Board Appointments Still Made Within Closed Networks. Why?

October 24, 201610:33 am599 views

Four in ten board appointments are made without any formal process, and more than half go to candidates already known to the organisation. This is despite almost two-thirds of boards prioritising widening the skillset of board members, especially in digital, according to the Harvey Nash Board Report 2016/17 in association with London Business School’s Leadership Institute.

The research, representing the views of more than 650 non-executive directors from the UK, Nordics and Asia-Pacific, also finds that despite the role of the board being to govern and audit the business, just over a quarter (26 percent) of respondents have never undergone an external board evaluation. In Asia that number rises to 45 percent.

Christine de Largy, Chair of the UK Board Practice, Harvey Nash, commented: “In the face of the current challenging global economic climate, boards need to evolve to be fit for the 21st Century. The status quo is being disrupted by external pressures and Chairs need to act now to prepare their boards for the future.”

The results of the Harvey Nash Board Report 2016/17 in association with London Business School’s Leadership Institute indicates that in order to improve board governance standards worldwide there should be significantly more uptake of board best practice through the use of evaluations, assessments, process and focusing on the talent pipeline.

The research suggests that despite external pressures created by economic uncertainty, digital disruption and increased need for transparency, many boards are struggling to adapt.

Key survey findings

  • Only 14% say their boards have a fully comprehensive digital strategy
  • 45% say their digital strategies are somewhat incomplete or not at all complete
  • 26% of UK boards have never had an external evaluation
  • 45% of the boards of APAC companies have never had an external evaluation
  • Only 45% of UK boards have had an evaluation in the last two years
  • 58% of non-executives indicate ‘good business’ is on the agenda of most of the boards they are a member of. The primary reason for being ‘good’ is to improve employer engagement
  • 63% of boards are actively pursuing more diverse functional expertise
  • 48% of boards are actively pursuing gender diversity
  • Areas of diversity actively pursued by boards are:
Functional expertise 63%
Gender 48%
International expertise 37%
Age 24%
Ethnicity 23%
Culture 21%
Academic background 14%
Other 10%
Social background 5%
Lesbian, Gay, Bisexual and Transgender 3%

Digitisation is firmly on the board agenda across all geographies and takes second place only to strategy in board discussions. Despite this only 14 percent of respondents said that their board had a fully comprehensive digital strategy. And a surprising 41 percent say they don’t think their business is either disrupting or disrupted.

Diversity and inclusion can act as a catalyst for innovation and despite increasing emphasis on the importance of diversity of thought in the boardroom; only 29 percent of respondents are creating succession plans focused on populating the board talent pipeline with a richer mix of backgrounds and experience.

Randall S Peterson, Professor of Organisational Behaviour and Academic Director of London Business School’s Leadership Institute, says: “There are some pockets of good practice in the boardroom, but largely, boards have some way to go to reach their fullest potential. And for those organisations with effective boards it will be a source of significant advantage.”

“We hope that the results of the Harvey Nash Board Report 2016/17 in association with London Business School’s Leadership Institute will inspire board chairs and directors to continue to improve, by taking research insights forward. For example, when boards view diversity as a business opportunity rather than a problem to be managed, and start to routinely have their behavioural dynamics assessed, they will create improved and sustainable value for their business.”

The most effective boards may or may not follow every recommendation in the various codes of conduct, but what distinguishes outstanding boards is that they are robust, inclusive, and feature best practice mechanisms, processes and performance.

 

 

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