of C-suite executives say their board should be more willing to challenge management
of directors say the board assessment process didn’t lead to any changes at all
of directors say their board understands ESG risks very well
As an independent audit firm with a unique vantage point into companies, we are often asked what we see in the area of corporate governance. Investors, policy makers, regulators and, of course, corporate directors themselves want to know: What is working? What needs to be improved? These questions are more important now than ever, with an increased focus on governance: the “G” in ESG.
To learn more, Tim Ryan, PwC’s US Chair and Senior Partner, had discussions with over 30 board members at America’s top companies—representing over 85 companies. He gathered unvarnished perspectives, and found that while the state of corporate governance is strong, together we have the opportunity to take it to a whole new level.
Avoiding audit committee overload. For years, audit committees’ agendas have continued to grow. When new risks emerge, it can seem natural to allocate oversight to the audit committee. But with already packed agendas, boards need to resist the urge to overload the audit committee.
Looking for culture red flags. It is hard to measure corporate culture, and to know if the board is getting it right. Metrics can help, but boards need to be alert and connect the dots on what they see and hear—a challenge intensified in a remote or hybrid work environment. Look for a defensive management team, a lack of transparency or executive failure to admit mistakes.
Evaluating the looming talent war. Understand what the company is doing now to differentiate itself and attract talent, and how that strategy will evolve in the future. Take a close look at diversity, equity and inclusion and make sure the approach and advancement of goals are happening.
Staying ahead on cyber. Cybersecurity is one of the most challenging areas of oversight for boards. Make sure the board has access to cyber expertise to guide decisions. Double down on education sessions by internal resources and third parties to really understand what’s happening.
Navigating the proxy advisors. The power and influence of proxy advisors has waxed and waned over the years, but when it comes to corporate governance, they continue to be a significant driver of shareholder expectations and agenda-setting. Being an engaged public company director means understanding the proxy advisors’ positions and their views on your company.
Businesses are becoming ever more complex, competition is increasing, and investor expectations are increasing. And, risks and opportunities multiplying. Trust today is becoming both more important and harder to come by. While there’s evidence that businesses are actually more trusted than the government, media or NGOs, that trust is tenuous and businesses must continue to earn it.
In short, board oversight is not getting any easier. What is considered good governance today won’t be enough to adapt to the challenges of tomorrow. And while most corporate boards are doing well and governance is strong, directors should take the challenge to push the bar further and take board governance from good to great.