Founded to address the frustrations of executive teams, corporate directors and independent board members over ineffective board meetings, Board Intelligence (BI) was established with a clear mission: to understand what was driving frustration in boardrooms, identify what was going wrong and determine what needed to change to foster more meaningful, value-driven conversations.
BI’s latest survey, the Board Value Index, highlights the key challenges boardrooms face today. According to its findings, 46 percent of directors in both the US and UK believe their boards do not add enough value to the organization.
‘I think that the problem exists mainly because of a lot of the negative habits and conventions that occur in boardrooms,’ says Pippa Begg, CEO of Board Intelligence.
In her view, boards have fallen into repetitive patterns. ‘They have a fixed and repetitive agenda that may start with the CEOs report, moves onto the CFOs report and finishes with set minutes at the end,’ she explains. ‘They kind of go through the motions out of habit which isn’t aligned with driving value and what most boards want to do.’
Begg adds: ‘One of the things that is woefully underrepresented in boards is conversation around innovation around growth.’
Looking deeper into the Board Value Index findings, Begg observes that one reason many feel their boards aren’t adding enough value is because they spend too much time looking backward instead of focusing on the future. ‘The time they spend on compliance as opposed to strategy is out of balance,’ she says. ‘What you’re left with is an overweight focus on backward looking, operational and introspective information.’
Part of this, she argues, can be traced back to past corporate failures, such as the 2008 global financial crisis, which led to increased regulation and a greater emphasis on the supervisory role of boards.
‘But the pendulum that swung that way hasn’t swung back. There hasn’t been that same active fear that things might go wrong if we’re not spending enough time on growth and innovation,’ says Begg. ‘Both can kill an organization.’
Pippa Begg, CEO, Board Intelligence
The Board Value Index also found that 31 percent of directors feel their boards add no value at all, with half of them believing their boards are actively holding the organization back.
‘This aligns with the sentiments around boards being backwards looking,’ Begg explains. ‘It means there’ve been no actions that wildly change the direction of the business. That’s why you get this sense of a board not only lacking value but also being detrimental to its progress.’
Despite these challenges, Begg sees a potential shift on the horizon. ‘At the moment, there is a trend around deregulation, simplification, growth and innovation that’s coming from governments and regulators,’ she says. ‘We also need to see that shift in the chairs’ perception of the way they run their boards and what plays out in board assessments.’
Before the conversation moves on, Begg recalls a poignant quote by Sir George Buckley, former chair of Smith PLC, which succinctly sums up the situation: ‘Every organization is decaying from its core. Whatever product you developed five years ago is becoming less relevant with every minute that goes on. When you understand your rate of decay, you understand the rate of innovation. You need to stay current and present, and boards need to be preoccupied with whether their rate of innovation outweighs their rate of decay.’
In support of this, the report found that fewer than half (44 percent) of boards in the US and UK spend more time looking ahead than reviewing past performance, suggesting that boards are, in many ways, set up to fail.
This trend, however, varies geographically. In the UK, 39 percent of respondents say their boards spend more time looking backward than forward, compared to just 29 percent in the US.
‘One of the things that’s interesting about the data is that the 10 percentage point data is consistent between the UK and the US on a number of topics,’ says Begg. ‘Culturally, one of the things that we’ve experienced is that the US is just a more positive, optimistic culture.’
She adds: ‘I would love to get to the specifics of this phenomenon with more research and a set of “control questions”.’
Tied to this issue is the growing need for board members to enhance their skills. ‘In an era of AI, any corporate director that doesn’t feel like they would want a continuous stream of information and education blows my mind,’ says Begg. ‘The world is moving so quickly that as a board director I would want my monthly briefing, education session on the newest and most innovative forms of AI or just staying up to date with AI geopolitics.’
Another trend revealed by the research is the prevalence of information asymmetry, where only positive news reaches the boardroom. Begg explains the impact of this and how technology, including AI, is helping to change the narrative:
‘An organization might be in the press or not doing very well, but you pick up their board pack and you will read a rose-tinted glasses kind of view of the world,’ she says.
‘The challenge with that is that corporate directors know things aren’t always perfect. In fact, if one tries to hide it and not disclose that information up front, you create a board environment that has a lot more tension on it,’ she adds.
One of the tools offered in BI’s intelligence platform is designed to address this very issue. It provides feedback to management when they’re preparing these documents, highlighting the sentiment balance in their reports.
‘It tells you how much good news to bad news is basically in their paper to try and support them in providing a balanced view,’ Begg says.
With increasing deregulation positioned as a positive for most businesses, Begg recognizes that while less red tape may seem advantageous, it poses significant implications for boards.
‘While on the face of it less red tape and less compliance is a good thing, the reality of what it means is actually much starker for boards,’ she says.
Begg recounts a conversation she had with the chief executive of the UK’s Financial Conduct Authority, who made an important point.
‘If, as a regulator, we are prescribing less that onus of responsibility to make sure everything is okay transfers to the boards,’ she said. ‘This is an important point that has been missed in the narrative around this.’
Begg leaves us with one final piece of advice: ‘Get clearly focused on the articulation of the value that you want the board to deliver over the next 12 months.’
Once this is set, the challenge is to translate that ‘purposefully’ into agendas and ‘proactively’ through materials and education delivered to the board to help them be effective.