents) and digital transformation initiatives (63%) as their top two areas of focus.
Some of those digital transformation dollars are likely being directed to where and how talent is working along with the relevant upskilling. To address the challenges of the tight labor market, board members say their organizations are offering hybrid work options for employees, including making remote work permanent for roles that allow it. Companies are also increasing compensation with perks such as retention or sign-on bonuses, off-cycle raises and cost-of-living adjustments.
Broader ESG issues continue to be an area of importance to directors. Seventy percent of directors say ESG and sustainability will be integral to longer-term planning at the end of 2022 (compared to 60% of all executives).
As our 2021 Annual Corporate Directors Survey revealed, a major shift continues in how boards are thinking about and addressing ESG issues. Most importantly, more boards are linking ESG to company strategy. In 2021, almost two-thirds of directors (64%) said their strategy is tied to ESG issues—a 15-point jump over the previous year and a strong indicator of how quickly things are changing. And almost three-quarters of directors (73%) say board-level discussions on human capital or DE&I strategy have increased. As with talent management, the board is getting involved in ways they haven’t traditionally in the past.
Another driving force for 2022 in the ESG space? The SEC’s signals for potentially big changes on the disclosure front. New requirements are anticipated to be proposed for ESG reporting early in the year—including the potential for mandatory disclosure on human capital and climate. One in three directors (36%) points to anticipated ESG disclosure requirements as a policy shift leading them to make the most changes in their organization. Thirty percent of directors cited climate risk as an issue shareholders are very concerned about, perhaps driven in part by the relatively strong support given to shareholder proposals related to social and environmental issues in 2021, as well as activist investors who remain focused on how businesses affect the environment.
More than half of directors (57%) point to technology and data regulations—those related to privacy, cybersecurity, social media and antitrust—as leading policy shifts causing them to make the most changes in their organization.
Cybersecurity—along with ESG and human capital—are all areas in which board members are requesting additional reporting from management (60%) to aid in their oversight. It’s a natural action for directors to take as they are asked to dig more deeply into these fast-evolving areas. Directors need to be readily equipped with information and analysis and are accordingly asking for more from management teams.
Considering the dizzying pace at which new cyber threats emerge and the importance of mitigating risk, cybersecurity presents challenges for every board. Education and on-call knowledge can help directors better oversee a prepared cybersecurity risk management program.
Our latest PwC Pulse Survey, fielded January 10 to January 14, 2022, surveyed 83 corporate board members from Fortune 1000 and private companies, along with other C-suite executives, about business priorities, investment plans and concerns as they think about the year ahead. Find all of these insights in our PwC Pulse Survey.