Every year, as part of PwC’s Annual Corporate Directors Survey, we ask directors to evaluate the performance of their peers, and whether any of the members of their board should be replaced. The share of respondents who say one or more of their fellow directors should go has been rising, and in 2020 it reached 49%. Given the importance of collegiality to a well-functioning board, that may seem surprisingly high.
But it’s nothing compared to what C-suite executives told us when we asked them the same question. More than four in five (82%) said at least one of their company’s board members should be replaced. And 43% said two or more directors need to go.
These insights, drawn from our recent study Board effectiveness: A view from the C-suite, are bound to be discomfiting to many directors. Candid feedback from management teams on board performance is rare. But it’s extremely valuable, especially when it confirms what many directors already recognize—namely that board composition and refreshment deserve a closer look.
Here are the actions boards can take now to focus their efforts.
Even though board turnover is clearly on the minds of many directors, the Annual Corporate Directors Survey found that few boards are making succession planning a priority. Ten percent of directors reported that their board doesn’t have a succession plan at all, and 33% said it is ad hoc. For boards that do have a plan, it’s shared with the full board less than half the time (49%).
A robust long-term succession plan considers the skills the board currently has and those it’s likely to need in the future. It asks what professional and personal attributes may be missing from the boardroom. A board armed with a strong succession plan can begin to build a talent pipeline to ensure the right candidates are on deck when vacancies occur.
One clear takeaway from our C-suite survey was that many executives question how ready directors are to perform their essential duties. Only a slight majority (53%) of executives said their boards spent enough time in its oversight role and just 37% said members came fully prepared to board meetings.
Our survey highlighted a striking divergence between director and executive perspectives. Thirty-eight percent (38%) of C-suite leaders said their company’s directors serve on too many boards; meanwhile, 6% of directors felt that way. Boards may be well served to take a hard look at whether their directors are spread too thin.
The news from our survey wasn’t all bad. Almost all executives (94%) gave their boards high marks for their understanding of their company’s strategy. And the vast majority said directors had a strong grasp of the company’s key risks (89%), shareholder base (87%), and competitive landscape (86%).
It may not thrill directors to hear that their management teams are so keen to have fresh perspectives on their boards. But, as our survey shows, there are proponents of change in both the C-suite and the boardroom. Directors may be well served to take this as a cue to give board refreshment practices another look.